Choosing growth and a prosperous economy

We are in the middle of the annual debate of how to balance Maryland’s budget. The budget deficit is estimated to be nearly $3 billion. The governor’s proposed budget includes $2 billion in cuts and about $1 billion in new tax revenue.

Politicians have two constituencies to worry about when considering raising taxes: the voters and businesses that generate jobs and wealth for our state. Take voters first. Two polls come to the same conclusion: Upwards of three-fourths of Marylanders oppose hikes to income, sales, or property taxes. The University of Maryland, Baltimore County found that 40% want no appreciable change in services or taxes, and a third want to reduce state services and cut taxes. Maryland’s state officeholders are apparently targeting the 15% who want increased state services and are OK with higher taxes.

Don’t expect job-creating businesses to have a different view. As far as economic growth is concerned, Maryland’s record is already terrible. Maryland’s gross domestic product has been growing at a rate nearly 90% less than that of the entire country.

Maryland’s labor market has declined significantly: U.S. News ranks Maryland 48th in job growth, which compares to Virginia’s 12th. Guess which state has a better record of growing its tax base, a tax base that can fund programs, and a tax rate that attracts businesses and people to a state?

Nor does Maryland have a great record at delivering revenue from tax hikes. The digital advertising tax passed by the General Assembly was supposed to raise $250 million annually; the last fiscal year reported raised almost exactly half that.

The Washington Post interviewed two Democratic governors of red states, Kansas’s Laura Kelly and Kentucky’s Andy Beshear have a different approach. Kelly stated:

“We want to fund our school, we want to fund our roads, we want to fix our foster care system. We need money to do that. he way to do that without raising taxes is to expand your economic base. And so all the governors I know have focused like lasers on that and are very successful in bringing in lots of new capital investment, lots of new jobs, and so we’re providing the foundation and the tax base to allow us then to take care of the kitchen table needs of our state.”

It’s not as if Maryland was not already levying a high rate of taxation on those of its citizens who have so far decided to stick around. NPR reported that WalletHub took a measure of income, property, and sales taxes and calculated that Maryland was the state with the seventh highest tax burden. Virginia is 21st.

What do we get from increased tax rates? Not much. Washington Post columnist Fareed Zakaria compares Florida to New York:

“It’s easy to comfort oneself by thinking that these sky-high tax rates and growing government revenues are providing some crucial ingredients of progressive government. But they are often simply the toll of waste and mismanagement.”

Perhaps we, too, are deluding ourselves in believing that spending more and taxing more will produce anything different than more of the same: economic stagnation, loss of population and jobs, and a hollowing-out of the tax base.

Nor does taxing “wealthy” citizens work. Better-off people who live here are best equipped to leave it. When David Tepper moved to Florida after 20 years in New Jersey, the New York Times reported that his action “put the entire state budget at risk.”

The same is true for businesses whose employees will be facing the higher taxes. The governor says that he wants to prioritize three industries: life sciences, information technology, and aerospace and defense. Good luck with that.

At a time when Maryland faces a $1 billion tax hike, dozens of states have cut taxes as part of multi-year plans to attract industry: New Hampshire eliminated its tax on dividends and interest and has no income tax on wages; Iowa has a flat tax at 3.8%, down from a top rate of 8.98%; Louisiana adopted a flat tax of 3%, down from 4.25%. Fourteen states have a flat tax, up from nine just four years ago; another eight don’t tax income at all.

To govern is to choose. If creating an economically-robust Maryland means ending expensive subsidies for stadiums, for public transportation with fixed routes (half again more expensive to build and half as many riders as “predicted”), for giveaways for “new” businesses (which are more expensive than expanding existing businesses), and for unproven schemes to shove money at our woebegone public education system, then so be it.

There’s a saying: “IBG YBG,” short for “I’ll be gone; you’ll be gone.” If it ever applied, it certainly doesn’t now. At the rate Maryland is going, the only ones gone will be its citizens. Florida be ready.

Editorial Advisory Board members Eric Easton, Susan Francis, Julie C. Janofsky, George Nilson, Catherine Curran O’Malley, Angela W. Russell, and Jeff Sovern did not participate in this opinion.

EDITORIAL ADVISORY BOARD MEMBERS

James B. Astrachan, Chair

James K. Archibald

Gary E. Bair

Eric Easton

Arthur F. Fergenson

Nancy Forster

Susan Francis

Julie C. Janofsky

Ericka N. King

George Nilson

Catherine Curran O’Malley

Angela W. Russell

Debra G. Schubert

Jeff Sovern

H. Mark Stichel

The Daily Record Editorial Advisory Board is composed of members of the legal profession who serve voluntarily and are independent of The Daily Record. Through their ongoing exchange of views, members of the board attempt to develop consensus on issues of importance to the bench, bar and public. When their minds meet, unsigned opinions will result. When they differ, or if a conflict exists, majority views and the names of members who do not participate will appear. Members of the community are invited to contribute letters to the editor and/or columns about opinions expressed by the Editorial Advisory Board.