Why should the giant defense contractor get a hotel tax break that it doesn't need and Maryland can't afford?

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Corporate welfare for Lockheed Martin

Why should the giant defense contractor get a hotel tax break that it doesn't need and Maryland can't afford?

By Lawrence S. Wittner

12:04 PM EDT, March 13, 2013

At this time of severe cutbacks in government funding for food stamps, early childhood education and Meals on Wheels, some Maryland legislators are hard at work looking out for the welfare of one of the world's wealthiest corporations. Under a bill advancing in the General Assembly, the Lockheed Martin Corp. would have the taxes on its luxurious Bethesda hotel and conference center reduced by approximately $450,000 a year. An earlier version of the legislation also included a $1.4 million refund for the period since 2010.

Lockheed Martin would seem to be an unlikely recipient of this lavish government handout, at least on the basis of need. Indeed, it is one of the world's largest business enterprises, with sales that reached $47 billion in 2012. It is also America's largest defense contractor, and in fiscal 2012 its U.S. military sales topped $29 billion.

The effort to shovel millions of additional taxpayer dollars to this giant corporation goes back to 2010, when the General Assembly passed a bill that exempted Lockheed Martin's hotel guests from paying the state hotel tax. Then, in 2011, the company asked to be exempted from the 7 percent hotel tax levied by Montgomery County. Accordingly, the Montgomery County Council reviewed a bill that would change the definition of a hotel to exempt Lockheed Martin from this tax, too. Nevertheless, after citizen testimony at a public hearing, the council refused to rewrite the law. As a result, patrons of the hotel, grandly named the Center for Leadership Excellence, are forced to pay a lodging tax, just like patrons of all the other hotels in the county.

It should be noted that when Lockheed Martin's employees stay at the hotel, the company can usually pass on the costs to the appropriate federal contract. Thus, in most cases, the federal government already compensates Lockheed Martin for any hotel tax it pays.

In 2012, Montgomery County Executive Isiah Leggett spearheaded a new effort to subsidize Lockheed Martin by proposing that the corporation be given a no-strings "grant" of $900,000 to compensate it for the hotel taxes it paid in 2011 and 2012. But the county's legislative analyst suggested that providing such a grant, without any information as to the extent to which the company had already been reimbursed by the federal government, would not be advisable. Ultimately, the County Council refused to allocate the grant.

Lockheed Martin maintains that its conference hotel is a "private" facility solely devoted to training its employees, and for this reason its guests should not have to pay the tax. And it is true that Lockheed Martin decides who can reside there.

But the 183-room hotel is not, in fact, limited to Lockheed Martin employees. It is available for contractors, vendors and anyone else the company welcomes. For example, the business school of the University of Southern California held a conference there in October, with attendees offered the option of staying at the hotel for $225 per night or finding their own accommodations. Benchmark Hospitality International, which manages the facility, advertises it online as "a private, full-service business-class lodging and conference center" with a sports bar, fitness facility, lounge and other amenities.

Faced with the unwillingness of the County Council to provide a multimillion-dollar giveaway to this giant corporation, Lockheed Martin and its local enthusiasts have turned to the Maryland General Assembly for assistance. Sen. Nancy King, a Montgomery County Democrat and the chief sponsor of the new bill, argues that it is necessary to keep the Lockheed Martin hotel operating (although she has not specified why a corporation with $47 billion in revenues cannot manage this feat on its own). She has acknowledged that, under the legislation, Lockheed Martin will be the only company in Maryland that qualifies for the exemption from the hotel tax.

The Maryland Senate is likely to vote on the amended bill this week. The House of Delegates will consider it thereafter.

Citizen activists, especially from Montgomery County, are outraged by what they are calling the "Corporate Welfare for Lockheed Martin" bill. Peace Action Montgomery coordinator Jean Athey terms it "blatant corporate welfare for one of the wealthiest, most profitable companies in the nation." She asks: "Why, in a time that WIC supplements for babies and pregnant women are being cut, when children are being deprived of Head Start, when unemployment benefits are being reduced ... should one of the wealthiest companies ... receive this kind of special tax favoritism?"

It's a question well worth considering.

Lawrence Wittner (http://lawrenceswittner.com) is a professor of history emeritus at SUNY/Albany who writes for PeaceVoice, which distributed this article. His latest book is "Working for Peace and Justice: Memoirs of an Activist Intellectual."

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