Last October, former Maryland Gov. Marvin Mandel and Ambassador Ellen Sauerbrey, co-chairmen of Maryland Business for Responsive Government, warned about the “anti-business climate” in Annapolis. Within the previous two years, Mandel and Sauerbrey pointed out, Northrop Grumman, Hilton Worldwide, SAIC, Volkswagen of America and Computer Sciences Corp. had each bypassed Maryland in favor of locating major facilities in Northern Virginia — taking their jobs, employees and corporate tax revenue with them. No wonder, since Maryland’s overt hostility toward job-creating businesses is no secret. In 2006 the General Assembly passed a Wal-Mart-only tax, which was later declared unconstitutional. A 2007 tax increase on service businesses and “millionaires” backfired, resulting in lower revenue being collected from a diminishing pool of high-income earners who opted to get out of Tax Town altogether. Surveying the high regulatory costs imposed by state government here, business executives elsewhere could be forgiven for thinking Maryland politicians and bureaucrats would view them as convenient ATM machines to pay for more special-interest spending programs.
The loss of private-sector economic activity has been masked, at least temporarily, by federal stimulus funds that kept Maryland and many other states afloat. But the stimulus is winding down. Referring to the end of stimulus funding as “the cliff,” states across the country are having to cut their spending dramatically, by at least $18.7 billion from 2008 levels, according to the latest “Fiscal Survey of States” report by the National Governors Association.
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Not Maryland, however. According to the NGA, Maryland will increase its general fund spending by a preposterous 11.2 percent over 2011 levels, ranking fourth among states with the highest spending growth in the nation — behind only Florida, Minnesota and Iowa. Even though the Maryland state budget ballooned to $34.2 billion from $29.6 billion just four years ago, “while other states tighten their belts, Maryland continues to spend,” says MBRG President Kimberly Burns.
NGA Executive Director Dan Crippen warns that the loss of federal funding and the coming expansion of Medicaid pose major short-term risks to states’ fiscal solvency which, thanks to Maryland’s “sanctuary” policy toward illegal immigrants, will continue unabated. A second risk is Maryland’s “maintenance of effort” policy designed to wall off bloated education budgets from spending accountability. Yet another is erosion of the tax base, which has been accelerated by the anti-business climate.
There’s just one way for a state with a $1.1 billion deficit that is already driving out private-sector businesses to pay for an 11.2 percent increase in spending: higher taxes. Indeed, legislators are already considering a slew of new taxes for this fall’s special session, which, if enacted, will make Maryland even more business-unfriendly. For Maryland residents, that should be a matter of grave concern.
