Will 2011 be another 2007?

With Martin O’Malley as governor, I’m afraid the answer is yes.

Brian Griffiths at Red Maryland questioned why the Maryland Business Tax Reform Commission, which was created as part of the 2007 Special Session, suddenly decided to begin meeting and taking public testimony in the wake of the election – where were they over the last several months, he asks.

In part this is thanks to a bill introduced last year which changed the original law and decreed the MBTRC has to complete its work by the end of this year, so the accelerated pace may be a natural outgrowth of that prospect.

But Griffiths naturally assumes that Martin O’Malley is going to use whatever they say as a pretense to club Maryland businesses with a tax increase. After all, if O’Malley wins he’s a lame duck who’s going to spend the latter half of his second term attempting to position himself as a contender for the 2016 Democratic presidential nomination, whether as successor to Barack Obama or challenger to a Republican president.

Of course, one selling point for him will be the shape Maryland is in when he leaves office and he’s extremely fortunate to have the job creation machine of the seat of federal government right next door. Is is any wonder the battleground of this election is MoCo and PG County? What happens to the the areas of Maryland outside the I-95 corridor will be barely noted and not long remembered by the MOM spin machine. We don’t need those icky chicken farms in our state anyway.

But as long as the federal government is hiring, it places businesses in a position where they have to grin and bear whatever tax increases are created just as long as they can access a relatively affluent market in MoCo and PG. It’s the rest of the state, particularly the areas close by state borders, where employers will be effectively told to pound sand.

Of course, there won’t be a need for a Special Session this time around because O’Malley won’t have the surplus he was handed in 2007 to cushion his first budget. They’ll get right to work in January attempting to chisel more revenue out of the state’s producers and redistribute it to the illegals and so-called working families. (That term only seems to apply if the worker toils in a union shop – all others need not apply.)

I’m not going to say that things will be easy if Bob Ehrlich wins – that is unless we have an unprecendented shift in the General Assembly which would see the GOP gain 34 House seats and 10 Senate seats to place themselves in the majority for the first time in, well, ever. But at least Maryland businesses would have a fighting chance.

A list of tax raisers

This is an extended version of an article I feature today on my Examiner.com page. Feel free to read it as I get takes on the proposed “dime-a-drink” tax from three candidates for Delegate: John Hayden, Dustin Mills, and Marty Pusey, along with State Senate candidate Chris Jakubiak. He and Hayden favor the tax while Mills and Pusey are opposed. Then come back for my argument on this.

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John makes some good points, but there are two items he didn’t consider. One is that sin taxes generally don’t bring in the revenue promised, and even the fiscal note for the 2010 Senate bill notes, “to the extent that the tax increases proposed by the bill result in a higher incidence of cross-border sales activity than is accounted for in the estimate, revenues would in turn be lower than estimated. This would most likely apply to the sale of distilled spirits, since these sales are likely to be more price sensitive than the others.” State beancounters estimated the tax would raise over $200 million but if they count on the revenue and it doesn’t come, who will make up the difference? We will.

Secondly, where does the taxation stop? As proposed, this would be a nearly sevenfold increase in the tax on distilled spirits, over sevenfold jump in the wine tax, and raise the beer tax by a factor of nearly thirteen. If passed, Maryland would have the second-highest tax on distilled spirits and highest taxes on wine and beer in the nation. Is that a way to portray being business-friendly?

What makes me even more incredulous is that Hayden would be representing a district where a significant percentage of that tax would be raised – walk into any Ocean City nightspot during the season and you would see hundreds or even thousands of patrons with a drink in their hand. It’s a highly competitive environment and these businessmen don’t need to give consumers any excuse to take their dollars up to Delaware (where drink taxes are also high but lower than those proposed.)

And while John advocates the drink tax, he stops short at raising the cigarette tax.”Any increase (in the cigarette tax) would be an unfair and harshly punitive tax on addicted smokers,” he said. And a drink tax would be different?

But the largest difference may be in philosophy. Where is it decreed that the government needs to pay for health insurance anyway? Hayden argues that the funding for these programs has to come from somewhere, but perhaps the better question lies in the need to have some of these programs at all. There’s no question that some in society need assistance, but does that funding really need to be from the government and does it need to come in a form which enhances Maryland’s reputation as a high-tax state?

It’s worth noting that many of those who signed the pledge are incumbents, but even for this noble cause they couldn’t be bothered to even have a committee vote on the bill last year – probably because they were afraid to back any tax increase in an election year. If they can’t stand up for principles even though the cause is so right in their eyes, why should we listen to them?

The anti-tax man

While it’s not quite “one for you, nineteen for me” yet here in Maryland, one perception among business owners who remain in the state after the last four years of being battered by a sluggish economy and government less than friendly to their interests is that taxes are simply too high.

GOP frontrunner Bob Ehrlich already promised his effort to repeal the one penny per dollar increase in the state sales tax adopted in 2007 while Libertarian Susan Gaztanaga pledges to phase the sales tax out entirely over 8 years, but fellow Republican contestant Brian Murphy is going farther down the anti-tax road.

In a series of press releases this month, Murphy has challenged his two main opponents to refrain from raising taxes, vowed to cap property tax rate increases, and revealed a plan to eliminate the corporate income tax entirely. Taken at face value, one would be led to assume that Murphy would also have to make deep cuts in Maryland’s budget.

(continued on my Examiner.com page…)

Race to the sales tax bottom

In 2007, a special session of Maryland’s General Assembly enacted a slew of tax increases designed to deal with the state’s structural deficit. Among them was a 20% increase in the sales tax rate, which increased from 5 cents on the dollar to 6 cents.

For years, merchants along the Eastern Shore have complained about the disadvantage they labor under because Delaware businesses charge no sales tax. It’s no accident that the seaside resort of Rehoboth Beach has also become a shopping hub. Or take a drive north from Salisbury along U.S. 13 and you’ll notice a number of stores selling big-ticket items located just across the border. While Maryland residents who buy items in Delaware are supposed to remit a tax to Maryland, the law is rarely enforced.

(continued on my Examiner.com page…)

Solutions to our problems

Tonight Wicomico County Councilman Bill McCain hosted a townhall-style meeting designed to solicit solutions to the county’s present and upcoming budget woes. While yesterday’s Daily Times article pointed out that McCain was looking for suggested possible fixes, many of the nearly two dozen speakers had a single message: taxes are too high and they couldn’t afford anymore increases there. “Stay within your budget,” warned resident Kay Gibson.

A number of speakers echoed their personal economic struggles; resident Ed Nelson said it well when he noted, “times are tough for everyone.”

But Bill was blunt: “you will have serious, serious services eliminated in Wicomico County” next year – “what are you willing to give up?” He continued, “we need to do things differently…unfortunately, we have capped ourselves on the revenue side.”

McCain is in somewhat of a unique position, as the FY2011 budget will be the last he’ll have input into – he’s chosen not to seek re-election, maintaining his original plan to serve one term. But he was determined to maintain his home and business here, so it’s obvious McCain is planning to stay involved. Two other council members who would presumably maintain their positions, John Cannon and Sheree Sample-Hughes, were also in attendance.

The county’s Board of Education was also a favorite whipping boy of some. Many speakers advocated the accountability an elected school board would provide.

On that note, all three Council members present were put on the spot by questioner Joe Collins, who wanted to know how they stood on an elected school board. McCain was a firm “no,” citing the “diverse” school board we presently have. Cannon and Sample-Hughes held their cards closer to their chest, with John stating a “70-30” likelihood of support and Sample-Hughes wanting to study the particulars more – she did indicate her district was relatively supportive as was she on a personal level.

While a number of speakers commented on the revenue cap and didn’t want to see it go away, a couple observers pled for “investment.” Mark Cullen, representing the county’s volunteer firefighters, pointed out that the $4 million provided by the county covers less than half of the expenses. Instead, we’re “burning our personnel out doing fundraisers.” (Surely there was no pun intended.)

County resident John Groutt blasted the “simplistic” solutions offered by the number of “TEA Partiers” in the audience and preached “we need to invest in our children.” We also needed to address the issue of sprawl. On the other hand, it was also properly pointed out that areas which tax heavily tend to have difficulty maintaining businesses and jobs.

Most of those commenting were critical of the county’s current spending, but there were a number of good ideas pitched for consideration. Among them were:

  • Hiring a full-time auditor. The problem is that the county’s charter dictates the auditor be a CPA but the salary may not be sufficient.
  • Rein in the liquor control board.
  • Make union negotiations public as they are in Calvert County.
  • Eliminate the two at-large County Council positions.
  • Eliminate the County Executive’s Public Information Officer.
  • Instead of layoffs being the “last resort” they should be the “first resort.”
  • Replace the revenue cap with a tax rate cap, with exemptions for those on fixed incomes.
  • Rescind the increase in teacher’s retirement benefits.
  • Verify that all measures called for in the 2002 Parsons study are being followed.
  • Selling off any surplus land the county owns (my idea.)
  • Perhaps collecting some sort of tax on property owned by Salisbury University (also my idea.)

It’s worthy of note that in the last decade Wicomico County went from having the fourth highest property tax rate in the state to the fourth lowest. And if you consider education, public safety, and public works as “core functions” of government, McCain said that we spend 76% of our budget dollars on those items.

There’s no question that severe cuts will be seen when County Executive Rick Pollitt releases his FY2011 budget April 8th. But the dialogue tonight seems to suggest that raising taxes is going to be out of the question for overburdened county residents who will likely see tax increases on the federal and state levels.

A tax increase may be in the bag

As of the first of the year, shoppers in Washington, D.C. were forced to drop an extra nickel into the till for each paper or plastic bag they used when going to the store. Store owners collected a share of the tax, but the true intent of the proceeds was a fund to help clean up the Anacostia River.

While the ban has caused some confusion among District shoppers, what truly matters to their local government is the estimated $3.5 million in revenue created by the new tax. With dollar signs in their eyes, some Maryland legislators in both the House of Delegates and the Senate want to get in on the taxation action with proceeds going (of course) to the Chesapeake and Atlantic Coastal Bays 2010 Trust Fund. The fiscal note with these bills posits a possible windfall to the state of $7.8 million based on a number of assumptions – very tempting when this is a fee easily buried within the overall cost of grocery shopping.

(continued on my Examiner.com page…)

Maryland GOP: ‘Told you so!’

Unfortunately, sometime awhile back I already used “in the category of ‘duh'” and I didn’t wish to use it again. But, surprisingly, the best-laid plans of Martin O’Malley and Free State Democrats didn’t work, and Maryland Senate Republicans didn’t hesitate to point this fact out:

Final tax data from 2008 now proves what many predicted but had been strenuously denied by Democrats in Annapolis: Maryland’s high income earners are voting with their feet.

In calling a special session for the purpose of passing an historic tax increase less than a year after his election, Governor Martin O’Malley changed Maryland’s personal income tax from a flat rate to a graduated system with a surcharge on high income earners. During this 2007 special session, Republican Senators opposed these tax increases and forewarned that the net result would be revenue losses as this mobile segment of the population relocated their primary residences.

Wall Street Journal editorial writers agreed in a May 2009 opinion entitled “Soak the Rich – Lose the Rich”  that described how the misguided budget policy of the O’Malley Administration would lead to outward migration of the very segment of the population that a state wants to keep for a healthy, progressive economy. In response, Democrats in Annapolis produced their own analysis attributing the loss of high income tax filers to the normal slack-off of annual returns.

Now the late filers have completed their returns and final numbers have been tallied. Instead of $106 million of new revenues predicted by O’Malley’s budget office, Maryland saw a decline of $257 million – for a total gap of $363 million. This is just part of the problem created by O’Malley that results in continuing out-year deficits over $2 billion each year.

It’s bad enough business is down for society’s producers, but then they get slammed with a tax increase and figure out that Maryland may not be such a green pasture after all. Why do you think that hundreds of professional athletes, entertainers, and the like live in Florida and Texas? (Hint: yes, the weather is nicer but there are places with even better climates.) Could it be the fact those two are among a handful of states which don’t have a state income tax? (The others are Alaska, Nevada, South Dakota, Washington, and Wyoming.)

I don’t know if they tried this again this session, but last year some Democrat geniuses tried to introduce a bill that would consider 3 months per year as enough time to qualify for Maryland residency for purposes of taxation. It didn’t go far, but this is how many Democrats think – they can’t bear to have anyone here making more that what they deem as a “fair share.” Playing the class envy card has gotten them this far so they aim for continued success.

In the last three years, we’ve all endured an economy which can best be described as a difficult one. Yet those who were affected by the “millionaire’s tax” are those who most likely still have the means to uproot themselves and move to more tax-friendly states like Florida and Texas. And guess who’s the loser? State government.

The state did just fine without a so-called “millionaire’s tax” as well as their other tax increases until Governor O’Malley came in and wanted to prime the state spending pump. (Governor Ehrlich did so as well with his final budget; until then his increases were relatively sustainable.) Throw in a larger share of federal dollars being required to maintain the state’s appetite for services and you have the situation we are in now. Imagine how Democrats must feel to be forced into the box of having to make cuts in an election year – think they’re not inwardly seething?

We have a choice in November. One choice is to take a hard look at what are priorities are and tailor a leaner, smarter budget to match. The other will be a repeat of 2007, where no tax increase will be taken off the table – we could see increases in the gas tax, income tax, sin taxes, sales tax (and services subject to it), and a whole multitude of other fees and levies.

Being a fiscal conservative, I prefer the former. But part of getting that will be looking past the class envy, a favorite divisive tactic of Democrats everywhere, and deciding it’s time to make a stand for maximizing our freedom.

Ideas for the right direction

On Thursday the BrinkleyPipkin budget reduction act (in Maryland that’s SB1004, Budget Reconciliation and Balancing Act) had its hearing. When I got the release on this hearing this was the part which jumped out at me:

The Brinkley-Pipkin budget reduction act had a hearing before the Senate Budget and Tax Committee today. By taking significant steps to further reduce spending in this year’s budget process, the Brinkley-Pipkin plan buys additional time to constrain spending to the existing available revenues without the need to raise taxes.
 
A key feature of the plan is the elimination of built-in statutory increases in state programs. This feature and an additional $75 million in spending constraint over the next three years would allow current revenues to “catch-up” with spending, thereby bringing ongoing spending and revenues into balance.

Many lobbyists and county officials testified today against additional cuts to state spending. Representatives of unions also opposed the Brinkley-Pipkin plan of additional cutbacks including the removal prevailing wage from state projects. The majority of citizens and taxpayers who testified supported all efforts to cut back government overspending. (Emphasis mine.)

So once again we have the government and big-government interests (i.e. the lobbyists) vs. the people. The information I was provided also had a chart showing the difference between our current budget path (which will certainly lead to higher taxes) and the Brinkley-Pipkin projections.

In theory, at least, the Republicans’ proposal not only balances the budget but creates a small surplus.

Obviously the counties were there to argue that the budget would be balanced on their backs and perhaps they have a point. But this should also lead the local governments into an effort to prioritize what services they wish to deliver, with the public being involved by determining how much they want to pay. For example, it would fan the flames of the ongoing debate here in Wicomico County regarding the revenue cap the county currently employs.

Government cannot co-exist with a free society as a cure-all. Every dollar taken out of your pocket to pay for services they wish to deliver is a dollar that you cannot use as you wish, despite the fact it was freely given to you. (In more and more cases, however, that dollar was given to you by the same government who wishes to take it away.)

It’s way beyond time to consider that role government has to play and amend it accordingly. Maybe not all of the cuts in the Brinkley-Pipkin proposal are wise, but they can begin this vital discussion of the role our state government plays in our lives.

Robbing Peter (and John, David, Mary, etc.) to pay Paul

One criticism I’ve had about Maryland’s budget system is its lack of flexibility. There are a lot of money pots out there besides the General Fund, and Martin O’Malley seems to want to take money out of every one of them to balance his FY2011 budget. This from Americans for Prosperity:

As you know, the Senate Budget & Taxation Committee will be holding a public hearing this Wednesday on SB141. This bill, the Budget Reconciliation and Financing Act, will transfer nearly $1 BILLION from the state’s 382 special funds to cover Gov. O’Malley’s budget deficit.

(snip)

One of the funds Gov. O’Malley is proposing to raid is the Transportation Trust Fund (TTF). Started in 1971, the TTF is the account used to pay for road, bridge and infrastructure repairs. It is primarily funded by the gas tax – each time you fill up at the pump, you are contributing to road repair…or so you thought. This year, O’Malley has decided to take $125 million of those taxes and use it to paper over his $2 billion deficit.

Stealing from the Transportation Trust Fund becomes even more problematic next year, because the TTF is already under-funded. When the fund runs dry you can bet that the liberal politicians will want to raise taxes. Senate President Mike Miller has been pushing the idea of a gas tax hike for the last few years.

Another fund that O’Malley has decided to attack is the Injured Workers Insurance Fund (IWIF). IWIF is a low-premium insurer for many businesses who provide workers compensation to employees. It is financed by the premiums each policy holder pays on a quarterly basis.

Not only is the legality of the state confiscating $26 million from a private insurance company in question, but this move will hurt small businesses. Again, when the fund is drained, the premium rates will rise to replace the stolen revenue.

Small businesses are the engine of our state economy – they employ nearly two-thirds of the workforce in Maryland. If we expect an economic recovery with job growth, the government cannot continue to put undue burdens on businesses. The last thing small businesses need right now is to be paying higher insurance premiums or gas taxes.

382 special funds in the Maryland budget? WTF? Anyway, the Maryland Senate Republican Caucus also weighed in:

Entering the 2010 legislative session, there were few remaining reserve funds left to tap. They have all been depleted. O’Malley has exhausted all available reserves except for the Rainy Day Fund. Tapping the Rainy Day could jeopardize the coveted Triple A bond rating which would cause great embarrassment to the administration.

So O’Malley turned to the Injured Workers Insurance Fund to tap a reserve of $20 million. Problem is – the IWIF reserve is not state money. It is not taxpayer dollars. Instead it is overpayments of insurance premiums from small businesses throughout the state.

Then is it legal? A 1968 opinion of the Attorney General’s Office states that reserve funds of the State Accident Fund (IWIF’s predecessor) are not state funds accessible for general purposes. Established as a nonprofit insurance company, IWIF is a quasi-public agency and state use of insurance overpayments as a fund swap would be unconstitutional.

To cover their tracks, the O’Malley Administration has now introduced bills (Senate Bill 507 and House Bill 1008) that would give the Governor authority to transfer the $20 million this year just as long as it’s never done again. Go figure!

So, not only do we have the BRFA bill but now another bill in order to fix things for this year. Sheesh.

The larger question is what we’ll need to do next year to fill in all of these pots. With the federal portion of the state budget now eclipsing 60 percent, one would think that Barack Obama may bail out his cohort if he’s reelected this November. But with these funds come strings and that lack of flexibility will probably preclude O’Malley being able to make up the shortfalls with federal money next year.

Three years ago, Governor O’Malley called a Special Session to address this issue and its result was a number of tax increases which were supposed to correct the state’s structural deficit. However, the increase in the sales tax, cigarette tax, and a (since-repealed) “tech tax” on computer services were counterbalanced by a huge increase on spending which attempted to bring health insurance to thousands more Marylanders.

To the surprise of everyone – except those with a little bit of economic common sense – these new levies didn’t bring in as much money as the so-called experts predicted. In all that’s not so bad, but other previous taxes like property and real estate transfer taxes also declined. Making matters worse (but certainly not unexpected) is the outflow of capital due to the “millionaire’s tax” – again, from the Senate GOP Caucus:

According to an Associated Press article posted at Examiner.com, Montgomery County has experienced a 27% decline in tax returns from high income earners. This decline has contributed to a loss of $4.6 billion in taxable income: “County Executive Isiah Leggett says some wealthy residents who own homes in other states are establishing residency elsewhere. Officials believe the state’s millionaire tax is a factor.”

You think?

Unlike the perception progressives attempt to create about TEA Partiers as people who want to get government services without paying for them (a description more apt for Democrat voters,) most don’t mind paying a fair share in taxes. But what we want in return are efficient services which perform necessary functions, and too often we find that government at all levels fails to deliver on one or both sides of the equation.

If Martin O’Malley truly decided to live within his means, he would gain the intestinal fortitude to make cuts such as the insurance program he started. Obviously it’s a decision which affects a large number of people, but so would increasing taxes and fees. Raising the gas tax, for example, would disproportionately affect poor and middle-class Free Staters and rural residents like those on the Eastern Shore would pay more of a toll than city residents along the I-95 corridor.

One issue sure to come up in this year’s campaign will be fiscal accountability, and while Bob Ehrlich wasn’t the poster child for frugality the state was in much better financial shape when he left office than the potential mess he inherits should he be re-elected for a second, non-consecutive term.

Perhaps a solution would be to bring in some solid fiscal conservatives for the General Assembly in with Ehrlich, hopefully to keep his free-spending tendencies in check. Mark my words, if Martin O’Malley is reelected 2011 will be a rerun of 2007 – a session devoted to raising taxes and killing off whatever recovery the state is scratching out by then.

Rutledge gives his report

I’ve given quite a bit of attention to U.S. Senate candidate Dr. Eric Wargotz of late, but there’s others in the race – I’m particularly interested in finding out more about former Delegate Carmen Amedori.

But the other day I received my first “Rutledge Report” in my mailbox and one passage jumped out at me:

In (the) 1920s President Harding faced unemployment numbers doubling from 2.1 million to 4.9 million, excessive governmental interference in the market creating a 24% plunging gross national product, and $25B national debt.  By taking a hard stance, he reduced government spending in half, cut taxes, and watched unemployment numbers drop to a low of 1.8% in 1926.  (Not-So-Great Depression by Jim Powell.)

Today we face similar problems the country faced at the beginning of Harding’s administration. Unfortunately Congress continues to pass legislation creating more government jobs, increasing the national debt and the burden on tax payers.  Businesses have frozen plans for growth because the uncertainty of future costs of hiring an individual. 

We need to follow Harding’s example.  To create jobs and reduce unemployment we must take two simultaneous steps NOW: cut taxes and cut government spending!  We can kick-start the economy by abolishing the capital gains tax and the inheritance tax.  This will keep the money in the hands of the consumers and businesses giving them the freedom to choose their own path forward.  A simultaneous cut in government spending, and not just a freeze, will free-up revenue to pay off the ever growing national debt.

The road ahead is tough and Americans do not back down from challenges!  Now is the time for action – cut taxes and cut spending.  Place into office candidates willing to lead Americans down the tough road.  We can and will get through this together.

While I admire the Senatorial candidate giving a little love to one of my home state’s native sons, perhaps he needs a little bit better research. President Harding died in 1923, so Calvin Coolidge became President. Coolidge served out the remainder of Harding’s term and won election in his own right in 1924, pounding Democrat John Davis and Progressive Party candidate Robert LaFollette by securing over 54% of the vote. (This was back when the colors were proper too as this electoral map shows.)

Anyway, those policies began by Harding were continued by “Silent Cal” and some of this prescription could be enacted today. The biggest difference, though, is that the federal government of Harding’s era didn’t have nearly the entitlements our modern day government has – these Republicans has no Social Security, Medicare, or Medicaid to deal with (let alone legions of regulators in a number of agencies.) The Washington of the 1920’s was still a sleepy Southern town.

But we can and should cut spending and taxes. The Americans of the roaring ’20’s enjoyed great economic prosperity, at least until the stock market crash in 1929 (essentially, a price bubble similar to that in real estate or dot-com stocks.) What turned a simple market correction into a depression, though, was enacting the steep Smoot-Hawley Tariff in 1930.

The current set of economic doldrums can be traced in part to a different sort of government intervention and lack of oversight as Democrats prevented a probe of Fannie Mae and Freddie Mac several years ago. Once the housing bubble burst, our financial house of cards tumbled down and government overspending has been of little help in resolving the problem.

So why not harken back to Harding for solutions? Just stay away from influence-peddling (as in the Teapot Dome scandal) and things could be all right.

Observations on the Conway-Mathias townhall meeting

Even with a camera-shy person, the attendance on Saturday wasn't half-bad for this townhall meeting.

On Saturday I was joined by about two dozen others – among them seemingly half the local blogger community – who wanted to pepper local Delegates Norm Conway and Jim Mathias of District 38B with questions about the direction this state is going and just what they would do to send it in the proper direction. At times this was a very contentious meeting when the questions began to be asked.

First they were introduced by Salisbury Mayor Jim Ireton.

Fellow Democrat and Salisbury mayor Jim Ireton introduced the pair and pitched a new downtown library while he was at it.

Part of his introduction was an appeal to keep the library downtown, but as for Conway and Mathias Mayor Ireton noted that, “one of the reasons I support them is that they don’t vote no for the sake of voting no and they don’t vote yes for the sake of voting yes.”

Mathias began his presentation by stating “I’m just like you in many ways,” pointing out he had been a businessman, vetoed two budgets as mayor of Ocean City, and argued about increasing fees. Along with us, he felt that the state “should have a dependable budget” and asserted that he’d “stand up and take responsibility for the good things we’ve done and the tough things we’ve done.”

Jim seemed very defensive throughout the presentation, and speaking on the budget remarked that “we thought we’d close the (budget) gap (in 2007)…but we didn’t know the ‘great recession’ was on the way.” He made it clear that there were “a thousand sets of fingerprints to blame” so we needed “a thousand sets of hands to lift us up.”

Noting that much of the industry which had once been the backbone of the Shore – companies like Campbell Soup and Dresser – had abandoned the area, those entities which had taken their place like Salisbury University, Wor-Wic College, and Peninsula Regional Medical Center helped take up some of the slack but our number one industry remains agriculture. On that note, Mathias pled the case that they “tried very hard to get building permits for the chicken houses.”

District 38B Delegates Jim Mathias (left) and Norm Conway listen and interact with their constituents at a town hall meeting held February 20, 2010.

Unlike Mathias, who sat throughout the meeting, Norm Conway stood up to give his remarks.

One thing I didn’t know about Conway is that he’d been an elected official since 1970, beginning with the Central Committee and graduating to Salisbury City Council in 1974 before running and winning his current post in 1986. He recounted some of the mentors who had led him into his lifetime of public service as a teacher, school official, and political officeholder.

As a committee head in the General Assembly, he “tried to build alliances…build bridges” as Norm reminded those assembled that the sum total of the Eastern Shore delegation was 13 – 10 House members and three Senators. (Seems like it should be 12 because there are only three Eastern Shore districts – 36, 37, and 38. Point is we have a small delegation.)

Certainly those in attendance had known that Maryland “had some rough times over the last 2 or 3 years” as “revenues dropped off a cliff.” In the last year the Board of Public Works had chopped $1 billion out of the budget – it had been in balance at sine die of the General Assembly last April but once the fiscal year started July 1 things were already behind.

Norm observed, however, that revenues may be finally leveling off. His anecdotal basis of that claim was seeing more people shopping and in restaurants over the last few months, and to him that was “clear evidence” of a recovery.

But now the General Fund budget being debated was less than that approved for FY07 four years ago thanks to the shrinking revenues. Yet the untouchable area has been K-12 education and it was only this year the tuition freeze had been shelved, after three years of no change.

Delegate Norm Conway addresses the voters at a townhall meeting held in Salisbury on February 20, 2010.

As for the actual budget process, this year it was the Senate’s turn to begin the budget process (it alternates yearly between the Senate and House of Delegates.) Conway predicted the budget would be on the floor by the second week of March. One lament Conway had was the difficulty of maintaining funding for roads because once that area was cut it was “tough to catch up.” Yet we had to balance the budget and create jobs since Maryland’s 7.5% unemployment rate, while well below the national average because of the insulation of federal jobs, was still at a “high water mark.”

So far the meeting had gone fairly smoothly and people had listened attentively. Then the questions began.

Local Americans for Prosperity co-chair Joe Collins got the ball rolling by pointing out the examples of Dresser leaving and the Evolution microbrewery deciding to locate just across the state line in Delaware (after considering a downtown Salisbury location) and asking what can they do for the business community?

Mathias, who reminded us he was on the Economic Matters Committee, told us that part of the issue was local regulation. But he and Conway had urged a reduction in regulations, and Mathias called the poultry industry regulations “overbearing.” Jim also called it “embarrassing” that a permit for a fishing pier desired by a local businessman had languished for two years – that owner “should have had it in his hand by now.”

The former mayor also made the complaint that “as mayor, I was closer to a one phone call fix” but the state is a “matrix.” The only group which stays long-term is the bureaucracy.

Collins interjected that it sounded like Mathias was “making the case for less government.” Jim agreed that there was a need for incentives, less regulations, and more opportunity.

Delegate Conway spoke his piece, talking about how the poultry industry could be gone in a decade if things continue on their path, but bringing up the point that he has to work with other members and “help them.” But as head of the Appropriations Committee, “I do” use that as a weapon against the Maryland Department of the Environment in an effort to help local poultry farmers.

So when it was asked what they were doing to get rid of the bureaucracy, Conway pointed out that 400 vacant positions had been eliminated this fiscal year – but that may not be permanent.

Delegate Mathias then pointed out that, “bureaucracy is not just numbers…every business needs to have trained people.” Yet the government will have to continue to shrink, added Jim. Earlier this decade, we were largely in the ‘roaring Twenties’ of the 21st century.

Local businesswoman Sally Jones then asked about unemployment insurance, noting how much it affected her business.

The problem, responded Mathias, was that businesses were moving to a higher table on the unemployment scale and that raises their premiums. One change last year was adding part-time workers to the rolls, a move the Chamber of Commerce supported but Jim opposed (as did I.) But Jim also couched it as an issue between big business (like Wal-Mart, as Jim naturally mentioned) against small business and the NFIB.

Yet I happen to know there’s also a federal impact, as the bailout being proposed comes with strings attached. With Maryland’s fund in peril, the state is looking for an infusion of federal cash but in order to get it they have to “reform” their system (after just doing so five years ago.)

At that point, a questioner asked about illegal immigrants and the fiscal impact they have on our state, but neither Delegate was aware of a financial number and Mathias “doubt(s) my committee” has ever asked for one. Remember, Maryland is well known as a sanctuary state and is adopting a two-tier driver’s license system just for them. (That was a contentious bill, and many Delegates – including Conway and Mathias – asked their name by withdrawn as co-sponsors after numerous changes were made to gut that bill.)

Shifting gears, fellow blogger Joe Albero asked about the death penalty in the wake of the Foxwell case. Conway expressed his support for the death penalty but voted to weaken it in order to make sure it stayed on the books, noting wistfully “they have it where they want it” for now. He’s working on a bill to be heard tomorrow which would add scientific evidence to the criteria where the death penalty can be sought. Delegate Mathias chimed in that there “will be improvements” to sex offender laws and echoed Conway’s support for capital punishment.

Another fellow blogger (and the other AFP local co-chair), Julie Brewington, asked about the gas tax and why so much of it goes to public transit. Mathias said that he wouldn’t support an increase but also countered that “we all know we have to make that contribution” and perhaps change the funding mechanism for fixing roads as cars get more efficient. After our economy finally recovers, this will be “a different country than we know.” (He also had a sidebar about the one staunch Republican who supported Obama’s stimulus plan – that man runs a paving company.)

But here was a case of the quid pro quo which permeates Maryland politics. Delegate Mathias recounted his first votes, which were to override vetoes by Governor Ehrlich of various Baltimore City and County issues. He was going to sit them out (since he never voted on the original legislation) but was reminded by Norm Conway that the items he liked getting as mayor of Ocean City had to have the approval of Baltimore-area legislators to be done. In this case, they support the public transit predominant on the other side of the Bay as a trade-off for things we need.

One item that Conway said has been proposed in the past and could be revisited to address transportation would be a regional sales tax.

Johnnie Miller, a proponent of energy legislation, wondered why renewable energy bills pass the House easily but die in the Senate Finance Committee. He pointed out Delaware is way ahead of us in that area. More interesting was the fact he and fellow advocate John Palmer had written the draft of legislation to be introduced this year (they were only awaiting the legal language to be set) for energy policy.

To address the question, Delegate Mathias pointed out these bills generally come with a “strong fiscal note” which seems to scare off support. (Tellingly he also said, “maybe one day I’ll be on the Senate Finance Committee.” File that under “worst-kept secret.”)

This touched off a long and sort of meandering discussion which eventually returned to jobs and development. While it was pointed out (properly) that renewable energy was only made competitive when subsidized by the government and certain interests were more focused on rent-seeking than energy policy, the philosopical question was asked “how is it that government ever thought they could create development?” To that, Delegate Conway replied that there were a number of public-private projects under discussion but when pressed couldn’t name any local examples.

Delegate Mathias attempted to bail Conway out by postulating that even with the increasing amount of real property now owned by government (such as the ever-expanding Salisbury University and even the newly-purchased Pollitt’s Folly parking lot for the Civic Center) there are still jobs and disposable income being created by them. With all due respect, Delegate Mathias, at what cost to us? (I used that term because Delegate Mathias used it often.)

This is basically how it ended, since the time allotted for the meeting room was only two hours and it was booked for another group. I didn’t get a chance to ask my question, but did say my piece to Delegate Conway about the increasing proportion of the state budget comprised from federal dollars. To him, it was just our money coming back to us but that doesn’t address the philosophical difference I have that the money belongs to us in the first place and all that having a middleman does is keep some pencil-pusher (who may or may not live in Maryland) employed.

There was also a comment made by a guy whose name I didn’t catch which, to sum up, said that we should watch the Delegates in action before being overly critical. Come to Annapolis and watch them work on a Monday night or some other time during the week, he said.

That’s all well and good for a lobbyist or perhaps CASA de Maryland, but most working people in far-flung regions of the state don’t have the time to drive up to Annapolis and watch the legislature grind its sausage. We count on them to do what’s right and what’s proper in being stewards of our taxpayer money.

Instead we get “I’ll scratch your back if you scratch mine” politics, trading favors at the expense of the taxpayer. So much for “One Maryland.”

An annual ritual we can do without

This is the time of year most Americans receive their W-2 and 1099 forms, putting into motion the annual process of calculating the maximum amount they can get back from Uncle Sam.

Before April 15, many Americans will devote hours attempting to make sense of the tax laws for that elusive refund while others simply throw up their hands and hire a tax professional to handle their returns. It’s an industry which fetchingly promises their customers the largest tax refund they can get – if only Americans got an actual return on investment when that check arrived from the Department of the Treasury. Few people who receive tax refunds realize they’re simply being paid back the interest-free loan they gave to the federal bureaucracy the previous year.

Over the last decade or so, a few thinkers have attempted to convince Americans there’s a better way. Steve Forbes based two unsuccessful Presidential campaigns in 1996 and 2000 on the concept of a single-rate flat tax with few deductions, while Rep. John Linder of Georgia has spent the past decade introducing a consumption-based solution dubbed the FairTax to each new session of Congress.

While both methods are long on merits and could easily be adjusted to rates assuring sufficient funds for necessary government programs, there’s one element missing from these alternatives which prevents them from getting traction inside the Beltway or in any state capital.

America’s complex tax code allows Washington to control behavior through reward or punishment. In his recent State of the Union address, President Obama noted, “We cut taxes. We cut taxes for 95 percent of working families…We cut taxes for first-time homebuyers. We cut taxes for parents trying to care for their children. We cut taxes for 8 million Americans paying for college.”

Most readers would nod their head in agreement because these are behaviors which tend to lead to productive lives. But if you become too productive by earning too much money, suddenly you’re a target. And a favorite weapon of Washington insiders is pegging these tax breaks to income, phasing them out if your family’s take-home pay starts to creep over a certain threshold considered “fair” by those in charge. President Obama campaigned on “sharing the wealth,” and if you happen to be someone who makes over $250,000 he considers your wealth his to share.

Yet figures compiled by the Heritage Foundation tell a different tale, noting that the top fifth of income earners saw their share of taxation increase from 81.2% in 2000 to 86.3% in 2006 – on only 55.7% of total income. Even under the Bush tax cuts panned by Democrats as “tax cuts for the rich” the high income earners as a whole shared far more than they made. While either of the proposed alternative methods of taxation would still come down harder on those who make large salaries, they wouldn’t tend to single producers out for punishment.

This fairer, flatter approach to taxation, though, flies in the face of a governmental philosophy that exists to redistribute wealth and thousands of lobbyists who make their living pitching new regulations and tax code designed to benefit those who stroke their checks at the expense of business competitors or political opponents. These are the people who are perfectly happy to maintain a complicated, unfair system where its sheer complexity bullies taxpayers into not taking every allowable deduction and where errant filers are guilty until proven innocent.

It’s a system long overdue for fundamental change, and soon we’ll have the opportunity to elect politicians with the spine to undertake it.

Michael Swartz, an architect and writer who lives in rural Maryland, is a Liberty Features Syndicated writer.

This effort for Liberty Features cleared February 4th.