Scraping the bottom

Earlier this week the Tax Foundation released its annual State Business Tax Climate Index. Despite Governor Hogan’s insistence on improving business climate and efforts to adopt some of the Augustine Commission’s reforms, Maryland once again has the dubious distinction of being a bottom-10 state.

Yes, that sickening orange color tags us as a state to avoid insofar as business taxes are concerned. In truth, we’ve only dropped one spot from the 2015 index so while we could have made a few minor improvements other states are improving at a faster pace. (Maryland seems to tread water – over the last four years we have oscillated between #40 and #41.) Moreover, we still lag behind all of our neighbors with Delaware again leading the region. The First State maintained its #14 ranking.

There is one important caveat to Maryland’s decline which could push them out of the bottom 10 next year. Late last month Governor Hogan announced a significant cut in the unemployment insurance tax, which is one of the factors (albeit the least-weighted) the Tax Foundation uses to determine its rank order. But other states are trying to push the envelope more quickly by reducing corporate and individual tax rates, something Maryland has talked about but not acted upon. (The Tax Foundation’s weighting process is explained on page 16 of their full report.)

While reducing regulations doesn’t always require legislative approval, the tax nut is a harder one to crack. The requirement to balance the budget means that revenue no longer extracted from corporations and small businesses alike can’t be used for profligate spending. At a time when government getting an increase that’s less than expected brings screams about draconian cuts from the left side of the aisle, heads truly explode when less real money is allocated. Even if you get 97 cents when you used to get a dollar, liberals act as if you just shot their unicorn with a scary-looking AR-15.

There’s a reason I bring up 97 cents as a particular figure. According to the state’s FY2016 budget, the corporate income tax accounts for 3% of the revenue; thus, eliminating it entirely would mean a corresponding budget cut. (We’ll leave aside the obvious competitive benefit to the state, which would eventually attract more business and increase revenue via other means such as income and sales taxes.) While it’s true that having a poor corporate tax ranking doesn’t completely eliminate the good – Delaware’s #50 ranking in corporate taxes only drags its overall rank to #14 – eliminating the tax would make it plain that Maryland is indeed “open for business.”

Eliminating the tax would also eliminate what’s become an annual debate about combined reporting. Proponents of its adoption, mainly Democrats, claim large businesses are not paying their fair share because they use the accounting trick of claiming their income arises from low-tax states. They may make actual profit in Maryland but don’t report it because they have operations in other. more tax-friendly states. The most recent iteration of the idea came last year, with the tradeoff that would have eliminated filing fees for small (less than 10 employee) businesses. In that respect it was a money-loser for the state; however, the research showed in better economic times the effect would be beneficial to state coffers.

Interestingly, Salisbury has a new mayor that epitomizes the opposite end of the chicken-and-egg approach: last week in the Salisbury Independent, Jake Day was quoted as noting:

“Economic development isn’t what it used to be,” he said. “It includes more activities. It’s now about culture. About quality of life issues. The arts and people. Parks, bike trails, bike lanes. And if you don’t get those right, don’t even talk about workforce development and industry and business development efforts, because you have to have those things to attract anyone.”

This portion of Delmarva boasts a lot of natural beauty along its rivers and coastlines, a well-regarded university, and a proportionate share of arts and culture. Perhaps the traditional bricks-and-mortar manufacturing or legacy service industries won’t come to Salisbury, but it’s been obvious over the last ten years that the beauty, academics, and culture isn’t exactly making this a hotbed of economic activity either. There needs to be a more balanced approach to development because it takes a fair amount of money to create and maintain parks, bike trails, and bike lanes – particularly if the money is granted from the state as it often is. We may be competitors to certain other urban areas around the state, but development somewhere else in the state or even another state, depending on the grant source, is paying the lion’s share for the bike lanes to be installed here. (In some cases, local gifts have helped.) Funding will also be required to maintain parks and develop new ones like Pirate’s Wharf along the Wicomico River.

There are thousands who have moved here over the decades as adults, and for the most part they came here for one of two reasons: they came to school or they came for a job. And if they came for school, there’s no guarantee they will stay if jobs or entrepreneurial opportunities aren’t available.

Simply put, Maryland has a long way to go in overcoming the poor reputation they have for growing and attracting businesses. It’s a lot easier for those on the Western Shore to prosper when there’s a ready-made source of confiscated wealth in close proximity. (If all those people had to find honest work Maryland would be just like West Virginia, with high unemployment. Because it’s well away from that honey pot of confiscated largess, the lower Eastern Shore already is in that same high-joblessness boat.)

I learned the other day that the Augustine Commission determined 1/4 of Maryland’s GDP comes from the federal government. If we can rightsize the federal government over the coming decades, Maryland will be negatively affected in what would be of overall benefit to the nation. It’s time to wean our state off the opioid of living off the federal employees and make strides in diversifying our economy. For that reason, making our state more business-friendly simply has to occur.

10 from 10: Welcome to the Rushalanche!

October 5, 2007 is a day – to borrow a phrase from some failed presidential candidate – that is forever seared into my memory. It wasn’t the first time I’d tried to call Rush Limbaugh on “open line Friday” but I amazingly got through, Snerdly liked the question I was going to ask, and right after the 1:30 news it was time for my big show business break. (I have the transcript as a private page. Think I did the job of making the host look good.)

And yes, it did fry my server. But for one glorious day I had several thousand people read my site – who knows, maybe some are still around.

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Since most of you readers have never heard of monoblogue prior to my conversation with Rush, a little about my website.

I started this a couple years ago because I couldn’t write a letter to the editor every day. But in the last 22 months this has become my hobby/obsession and the actual reason I wanted to call in was to see what websites are considered the top sites for conservative thinking so I can link to them and use them to improve my own writing.

On monoblogue, I cover a variety of subjects ranging from national and Maryland politics to my love of baseball and local music. Another goal is to inform the voters of the Eastern Shore and elsewhere of the political choices they have and editorially push them in the “right” direction.

So welcome to monoblogue, and I hope you come back often. And thank you for the “big show business break” Rush!!!

P.S. There’s been many great comments so far and I’m going to spend some time this weekend answering them. I’ve always been proud of those who comment (I think I have the best readers of any website) and you folks continue the tradition. Plus you’ve given me valuable insight on good websites, some I already knew of and a few I didn’t.

And for those who ask, in maybe two hours you’ve topped my best WEEK ever. Now the challenge is to keep all of my new readers, and I look forward to it. My thanks to you and to Rush for taking my call.

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I would be remiss if I didn’t add the companion post I did for the new audience. It was a day I’ll never forget.