Thursday, August 25, 2011


Almost every year over the last three decades, Maryland has ranked in the top ten of most heavily taxed states in the country. This is taking a toll on the state's economy: while its state GDP has grown fairly well on average over the past ten years, ranking 15th in the nation, the average growth rate since 2003 has not exceeded the national average at all. In fact, after having been comfortably ahead of the rest of the country in the late '90s and around the Millennium, The Old Line State fell below the average growth rate for states in three of the past seven years. in view of this, it is not a very good idea to raise taxes. But as the Baltimore Sun reports, that is exactly what Governor Martin O'Malley has in mind:
Gov. Martin O'Malley said Maryland must be open to new taxes to address the state's budget problems next year, and he cautioned that the state must be prepared for serious ripple effects from potentially deep budget cuts by the federal government. O'Malley, who gave his annual speech to the summer conference of the Maryland Association of Counties in Ocean City Saturday, cited three primary shortfalls. The first is a state budget deficit of about $1 billion. He also said action is needed to maintain sewage treatment upgrades in the state. The governor also highlighted shortfalls in funding for transportation infrastructure. "We will have to make more cuts and at the same time, to protect our children's future, we must be open to new revenues," the Democrat said, adding that "we're all in this together." ... Unlike recent years, when states received significant help from federal stimulus aid, O'Malley said there's far more potential for "serious hurt coming from Washington" from conservative Republicans in Congress. "I think we have to be flexible and I think we have to be ready to adapt and to respond quickly to protect Maryland ... State Sen. E.J. Pipkin, R-Cecil, said it was "truly amazing" that O'Malley would talk about tax increases, as some economists warn of the possibility of a double-dip recession. "What planet does he live on? I mean, we have people that are trying to make ends meet in our state and it's outrageous," Pipkin said.

Indeed. Maryland taxes income earners at five percent already at $150,000 for single filers and $200,000 for couples. That comes on top of federal and local taxes. These brackets include small business owners who have grown big enough to be stable and start creating jobs. More punitive taxation will only add to the bad business climate in Maryland, which is already one of the worst in the country. But that does not seem to bother Governor O'Malley:

In his speech, O'Malley underscored the need "to stop cutting America." He said public sector job loss could kill the fragile jobs recovery effort just as surely as private sector job losses can. "There is no amount of tax cuts that any government can pass that can substitute for a job," O'Malley said.

This reflects the same statist mentality that we have recently seen come out of Congressional Democrats and the White House. Their attitude is that unemployment benefits and food stamps, all paid for by tax dollars, actually generate more economic activity than they cost. By the same token, Governor O'Malley seems to believe that government employees are net generators of economic activity. But if this is the case, and if government bureaucrats are better than private employees for the economy, then why do not Governor O'Malley, Nancy Pelosi and President Obama simply propose a plan where all of us are on food stamps and government payrolls? Why let anyone stay on a wasteful private sector job?

Before Governor O'Malley pushes ahead with his plan to punish productive Marylanders even more, perhaps he should take a look at the mayoral race in Baltimore. There, all candidates except one are floating ideas for tax cuts. They have realized that high taxes actually scare away private economic activity.

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