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.

A toast to our neighboring states

Summer has arrived – the kids are out of school (in some cases, like ours), the weather is warm enough to fire up the grill on the deck, and people are hitting the beach in droves. And it’s the weekend to boot. In many cases such as this, the setting is not complete without a cold one by your side.

So my interest was piqued by a piece in the Daily Signal asking how high the beer taxes are in our state. When it comes to high taxes, Maryland is generally right near the top and the data from the Tax Foundation found beer taxes in Maryland, expressed in their cost per gallon, are no exception – they rank among the highest in the nation.

But there were two surprises in the data. First is that states in the Deep South, which generally have the reputation as low-tax bastions, have the highest beer taxes int the country. I suspect this is a hangover (see what I did there?) from their days as the Bible Belt. While Maryland is 9th in the country, they are well outside the top 8 and the top four (Tennessee, Alaska, Alabama, and Georgia) have rates at least double Maryland’s 49 cent-per-gallon toll.

Second, though, is the large disparity between Maryland and its surrounding states, which rank no higher than 24th (Virginia.) A beer in Pennsylvania costs 41 cents per gallon less in taxes, as their 8-cent rate is tied for the sixth-lowest in the nation. (Wyoming drinkers only pay 2 cents per gallon in tax.)

Maryland may make a little more money soon, because recently two local breweries (and perhaps others yet to be created) were the beneficiaries of a bill signed into law by Governor Hogan at the behest of the Wicomico County delegation. Dubbed the “Evo Bill,” it allows Wicomico County brew pubs to create more product with their current licensing structure. This is good, but only slightly dampens the effect of a increased alcohol tax that took effect under Governor O’Malley.

So now that Larry Hogan has rolled back tolls, maybe it’s time for him to give more assistance to a fledgling industry by removing the additional 3% sales tax on alcohol. Remember, we exist next to a state which has no sales tax so we’re now at a 9% disadvantage to our neighbors to the north.

Time to get serious

While I mentioned the other day that not much fresh news would come from the political races until after the Independence Day holiday, that doesn’t mean that “Maryland’s top conservative blogger” (at least according to David Gerstman, contributor to Legal Insurrection) won’t have his say on things. I wanted to open up by taking a look at Larry Hogan’s “Hogan’s Plan” for the state’s finances.

Over the course of the primary campaign I was critical of Hogan for having such a vague “to-do list” of priorities he would have as governor, and this wasn’t a whole lot better. Be that as it may, I’m going to try and work with it in the real world anyway.

In Maryland, the governor perhaps has the most power of any such chief executive in the country – particularly if he wants to get serious about cutting the budget. The General Assembly can’t come back with a larger budget total, although they can tweak around the edges to some extent. So let’s go with the baseline established by Martin O’Malley when he set the FY2015 budget that takes effect tomorrow at $39.224 billion. Hogan promised that:

On day one, he will begin to run the government more cost-effectively and honestly. The Hogan-Rutherford administration will implement the recommendations of past audits, conduct additional independent audits of every state agency, and immediately get to work eliminating duplication, fraud, and waste to make sure that every cent of taxpayer money is spent efficiently.

By his reckoning, there is “$1.75 billion in waste and abuse” in state government. Figuring this with my public school math, that is 4.46% of the state budget – which seems like a nice little chunk of change until you realize the difference between the FY2015 and FY2014 budgets is $1.886 billion. In other words, the “waste and abuse” only accounts for about the same amount of money as an average annual increase. Something tells me there’s more low-hanging fruit than that. Yet Hogan says:

By cutting the waste and abuse from state government, he will be able to save the taxpayers of Maryland billions of dollars without having to cut our priority programs and agencies. It is a simple solution to a problem that has plagued our state for the last eight years, and it will enable him to cut and eliminate the regressive taxes that have crushed middle-class families and small businesses.

Nothing is ever that simple, but on the other hand his opponent is willing to blow up the budget with millions and millions of dollars in additional spending. If Anthony Brown simply maintains the Martin O’Malley glide path of 4% budget increases each year, this is what the next four budgets would look like:

  • FY2016: $40.793 billion
  • FY2017: $42.425 billion
  • FY2018: $44.122 billion
  • FY2019: $45.887 billion

Compared to level-funding the budget, that’s an additional $16.331 billion in tax dollars needed and you can bet your bottom dollar the Democrats will take all that and more from hard-working Maryland families.

And if you look at what Anthony Brown is promising, particularly in the area of education with universal pre-kindergarten, student loans for children of illegal aliens, creating a new Office of Educational Disparities, and providing extra money for HBCUs, assuming 4% annual increases may be on the low side.

The other part of Hogan’s Plan deals with business climate:

Maryland’s unemployment rate is 75% higher today than it when the recession began. In fact, the nonpartisan Tax Foundation ranked Maryland #41 in the nation for business climate. The main reason for this unfortunate reality is that it costs too much for job creators to stay in or come to Maryland. He will reduce the burden on job creators, open Maryland for business, and make our state more competitive with others in our region. The Hogan-Rutherford administration will overhaul the Department of Business and Economic Development to focus on aggressively attracting and retaining job creators in order to bring more and better-paying jobs to Maryland.

This is where the lack of specifics is really aggravating, particularly when Hogan’s vanquished opponents directly addressed the issue by proposing corporate tax cuts. In the FY2015 budget, corporate taxes bring in $1.011 billion so eliminating them entirely is affordable if you assume Hogan has the $1.75 billion of waste and fraud elimination in his pocket. Now THAT would turn some heads, but Hogan refuses to make the commitment.

Let’s look at Brown’s “Competitive Business Climate Tour” plan, though. There are nine “areas of focus” therein, but I’m going to focus on five of them:

Tax Liability: Reform our tax code to ensure that it reflects our current economy, enables state and local government to adequately fund our shared priorities, and encourages job generating investments in Maryland.

If you want the tax code to reflect our current economy, rates should be decreased to match the zero growth Maryland is enjoying right now. Unfortunately, it will instead be certain to “enable…government to adequately fund” all the brilliant schemes these liberals come up with. And don’t be surprised if combined reporting isn’t among those items designed to “encourage” investment in the state by hiking taxes on national companies.

Cost and Reliability of Energy: Promote the cost-effective generation of energy and improve the reliable delivery of energy through the grid to businesses and residents while transitioning to more sustainable energy sources.

There’s either one of two ways to go here: we get a “grand bargain” where fracking is finally allowed on the western end of the state in return for “investment” in wind turbines off Ocean City (perhaps via a tax on natural gas producers), or we just get the necessary subsidies to make these unsightly and inefficient wind turbines and land-wasting solar panel farms a reality. Look for the “renewable energy portfolio” to increase the percentage of “sustainable energy sources” to levels unsustainable for utilities to address without huge increases in consumer bills.

Cost of Living: Expand access to affordable housing and healthcare, healthy food options and cost-effective transportation to create a reasonable cost of living for all Maryland families.

When you see the words “expand access to” they really mean “spend more on,” with two exceptions: expanding access to “healthy food options” will involve the elimination of those options deemed unhealthy, such as fast food outlets. You will eat your broccoli and like it. The same goes for “cost-effective transportation” because, for many, transportation will become cost-ineffective: gas taxes will increase in order to subsidize mass transit, which is only cost-effective to the inner-city user whose farebox donation isn’t nearly enough to cover its cost.

And just how is a “reasonable cost of living” determined by the government? To me, that is determined by the market and the desires of those families as to their priorities.

Reliable and Predictable Legal System: Provide a civil justice system that allows deserving individuals to get justice and hold wrongdoers accountable while ensuring that awards are fair and equitable.

That is called tort reform, and the chances of pigs flying in Maryland are probably far higher than passage and enforcement of anything of the sort – especially if Brian Frosh is elected as AG.

Small- and Medium-sized Business Access to Working Capital: Ensure all viable small- and medium-sized businesses have access to affordable capital by working with lenders and businesses to maintain a strong environment for growth.

When I read this, I immediately thought: nice little financial institution you got there, be a shame if something happened to it. It’s the market’s job to figure out if a business is capital-worthy, not government’s.

My gosh, Larry Hogan, you have to do better than this. There are so many holes and code words in Brown’s plans that it should be easy to come up with something actually viable for keeping businesses and people from leaving the state.

The tax man cometh

I was perusing a LOT of e-mail today because I had a short night and long day, and among the items I found was from this Rasmussen survey:

A new Rasmussen Reports national telephone survey conducted over the past weekend finds that 75% of American Adults have filed their income taxes, while another 13% expect to do so by today’s deadline. Five percent (5%) plan to get an extension.

Since I did the taxes for both Kim and I over the weekend, I think I qualified in that 75 percent category. (Surprisingly, I didn’t get screwed but probably screwed myself by giving an interest-free loan to Uncle Sam.) But what I can’t figure out is the 8 percent who are unaccounted for – are those the people who pay estimated tax? Or, were these the people who don’t earn enough to have to file? Way back when I was in college I had that situation, only filing because I wanted the money from my backup withholding back. It may have only been $50 or $100, but it was my money. Otherwise, if 8 out of 100 aren’t filing, that seems like a whole lot of civil disobedience.

Yet while April 15 is the day of infamy when we pay our tribute to the Internal Revenue Service, the real day we’re relieved from this annual burden falls on April 28. That’s the day those of us working in the Free State since January 1 finally pay our debt to the federal and state governments, according to the Tax Foundation. (Those of you reading across the line in Delaware are relieved a little earlier, this Friday the 18th as a matter of fact. Go out and tip a 16 Mile or Dogfish Head to celebrate.) Meanwhile, the state where Anthony Brown was endorsed to lead doesn’t have Tax Freedom until May 9, so he would feel right at home there in Connecticut.

Naturally, the whole idea of filing a return is one of aligning what the government thinks you should owe (and takes out of your paycheck) with the actual amount due after all the calculations are done. They don’t really mind sending your money back – or adding a little extra to that amount if you qualify for the earned income credit – but heaven help you if you owe them more than a few hundred dollars. They’ll have the audacity to penalize you even more money then! Unfortunately, that doesn’t work both ways, but most people believe they’ve pulled one over on the feds if they get a few thousand dollars back. $5,000 looks great as a lump sum, but if people were smart they’d work it in such a way they get the extra $100 a week. (That’s not always possible, though – again, the government sets the withholding rules and I’m sure they’re not doing it for us to accrue a benefit.)

Many of us live our lives in order to avoid paying taxes one way or another. But wouldn’t be easier if the nation did what several states have already done and decided to live without an income tax? I think the FairTax is a pretty good idea myself and talk about it always peaks this time of year. While nothing can be done about until 2017, why not lay the groundwork for doing something more than talk?

The demise (and rebirth) of manufacturing?

Those who hold power in Annapolis continue to talk about bringing back manufacturing jobs, but the path toward making Maryland a major player again in that field begins with making a number of changes. So says gubernatorial candidate Ron George, who put out a stark criticism of the O’Malley record:

The O’Malley/Brown administration has abandoned the working man at the time when manufacturing companies are relocating back to the US and looking for a hard working, well-educated workforce. Our progressive tax system, from the sky high property tax rates in Baltimore City to the equipment tax that is four times the national average, has positioned Maryland as the worst state in the country for manufacturing.

Manufacturing accounts for a significant percentage of new jobs for workers with less education and experience in the workforce. I am working to reform education in our urban centers to direct and expose our young people towards careers requiring a trade or specialized certification.

George cites a Tax Foundation study which shows Maryland lagging behind its neighbors; indeed in several aspects of the study our state was dead last. (Oddly enough, though, Pennsylvania fared worse overall than Maryland – its recent good job fortune comes with its farsighted decision to exploit its underground resources.)

I found this interesting on the heels of a recent op-ed by Scott Paul, the president of the Alliance for American Manufacturing, which chastised the Obama administration for a slow growth in manufacturing jobs nationwide. Paul concludes that:

Too few of our policymakers have considered the consequences that came with losing a third of our manufacturing jobs in the last decade. This economic recovery has not worked for the middle class; but a real one will occur when we begin to revalue manufacturing’s place at the heart of it.

Ironically, this op-ed came out on the same day leading Democratic contender Lt. Gov. Anthony Brown skipped a Maryland manufacturing conference.

So why can’t Maryland be a leader in making things? It would certainly be good for diversifying our state’s economy, which seems far too dependent on the federal government. Rather than pushing the pencils inside the Beltway, we should be making them in Hagerstown, Elkton, or any of a number of small towns which could use the employment. Of all the GOP candidates, Ron has probably devoted the most thought to the process. I also applaud the implied endorsement of vocational programs which are sorely needed in this day and age, giving people the skills necessary to not only become useful workers but also potential entrepreneurs and teachers of skilled trades.

Yet there is one thing missing in George’s idea; admittedly, no one else has really considered it either. There are several modes of transportation available for goods produced in Maryland; for domestic consumption we have reasonably good (if somewhat traffic-choked) north-south highways in I-95 and I-81 with an alternate coastal route of U.S. 13 through Delaware and the Eastern Shore. Unfortunately, transportation to the west is somewhat more problematic, with the meandering I-70 being the best bet. There is also rail transportation available, along with a oceangoing seaport in Baltimore to export goods and more limited facilities in Salisbury for barges. (Obviously there are airports as well, but generally manufactured goods use other means of transport.)

Maryland needs to position itself as a state which has a relatively good location between the metropolis of the Boston-Washington axis and the growing region of the Sun Belt, a workforce which is better educated than most, and – most importantly – a mindset I’m going to borrow from a former Republican governor of my home state, James Rhodes: “Profit is not a dirty word.” Let businesses come and make some, rather than confiscate the fruits of their toil as Maryland seems most willing to do.

Let’s face it: with the government we have in place, both in Maryland and nationally, the middle class is being phased out. There are a few on the top with all the cronyism and connections, a small (but growing) cadre of government minions who get their wealth from writing the rules which allow the upper crust to stay where they are at, and a huge number who have become the serfs of this modern-day feudalism. When America made things, it had a middle class and everyone benefited. It’s time to bring it back through leadership with an eye toward that goal.

Maryland treads water in two key reports

Crossposted from Watchdog Wire – Maryland.

In a nation where each state can (somewhat) determine its own destiny through the laws and regulations they adopt as well as the promises made to its citizens, two reports that came out this week determined the Free State needs a lot of improvement in both present and future policy.

The 2014 edition of the Tax Foundation’s State Business Climate Tax Index showed Maryland in a familiar position: lagging in the bottom ten of the country alongside a roster of states which mainly share the similarity of Democratic-controlled governments. For the second straight year, Maryland ranked 41st overall, with its lone bright spot an 8th-place rank in the sales tax category. While Maryland has a 6 percent sales tax rate, higher than several surrounding states, the complex calculations performed by the Tax Foundation give our state a better score. Ironically, applying the sales tax to gasoline, which the state began collecting on July 1st, may have proven politically unpopular but bolstered the state’s ranking in the eyes of the Tax Foundation.

As the report points out, however, a state can assist itself practically overnight. Despite its 44th place ranking, upcoming changes in North Carolina promise to vault the state into the top twenty in coming years:

While not reflected in this year’s edition, a great testament to the Index’s value is its use as a success metric for comprehensive reforms passed this year in North Carolina. While the state remains ranked 44th for this edition, it will move to as high as 17th as these reforms take effect in coming years.

One can speculate, then, that if a governor came to office willing to decrease the state’s corporate income tax – as many candidates promised to do at a recent manufacturing summit – and could make other key changes to the system, Maryland could place itself into a position at least competitive to its neighbors. While Delaware remains a top contender at #13, other surrounding states are in more pedestrian positions: West Virginia ranks 23rd, Pennsylvania 24th, and Virginia – somewhat surprisingly, given Martin O’Malley’s grudge against all things Bob McDonnell – is 26th.

Maryland may need to look into changing its anti-business policies soon, since another study from State Budget Solutions regarding unfunded public employee pension liabilities found that Maryland is staring at over $110 billion in promises made. This report, entitled “Promises Made, Promises Broken – The Betrayal of Pensioners and Taxpayers”, found that just 34 percent of the various pension programs (in Maryland’s case, these are the State Pool and Municipal Pool of the State Retirement and Pension System along with the Transit Authority Pension Plan) are currently funded. In actual dollars, the unfunded portion is just over $73 billion.

However, when compared to the rest of the country, Maryland fares a little more toward the average. While their 34 percent funding ratio ranks in a tie for 30th among the states, the percentage of GDP represented is 19th overall. Despite itself, Maryland has the potential to grow out of the problem if corrective measures can be taken. Indeed, $73 billion is certainly a lot of money – by comparison, the entire FY2014 state budget weighs in at just over $37 billion – but consider that Ohio, with roughly twice Maryland’s population, has a hole of $287 billion to fill. (Ohio’s funding ratio, however, is just about equal to Maryland’s 34 percent figure.)

Across the country, the amount promised to pensioners by states is staggering: over $6.7 trillion is pledged to retirees, with only $2.6 trillion in the bank to cover them. But it’s a small ticking time bomb of debt when added to the arsenal of unfunded federal liabilities that may be over $100 trillion.

It will take a lot of tax reform and GDP growth to make good on those demands.

A rarity: IRS reverses course

After a number of people (including certain members of Congress, a group which likely included Andy Harris) raised the question, the Internal Revenue Service decided not to drop beyond the 2010 tax year an important research tool people like Jim Pettit and Change Maryland were using to track the inflow and outflow of income and tax filers between states. You may recall that earlier this summer Change Maryland used the IRS data to throw cold water on Martin O’Malley’s claims of Maryland’s great economic recovery, and I expanded on it to make the case that county policies could be to blame as well.

Jim was kind enough to bring this item to my attention, though. In the piece on the Tax Foundation blog, Joseph Henchman writes:

…the data is vital to seeing trends and using economic tools to measure what might have caused them. (States like California, Illinois, and Maryland have also found the data embarrassing, as it shows negative net migration year after year.)

The prospective absence was also noted in the Washington Examiner:

Americans deserve as much information as possible about how each (taxation) model is serving its citizens. It would be a shame if the IRS stopped reporting which model Americans are choosing.

The theory, of course, is that people are fleeing high-tax states like California, New York, Maryland, and Illinois (all generally run by liberal Democrats) to relocate in less punitive places such as Texas, Florida, Tennessee, the Carolinas, and even Delaware in search of a better tax climate.

As it turns out, the IRS is actually committing itself to working with the Census Bureau to, “develop additional migration statistics that take advantage of improved methods.” Obviously the proof of that will come with the release of 2011 data, which will likely see the same trends which have established themselves continuing in many cases, but may also reflect the resurgence of particular states which have taken steps to curtail government spending and focus on job creation through retaining and attracting businesses by making themselves over: in particular Ohio, Wisconsin, Michigan, and Pennsylvania. All of those states replaced Democratic governors with Republicans.

Although there’s no guarantee Maryland would greatly improve simply by replacing Martin O’Malley with a Republican like (in alphabetical order, not necessarily order of preference) David Craig, Charles Lollar, or Blaine Young, we could perhaps at least slow things down to avoid a further train wreck. Now if the Republicans pick up 28 seats in the Maryland House of Delegates and an even dozen in the Maryland Senate – admittedly a Herculean task at the very least – then we may start to reverse the slide. I can think of a few dozen Democrats who richly deserve to be thrown out on their collective rears; unfortunately they’re in relatively safe districts because the sheeple there prefer to vote against their best interests.

But keeping that IRS data stream going can help us state our case. Let’s see how they respond now that the pressure’s been put on.

The understanding of ‘trickle down’

Well, I guess this old Senate candidate won’t fade away; then again despite celebrating a birthday yesterday Dan Bongino really isn’t that old. He showed once again his economic chops in a statement yesterday:

Maryland is preparing to take the gold medal in a competition only a fool would want to win. If we go over the “Fiscal Cliff”, my home state of Maryland will see an incredible $7,000 tax hike for a family making just the median income, according to an analysis by the Tax Foundation. This dramatic tax hike ranks as the highest amongst the 50 states and would do untold damage to the state’s already fragile economic environment.

Noticeably absent from the 2012 campaign conversation was the real economic impact of these dramatic tax hikes on families living in high cost-of-living states such as Maryland. Disposable income simply does not buy in Maryland what it purchases in lower cost-of-living states and when combined with our total tax burden, it is creating an unsustainable economic environment. Nearly 40,000 Marylanders have fled the state since 2007 and the exodus stands to worsen without a change in course.

This tax hike on the “Rich” political pitch is a red herring designed to further a political agenda, not an economic one. It is time for the President to lead, the campaign is over and the country needs a President, not a politician.

Good luck with that last sentence. But there are a couple points which Dan misses here.

It’s assumed that Maryland is a among the wealthiest of states, and as an average that’s probably true because so much of the population lives along the Beltway and, quite frankly, living off the federal government is most lucrative when you’re an employee or employed by someone who depends on the same sort of skilled labor and has to compete salary-wise. But come out here to the “shithouse,” as the late Governor William Donald Schaefer once referred to the Eastern Shore, and you’ll find that the tax increases may not exact the same amount per capita but will make it even harder to live a reasonable lifestyle. Those of us in the lowest of tax brackets will see rates increase 50 percent, and it has to be granted that the 13.1% rate hike endured by the top bracket will look paltry by comparison.

The other point Dan left incomplete was mentioning not just those who fled Maryland, but their economic status in comparison to those who arrive to take their place. Several months ago Change Maryland released figures showing these differing numbers and I parsed them to find out the net outflow of income is real despite a slowly growing population. Obviously there are some places where the difference is positive, but the lower performing areas tend to be the poorer ones.

All in all, though, this is another excellent analysis from a guy who’s not choosing to stay quiet after a crushing defeat. I’m not sure why we would have expected otherwise.

This also gives me the opportunity to bring up an event Dan will be a featured speaker at next month. The Turning the Tides 2013 conference will be held in Annapolis at the Doubletree Hotel (site of several past state GOP conventions) and details can be found here. Along with Dan we’ll hear from state and national luminaries like Jim Rutledge, Ken Timmerman, gubernatorial candidate Blaine Young, Pamela Geller, Stanley Kurtz, and many others.

Bonus research

I was writing something the other day as a possible addition to another venue, and in doing the research kept the link on my bookmark bar for future reference. Well, as it turns out I didn’t need the extra research for the other piece but I wanted to make my point on the subject. So here are more of my thoughts on the prospect of an additional Maryland gasoline tax – something I originally visited in January.

The two pieces I found were comparisons – one being the current gasoline tax table provided by the Tax Foundation which shows Maryland’s gasoline tax rate is currently tied for 29th among the 50 states. The second is an older comparison table that I found, and the reason I wanted it was to determine where Maryland’s gasoline tax ranked among its peers when it was adopted in 1992. (I couldn’t find 1992, but figured 1994 was close enough.)

It’s quite telling to me that back in 1994 our state had one of the highest gasoline tax rates, with only a handful of states charging more: Connecticut, Montana, Nebraska, Nevada, Oregon, Rhode Island, and West Virginia. Worse yet, only Montana, Nevada, Rhode Island, and West Virginia charged more tax on diesel fuel. In 1994 our taxes were a full 30% higher than the national average, but because states have began to add various other fees and local tariffs we remain above the average insofar as excise tax is concerned but slightly below the mean in overall taxation per gallon. Apparently 20 years is long enough and we have to break out of the pack and lead the country once again.

Since several states now add various amounts of sales tax to the price of gasoline at the pump, it’s difficult to accurately say just where Maryland would rank if gasoline prices were significantly higher or lower than they are today should they adopt Governor O’Malley’s idea of an additional sales tax phased in over three years. But it’s obvious we would be paying more at the pump regardless of the price – even if Newt Gingrich could get gasoline back down to $2.50 per gallon that’s still an extra 15 cents per gallon, or around $2-3 per fillup depending on tank size. At $4 per gallon the fee goes up to perhaps $4-5 for every tankful.

(Note that there’s also a number of alternative plans being floated around for a straight per-gallon excise tax increase, which would make the impact more easily gauged. Adding 15 cents per gallon, as one proposal advocates, would put us just a tick behind North Carolina as the highest-taxing state in terms of excise tax.)

Regardless of what proposal to increase fuel tax is adopted, when combined with the additional tolls being charged by the Maryland Transportation Authority at their facilities (including the Bay Bridge) the cost of getting around via car will certainly jump. By next summer driving across the state from Cumberland to Ocean City and back on a 12-gallon tankful of gas each way may well cost $15 extra in taxes and tolls alone from the price in 2011 – before the new tolls were adopted for the Bay Bridge and other MTA facilities.

The stated reason for the increases are quite simple: the state claims it doesn’t have enough money for road and bridge construction. Yet the MTA toll increases spared the Inter-County Connector and gasoline taxes tend to come down harder on rural residents who have to drive farther to work and shopping. In sum, they tend to serve as a wealth transfer from rural to urban dwellers, particularly in the Washington metro area because the ICC tolls did not go up. Moreover, the tendency for gasoline taxes to be spent on mass transit provides a further shift in prosperity from rural to urban; one particularly galling when a mostly empty train or bus goes by.

The main reason the state “needs” this tax increase, though, is to patch over the holes created by several administrations by raiding the Transportation Trust Fund (TTF). It’s an art which has been perfected by Martin O’Malley because he wasted the $1 billion-plus raised by a series of 2007 tax increases Democrats rammed through the General Assembly on a program of further spending rather than simply addressing the vital functions the state is supposed to provide. So now he and Annapolis Democrats are coming back to the people of the state with hat in hand begging for more, and promising this time they’ll “protect” the TTF. Well, I want the protection first, and a number of bills in the General Assembly deal with this. Unfortunately, Delegate Norm “Five Dollar” Conway and Senator Edward Kasemeyer don’t seem to have much desire to move these bills. But I’ll bet they’ll move that gas tax along in a hurry.

It’s quite likely that over the next few years our gas prices will either be going up at an accelerated rate or not dropping as quickly as they could because the state of Maryland will take a larger bite from our wallet through the gas tax. Maryland doesn’t seem to want to be a national leader in anything except loony liberalism and high taxation, and the controversy over highway funding provides another perfect example.