Maryland voters oppose any increase in taxes to deal with a looming $2.7 billion state deficit as the Maryland General Assembly convenes Wednesday, according to a new poll from Gonzales Research & Media Services.

Opponents of raising the state’s income tax, sales tax or property tax include large majorities regardless of political party, gender, race or region. Strongest opposition comes from Republicans and independents.

Opponents also include the 61% of voters who approve of the job Democratic Gov. Wes Moore is doing.

“Given the economic concerns among voters highlighted constantly throughout the recent presidential campaign, not much enthusiasm exists among Marylanders for raising taxes as a way to deal with the deficit,” pollster Patrick Gonzales wrote in his synopsis of poll findings.

Here are the full results of the Gonzales poll, including cross tabs.

“Voters constantly express a willingness to pay taxes for needed services like transportation and public safety, but not for a problem they believe their elected representatives created,” said Gonzales. He went on:

“Only 17% say they support an increase in the state income tax to deal with the deficit, while 76% oppose this … 60% ‘strongly’ oppose.”

“Twenty-three percent support an increase in the sales tax, with 73% opposing a sales tax hike … 55% ‘strongly’ oppose.”

“And finally, a mere 18% of Maryland voters say they support, as a way to deal with the deficit, an increase in the state property tax, while 77% oppose – 65% ‘strongly’ oppose.”

The poll did not ask about changing and increasing the corporate income tax, one of the proposals floated to raise more revenues.

Moore’s approval

Moore gets his highest marks from Democrats with 79% approving of the job he is doing; 53% of independents also approve Moore’s performance, while 52% of Republicans disapprove.

With speculation that former Republican Gov. Larry Hogan might challenge Moore’s reelection next year, the poll found 52% of voters statewide say they’d vote for Moore while 38% say they would vote for Hogan, with 10% undecided. These poll numbers are similar to the election results two months ago, when Hogan ran for the open Senate seat in Maryland won by Democrat Angela Alsobrooks.

“Former Governor Hogan has enjoyed a very distinguished career in politics, but his neither fish nor fowl style that served him so well during his tenure in office has become a touch passé in the current day political gestalt,” Gonzales said.

“His prospects next year, should he decide to run, will be determined largely by events beyond his control. If an aggressive ‘tax enhancement’ package is passed and signed into law this session, voters come New Year’s Day 2026 might be very resolute in their desire for a return to Gov. Hogan’s eight years in office.”

Gonzales conducted this poll from December 27, 2024 through January 4, 2025. A total of 811 registered voters in Maryland, who indicated they are likely to vote in the next election, were queried by live telephone interviews, using both landline and cell phone numbers. A cross-section of interviews was conducted throughout the state, reflecting general election voting patterns.

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By Randolph J. May

In response to the rapid rise in prices at the pump, Gov. Larry Hogan and the leaders of the General Assembly quickly got together to adopt a 30-day “emergency” suspension of the state’s 37 cents per gallon gas tax. Since the suspension became effective on March 18, prices at the pump have dropped by roughly the amount of the tax reduction.

All well and good. I’ll cheer along with Maryland’s other drivers at the tax holiday.

But don’t mistake the temporary gas tax suspension for the broader, deeper permanent tax relief Marylanders deserve, especially now with the state projecting a huge near-term budget surplus.

By various measures, Maryland is widely acknowledged to be a high tax state. Indeed, according to a study released in March 2021 by the nonpartisan Tax Foundation, Marylanders bear the sixth highest combined state and local tax burden among the fifty states. Another March 2021 study, this one produced by WalletHub, determined that Maryland has the 3^rd highest personal income tax burden of all the states. And the Tax Foundation’s 2021 Business Tax Climate Index ranks Maryland near the bottom – 44^th among the 50 states.

With that in mind, I’m generally in favor of tax reductions whenever we can get them, including the gas tax suspension providing “temporary pain relief”! But what Marylanders, and Maryland’s economy, really need is a broad-based significant income tax reduction. This should be the deliverable for the legislative leaders and Gov. Hogan.

Hogan’s big package, Dems small offering

At the beginning of this year’s legislative session, Gov. Hogan proposed a tax cut package estimated to provide about $4.6 billion in tax relief over a number of years. His proposal targets the bulk of the tax cuts – about $4 billion phased in over time – to eliminating taxes on retirement income. The rest of the reductions would be used to increase Maryland’s refundable earned income tax credit and to provide additional tax incentives for manufacturers to relocate to Maryland or expand existing employment opportunities in the state.

Hogan touted the proposal as “the largest tax cut package in state history,” and it is a commendable proposal that, if adopted, would move Maryland in the right direction.

House Speaker Adrienne Jones and other Democratic House of Delegates leaders proposed their own tax cut package consisting of two components: permanent sales tax exemptions for a fairly narrow class of consumer goods and a temporary state match to the federal Work Opportunity Tax Credit, which would expire in 2028. The Democrats’ proposal is much smaller, equating to approximately a $60 million annual revenue reduction according to the Democrats’ own estimates.

Like the gas tax holiday, the House Democrats’ proposal, in and of itself, has some merit simply on the basis that it constitutes tax relief. But Gov. Hogan’s proposal is superior because it is far deeper – that is, the overall tax relief package is much larger at an estimated $4.6 billion – and it also appears to be broader – more Marylanders will pocket a tax reduction directly.

State would benefit most from broad tax cuts

And that’s important. Maryland would benefit most from broad-based reductions in its personal income tax, which ranks among the highest in the nation. A flatter structure than that currently in place, with lower overall rates and very few deductions other than a standard deduction, should be implemented. Even if such a pro-growth tax regime has to be implemented in stages, because of political or other imperatives, now is the time for Hogan and the Democrats in the legislature to start the reform process.

Indeed, because of the state’s budget surplus, it is an especially auspicious time. On March 10, Maryland’s Bureau of Revenue Estimates, a body comprised of Comptroller Peter Franchot, Budget and Management Secretary David Brinkley, and Treasurer Dereck Davis, issued new state revenue estimates that increased Maryland’s historic budget surplus to a whopping $7.5 billion. This is an increase in the projected surplus estimate of more than $1.6 billion for fiscal years 2022 and 2023.

Because aid to the states during the pandemic vastly exceeded what, reasonably, they needed, state coffers across the country are flush. And, as the Washington Post reported on Feb. 27, last year 29 states and D.C. – both red and blue – enacted “significant tax cuts.” The Wall Street Journal pointed out on March 13 that “the state tax cuts keep coming amid record budget surpluses.”

There are no good reasons for Maryland to continue to be a “high tax” outlier. To the contrary, there are good reasons for it not to be. A flatter tax income tax structure, with lower overall rates, would spur job growth, provide a much-needed jolt to kick-start Marylanders’ entrepreneurial spirit, begin the process of restoring a favorable business climate, and deter further outmigration.

We can enjoy the temporary gas tax reduction and applaud Gov. Hogan’s January proposal for a meaningful tax reduction – but we also can, and should, ask Gov. Hogan and the Democrat-controlled legislature to do more.

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By Andrew Magloughlin

Free State Foundation Legal Fellow  

The Tax Foundation just released its 2022 State Business Tax Climate Index—and, unfortunately, Maryland continues its downward slide.

It now ranks 46th overall among the states and the District of Columbia due to bottom-half ratings in each of the measured subcategories.

This is Maryland’s lowest ranking since at least 2014 and possibly marks its all-time low. It should be a clarion call of the need for tax reform in the state.

States compete with other states for businesses, residents, investment, jobs, and revenues by implementing business-friendly tax policies. Maryland’s rank as 46th shows serious room for improvement.

As the Tax Foundation explains, a business-friendly tax environment does not mean tax-free anarchy. It means structuring major taxes with “low rates and broad bases.” The broader the “base,” meaning the total amount of economic activity subject to a specific tax, the lower the rate a state needs to impose to achieve its revenue target.

Five major areas of taxation

The Tax Foundation’s State Business Tax Climate Index assesses a state’s overall performance based on five major areas of taxation that affect business: corporate tax, individual income tax, sales tax, property tax, and unemployment insurance tax. Some states do not assess all of these taxes, but that fact does not guarantee strong performance on the index. Utah and Indiana, both of which rank in the top 10, impose all of the major taxes as Maryland does, but they avoid “complex, nonneutral taxes with comparatively high rates” that detract from Maryland’s economy.

Maryland could improve in virtually every area, because its 46th overall rank reflects its bottom-half performance in every category:

• Unemployment insurance tax (46th)
• Individual income tax (45th)
• Property tax (43st)
• Corporate tax (33rd)
• Sales tax (26th)

Unemployment tax

Over the years, Maryland has been a consistent bottom-tier performer with unemployment insurance taxes, because it does not have “rate structures with lower minimum and maximum rates and a wage base at the federal level,” which cause uneven burdens on employers.

Maryland has the highest minimum unemployment insurance tax rate in the country at 2.2% and one of the highest maximum rates at 13%. It also relies on a wage base above the federal level.

These factors lead to non-neutrality in the unemployment tax by assessing more tax on struggling businesses and industries with endemic turnover, like retail. It makes little sense to burden struggling businesses with high unemployment taxes when doing so risks more unemployment.

High income tax

Maryland also has a high progressive individual income tax that places it in the bottom 10% of states in this category. This is a problem for Maryland’s business climate because “a significant number of businesses, including sole proprietorships, partnerships, and S corporations, report their income through the individual income tax code.”

Progressive taxes disincentivize labor over leisure for high income earners, which means Maryland’s tax code encourages wealthy individuals to spend money on activities like travel and entertainment instead of hiring workers and investing in Maryland’s economic growth. This disincentive is especially concerning at the state level, where individuals can “vote with their feet” by relocating to lower tax jurisdictions.

Maryland’s income tax also ranks poorly because it is not indexed to inflation, includes a marriage penalty, and double-taxes capital gains and dividends. Maryland could improve its business environment by eliminating or reducing the extent of these problems.

Property taxes

Maryland’s property tax regime falls in the bottom-10. Property taxes are not just taxes on ownership of real property—they also include any tax assessed to tangible or intangible property, such as business inventory taxes, real estate transfer taxes, estate taxes, and inheritance taxes.

Maryland’s poor performance on the Business Tax Climate Index is largely attributable to its property taxes that distort business decisions. For example, Maryland taxes business inventories, a tax that has the effect of discriminating against retailers and forcing businesses to factor tax minimization into sales and procurement strategies.

Maryland also taxes real estate transfers, which increases compliance costs and distorts decisions when businesses or individuals seek to transfer non-liquid assets, including small business and family-owned property.

Maryland is also the only state in the country to levy both an estate tax and an inheritance tax, often causing double-taxation of inherited property. These taxes cause businesses and individuals in Maryland to make decisions about property based on tax strategy rather than economics, so they should be eliminated.

Corporate tax

Maryland’s corporate tax ranking is not quite as abysmal as it is in the previous three categories but it still needs work. High corporate tax rates with progressive bracketing discourage businesses, especially when nearby states have lower taxes. In Maryland, corporations pay an 8.25% tax rate on business profits. Imposing a single rate is positive. But 8.25% is a relatively high rate compared to other states, so businesses may be deterred from locating in Maryland, especially when nearby Virginia has a lower 6% rate.

Additionally, Maryland does not conform with federal policy for deducting depletion, which adds complexity for businesses that deal with natural resources. Maryland should reduce its corporate rate and conform with federal depletion policy to attract business.

Sales tax does best

Maryland’s sales tax regime earned the state’s best subcategory ranking, but this ranking was still relegated to the bottom-half thanks to “including too many business inputs, excluding too many consumer goods and services, and imposing excessive rates of excise taxation.”

For example, Maryland’s 6% sales tax rate could be reduced if it didn’t provide a wide variety of sometimes seemingly arbitrary exemptions for various goods and services. Meanwhile, Maryland taxes business production inputs like leases, information services, and office equipment. Businesses likely pass taxes imposed on these items to end users of finished products, on whom the sales tax might apply again. Maryland could improve its ranking by eliminating exemptions for consumer goods and services while exempting inputs—creating a broader base that allows for overall lower sales tax rates.

Worse than adjacent states

The harmful effect of Maryland’s 46th place overall ranking becomes clear when you consider the more competitive rankings of adjacent states. All of the states bordering Maryland have better Business Climate Index rankings, except for the District of Columbia. These states include Delaware, Pennsylvania, Virginia, and West Virginia.

Delaware’s 16th place ranking is the best, and this might help explain why Delaware has the highest population growth rate among Maryland and its neighboring states. Virginia ranks 25th on the Index and also has a higher population growth rate than Maryland. While Maryland has faster population growth than Pennsylvania (29th) and West Virginia (21st), the potential for these states to outcompete Maryland for business and residents solely because of Maryland’s unduly high tax rates and overly burdensome tax policies should alarm lawmakers.

The 46th place ranking on the State Business Tax Climate Index should be a wakeup call to Maryland’s government officials and its citizens. This bottom-dwelling ranking suggests that Maryland’s tax code pushes investment, job growth, and revenue, as well as jobs and potential new residents to other states. And because Maryland’s ranking has continually declined over the last decade, it appears other states are taking the benefits of tax reform more seriously.

Adoption by the legislature of the tax reforms suggested above, and others discussed in the Index, would stop Maryland from losing further ground to other states, including its neighbors, and would help spur more economic growth that would benefit all of Maryland’s residents.

LOOKING FOR COMMENTARY, ANALYSIS: Maryland Reporter is looking to publish more commentary and analysis on issues about state government and politics from all points of view – left, center and right. If you have an opinion or analysis piece you’d like to see published, contact Len@MarylandReporter.com.

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Over the past year, Marylanders have stepped up to protect our families and our neighbors from the deadly COVID-19 pandemic. We’ve stayed home, kept our distance, worn our masks, and gotten vaccinated to stop the spread of this disease that can devastate the lungs. We’ve done this for the benefit of our communities and because it’s the right thing to do.

This year, the Maryland General Assembly has a similar opportunity to step up and protect our residents from a different but equally deadly threat to our health – tobacco use. By overriding Gov. Hogan’s veto of the first tobacco tax increase in 13 years, the General Assembly can save lives, improve health, and boost our economy. It’s an opportunity they must not pass up.

After decades of aggressive marketing to our kids and communities of color, Big Tobacco has succeeded in exploiting our health for profit, with deadly consequences. One in four cancer deaths in Maryland is linked to smoking, and 7,500 residents die each year from tobacco-related causes. With the CDC naming smoking and e-cigarette use as a risk factor for developing severe illness from COVID-19, now is the time to reduce tobacco use in our communities.

Higher cigarette prices save lives

The data tells us that significant and regular increases in the price of tobacco reduce tobacco use and save lives. How? Smoking rates go down when the price of cigarettes goes up. Most people start when they’re young, and they’re less likely to start if the price is higher. Time and again, we have seen that states with the most significant tax increases have seen the largest declines in smoking rates for both kids and adults.

Tobacco taxes do more than reduce smoking rates – they help fund critical state programs, including those that take a proactive stance to combat tobacco addiction. The tobacco tax increase passed by the General Assembly last year is projected to raise over $95 million in revenue for the state and reduce the long-term health care costs from adult and youth smoking by more than $973 million. Revenue from the tobacco tax increase will offset costs associated with COVID-19 and provide earmarked funding for Maryland’s critical Tobacco Prevention and Cessation Program.In May 2020, Governor Hogan vetoed legislation that would have raised Maryland’s tobacco taxes for the first time since 2008. The policy includes a $1.75 per pack increase on cigarettes and, for the first time, a tax on electronic smoking devices (e-cigarettes). The $1.75 per pack cigarette tax increase alone could prevent 15,300 Maryland kids from becoming adult smokers and help 32,600 adults quit.

Abandoning this proven public health policy that saves lives and raises revenue, especially during a pandemic that attacks the lungs, would be a monumental public health failure. I urge our state lawmakers to use their power to save thousands of lives in towns and cities across Maryland by overriding the Governor’s veto and increasing Maryland’s tobacco taxes. It’s an opportunity we can’t afford to miss.

[Editor’s note: The tobacco tax hike legislation also includes the new digital advertising tax. The House overrode the governor’s veto Thursday afternoon by a vote of 88-48. The Senate is expected to take it up Friday.]

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By Len Lazarick
Len@MarylandReporter.com

Stupid me for not reading the fine print when legislative leaders said they were not going to raise tax rates.

“Maryland’s new legislative leaders flatly ruled out raising income, property or sales tax rates this year to pay for sweeping education measures,” wrote Erin Cox in the lead to the Washington Post story.

Perhaps the Sun reporters missed the subtlety of the promise when they wrote in their legislative preview:

“…The legislature’s two new leaders are trying to pull off a historic feat: Pass sweeping reforms aimed at greatly improving the state’s public schools — and do it without a massive tax increase.

“In interviews with The Baltimore Sun, House Speaker Adrienne A. Jones and incoming Senate President Bill Ferguson said they have ruled out across-the-board increases to state sales, property or income taxes.”

All three of these experienced reporters probably recorded their interviews with Jones and Ferguson. While Cox mentions “rates,” the overwhelming impression was: We will not raise taxes on income, property and sales.

Hooray, that’s how Republican Larry Hogan got elected twice.

Then last Thursday, House Majority Leader Eric Luedtke, a former social studies teacher who is one of the sharpest, most articulate members of the progressive majority, unveiled a proposal that will lower the sales tax from 6% to 5%. Hooray again!

Taxing more than 80 services

But wait a minute. They will take that 5% and apply it to all kind of services that have never ever been taxed before, raising another $2.6 billion. Barbers, hairdressers and nail salons, plumbers and electricians, lawyers and accountants, newspaper advertising, financial advisers and fitness centers, labor on car repair, appliance fixing, home security, maybe on the services to pay your state taxes.

One Facebook posting lists more than 80 services that will now be taxed.

This will cost the average person only $3 a week, said Luedtke, as if anyone pays for anything by the week now that the milkmen and newsboys are out of business. That’s at least $150 a year.

Ferguson and other officials make the quite legitimate argument that the economy has changed, with services now dominating. He bemoans having a 19^th Century tax structure for a 21^st century government.

But the fundamental reason for taxing them is that after months of searching for ways to pay for the Kirwan commission education reforms without hitting the wallets of the middle class is that none of the proposals – sports betting, legalizing marijuana, revamping corporate taxes, taxing Google and Facebook ads– could produce the billions they need to fund the plans.

And what about the local jurisdictions who must come up with extra money from the same taxpayers? Their only option at the moment is raising the property tax, a regressive 18^th century invention.

What do voters think?

A Goucher College poll taken Feb. 13-18 and released Monday found Marylanders generally support some of the Kirwan Commission proposals, though two-thirds say they’ve heard or read “nothing at all” about it.

When asked about state taxes, half the respondents said they are already too high, and 44% said they are about right.

Nearly three-quarters of Maryland residents say they prefer an income tax system where “people with higher incomes pay a higher tax rate than those with lower incomes.”

When asked about the relationship between taxes and government services in Maryland:

• 37% would rather keep state services and taxes about the same as we have them now.
• 28% would rather have more or improved state government services if that meant more taxes.
• 28% would rather have fewer state government services in order to reduce taxes.

In her analysis, Mileah Kromer, director of the Sarah T. Hughes Field Politics Center that conducted the poll said:

“While the public continues to be largely unaware of the Kirwan Commission itself, large majorities of Marylanders recognize that public schools are facing the very problems its recommendations were designed to address. Residents across party lines largely agree that public schools need more vocational training and better-paid public school teachers.

“At the same time, a plurality of residents wants to keep state services and taxes at the current level, and a majority believe that state taxes are currently too high. Our results suggest that the costs of the Kirwan recommendations, rather than the merits of the plan, will be of concern to Marylanders.”

Here’s what the 713 poll respondents (83% interviewed on cell phones) said about Kirwan.

• 93% agree that “public schools should offer more job or vocational training programs,” 4%
• 85% agree that “the salaries of public school teachers are too low,” 10% disagree.
• 76% agree that “many public school buildings and facilities in Maryland are run-down,” 16% disagree.
• 69% agree that “public schools in Maryland don’t receive enough state funding,” 18% disagree.
• 64% agree that “state funding for public schools is not spent effectively by school administrators,” 19% disagree.
• The margin of error for the poll results is plus or minus 3.7%

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Key recommendations of the Kirwan Commission on Innovation and Excellence and Education include wide ranging changes on how teachers are recruited, trained and paid, including major increases in salaries attached to a new career ladder. This is in response to the overall difficulty of attracting people to teaching and the loss of 50% of new teachers by their fifth year.

The proposal has broad support from education advocates and the teacher’s union. In the commentary below, Sean Kennedy of the Maryland Public Policy Institute, a free-market think tank, takes strong issue against the proposals.

MarylandReporter.com welcomes comments at the bottom of this article, and we will also be happy to publish opposing points of view. Send any commentary or articles about the Kirwan Commission to Maryland Reporter Editor Len Lazarick at Len@MarylandReporter.com.

By Sean Kennedy

Maryland Public Policy Institute

The Kirwan Commission’s real aim is hiking teacher pay by $3 billion a year, and it is why the state teachers’ unions are so strongly backing it – more teacher pay. Kirwan aims at “making teacher salaries more competitive with other professions.”

The teachers’ unions, whose membership and coffers would boom, have even launched an expensive lobbying campaign to pressure political leaders to enact Kirwan’s pay hikes.

But Maryland’s teachers are not underpaid. Yes, some teachers, who are paid on a seniority rather than a performance basis, earn somewhat less than professionals with similar education and experience qualifications.

But most are highly overpaid. In aggregate, when all compensation (benefits, leave and job security) is accounted for, the average teacher earns as much as 40% more than those in comparable private sector professions.

No teacher shortage

Another false “crisis” that Kirwan’s massive pay hikes seek to remedy is the “teacher shortage,” with many teachers allegedly fleeing the profession. This is belied by the facts. Under 10% of Maryland’s teachers retired, quit, or were fired last year – less than half the leave rates for similar professional jobs. And they left the profession at a much lower rate than teachers across the country.

Maryland already spends a whopping 93 cents of every public K-12 education dollar on personnel (i.e., teachers and administrators) – not on instructional materials, facilities, or technology. That is the highest share by far in the country and 11% higher than the U.S. average (82%).

Statewide, Maryland’s per pupil spending averages about $16,000 per student, but the state’s economic and geographic diversity means district-level figures vary widely. Rural Talbot County spends very little compared to even the stingiest of states while Baltimore City spends the third most ($17,500) of the largest 100 districts nationwide, while ranking as the third worst in outcomes for all districts. Three other counties – Montgomery, Prince George’s and Howard – also rank in the top ten for per pupil spending nationally.

If one adds in the $5.3 billion in unfunded teacher retirement benefits (for generous pensions and healthcare) that Maryland school districts and state legislature fail to fund, the current real cost of a public school student’s instruction increases dramatically.

No meaningful reforms

Those figures are no matter to the teachers’ unions and the education bureaucracy who want $4 billion dollars a year more by 2030 – without meaningful governance or instructional reforms.

To fund the new expenditures, Baltimore City would be required to double its district’s spending share. That would require hiking Baltimore’s already burdensome property taxes on homeowners and businesses, driving them out of the city and further shrinking the tax base.

Meanwhile, two recent polls by University of Maryland-Washington Post and Goucher College suggest – erroneously – that Kirwan is a hit with the public. They claim to find that taxpayers are willing to pay higher taxes to improve public education – as if educational excellence can only be achieved through more spending.

But both polls find that over three-quarters of state residents know “nothing” about Kirwan. Seventy-four percent of Goucher’s respondents say they support “personally paying more in state taxes to improve [public education].” But Goucher never asks how much.

The Post poll introduces Kirwan’s recommendations as “major new programs aimed at improving Maryland’s public school system.” Even after such a leading prompt, only a small majority of Marylanders favor raising income taxes by even a quarter percent – which would fund only a tiny fraction of Kirwan’s cost – while a majority opposes a half-percent hike. By 2030, income taxes would have to rise by 40% — four times the half-percent increase offered in the Post poll.

A 2018 poll conducted by the Maryland Public Policy Institute found that, when given a choice, voters overwhelmingly oppose more spending as the primary means of improving education: 72% agreed that “to improve learning opportunities in public schools, policymakers should refocus on reallocating resources more efficiently and effectively, instead of continuously increasing the education budget.”

Tough choices avoided

Marylanders – unsurprisingly – want better, high-quality schools on the cheap. The tough choices are simply being avoided by Kirwan’s backers; the result would be cuts in other discretionary state and local spending or dramatic increases in income, property, and sales taxes.

Since Kirwan’s training, certification, and professional development programming have no consequences for poor-performing teachers or those who fail to improve, nothing will change in schools.

With union protections and a seniority-based pay scale, the rotten apples get the pay bump just the same and the beleaguered students can expect no real benefit.

But the teachers’ windfall – higher salaries and plumped up pensions – will carry a dramatic cost.

The Kirwan proposals will put the Old Line State into the red to the tune of $19 billion and increase the unfunded pension and healthcare liabilities owed by the state by billions more.

Maryland taxpayers will continue to feel the burn for decades to come as these new pay and pension entitlements cannot be easily clawed back unlike the necessary instructional or governance reforms – if those are ever enacted.

Sean Kennedy is a visiting fellow at the Maryland Public Policy Institute, a non-partisan public policy organization based in Rockville, Md.

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By Elliott Davis
Capital News Service

The Maryland Board of Revenue Estimates voted unanimously Thursday to increase the state’s projected revenues for the current fiscal year by just under $130 million, but cautioned that the uptick “is not indicative of long-term economic growth.”

The new estimate is really a reflection of a strong tax year in 2018, Maryland Comptroller Peter Franchot noted Thursday during the board’s meeting.  Franchot, Maryland Treasurer Nancy Kopp and Budget and Management Secretary David Brinkley make up the Board of Revenue Estimates.

The board also set the first official projection for fiscal year 2021 at approximately $19.1 billion, which is a 1.9% increase over prior planning figures, said Bureau of Revenue Estimates Director Andrew Schaufele during the meeting.

Schaufele told Capital News Service after the meeting that the updated projections are a “mix of good and bad.” He pointed to the “writedown in our wage growth outlook” as a point of concern for the future.

Franchot said that three top industries — the federal government, information and financial services —  “have contracted while lower-wage industries are growing.”

“While we may be experiencing the longest-recorded period of economic growth at 122 consecutive months,” Franchot added, “the tight labor market is not generating the wage growth that it has in the past.”

Franchot noted “stronger than expected” capital gains reported last month, as well as an uptick in online sales taxes collected after a U.S. Supreme Court ruling allowed it.

Franchot also spoke of other concerns for the future of the economy, including “reckless and erratic trade policy from Washington.”

Brinkley added during the meeting that “revenue growth may not be as rosy in future fiscal years.”

Budget analysts also show that spending is increasing higher than spending due to inflation and mandated spending, creating what’s called a structural deficit.

Schaufele added after Thursday’s meeting, “To some degree, we’re living on borrowed time here.”

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By Len Lazarick

Len@MarylandReporter.com

Gov. Larry Hogan, center, is interviewed in his State House office by MarylandReporter.com’s Len Lazarick, left. Communication director Matt Clark is on right. Photo by Rachel Bluth, Capital News Service

Five years ago, I sat in a small conference room with a local real estate entrepreneur discussing his new organization with the unlikely mission to “Change Maryland” from its tax-and-spend ways.

Late Friday afternoon, I sat down with Larry Hogan again, this time in his more spacious digs in the 240-year-old State House discussing how far Maryland has come in that time.

“I’m very pleased with where we are at this point,” Gov. Hogan told me, summing his view of the legislative session.

No longer a novice elected official, he is as blunt and self-assured as ever, packing a wealth of experience into 14-months in office. An oddity as the Republican governor of a blue state and its hyper-Democratic legislature, he has battled formidable challenges. Not just the expected test of dealing with the Mikes — Senate President Miller and House Speaker Busch — who have together 72 more years experience in State House governance than he has.

But a six-month long battle with lymphoma that could have killed him, the state’s major city in flames after a day of riots last year, and a governor’s more commonplace crises of a blizzard and other emergencies.

Of course, we talked about taxes and spending: The least contentious and swiftest passage of a budget in a decade, with huge reserves of extra cash and no tax hikes; the prospect of actual tax cuts, about which Hogan is more hopeful than optimistic; the legislature’s override of a veto on transportation scoring, a bill he blames on Montgomery County developers.

And there were a couple of small surprises, like his talk with Virginia’s Democratic governor about trading legislatures, and the guitar hanging on the wall signed by one of his favorite country music stars that is a reminder of his biggest challenge and personal success.

Still alive

Gov. Larry Hogan. Photo by Rachel Bluth, Capital News Service

The most important thing is that Larry Hogan is still alive. He will turn 60 next month, which was no certainty last June after he found a lump in his throat on a trade mission to Asia.

“I feel good. …. My energy level is back. I’m getting actual eyelashes for the first time.”

“I’m still overweight.” While in chemotherapy, “I took 10 steroids a day and ate a lot and didn’t exercise. I put on like 30 or 40 pounds.”

His hair, once a heavy shock of white-grey which he had for 20 years, is coming back. “Now it’s about half and half,” dark and white. “It’s sort of not coming in evenly.” He gets it trimmed so it all stays about the same length.

Tax cuts and spending

Spending and tax cuts are always top of mind with Hogan. His campaign mantra and governing principle is to roll back as many of the tax hikes of former Gov. Martin O’Malley as he can.

Controlling spending is the easier task with perhaps the strongest “executive budget” of any governor in the country, allowing the legislature only to cut his spending plan.

“We funded everything that anyone ever asked us to fund. Every group is happy; we put record money in education, higher education, HBCUs [historically black colleges and universities]; and we have more tax revenue coming in.”

The persistent structural deficits have been cured for at least several years.

Cutting taxes has been far less successful, but he succeeded in at least changing the dialogue from tax hikes to cuts.

“The fact that we’re actually debating about which taxes to cut is something that hasn’t happened in a while. Busch has a tax package, Miller has a tax package. And they seem to be in disagreement.”

“I’m just happy we’re arguing about cutting t

Gov. Larry Hogan. Photo by Rachel Bluth, Capital News Service

axes; I support Busch’s cuts and Miller’s cuts. I’m for all of them; I’m a little frustrated that we didn’t get our tax relief for retirees and small businesses, but it looks like hopefully we’re going to get hometown heroes[reduced taxes on pensions for police and first responders]; maybe an across the board income tax.”

“I’m hopeful that we’re going to get something done. But the fact that we’re actually talking about tax cuts — that wouldn’t have happened two years ago.

“It is literally a fight between Miller and Busch. I don’t think they can get it resolved by Monday. We’re just hoping they can come to an agreement.”

Veto override: ‘a very bad mistake politically’

Friday’s interview took place hours after the Senate overrode his veto of the new transportation scoring bill, one of only two bills he chose to fight. It would have required him to rate transportation projects before deciding which ones to fund.

“The real million-dollar question is who drafted that bill,” said Hogan, “because it was obviously written by lobbyists for a couple of projects in Montgomery County. It wasn’t drafted by the people downstairs. The people who voted on it had no idea what it did.”

“It wasn’t really the environmentalists [who did it]. It was about people making money in Montgomery County. They just used the environmentalists.”

Why did he choose to fight this so strenuously?

“I fight on the things that are really important even if we’re not going to win because it’s worth fighting for,” said the governor.

“Just because you can do something doesn’t mean you should. They can override every veto, I don’t think they should.”

“I think it was really bad bill in the first place,” though he admits it got better as provisions were stripped. “I think it was a terrible mistake for them to override that veto. And I think most people in Maryland are going to agree with that. And I think they are going to find that people are going to be very upset that they are trying to mess with their local roads.

“I think it was a very bad mistake from a policy standpoint and I think it was a very bad mistake politically, a very bad mistake.”

Hurting the rest of the state

Photo by Rachel Bluth, Capital News service

“There’s no question” developers were behind it, Hogan insisted. “It only benefits a couple of people. It hurts almost everybody else in the rest of the state. Or attempts to hurt them all — we’re going to try to make sure it doesn’t.”

Wait a minute. Don’t you have all that money to spend on roads because the legislature passed a gas tax hike in 2013 that you tried to roll back last year?

“Absolutely — we had more revenues,” Hogan said. “We’ve been eight years behind on road construction. As you pointed out, now we have the money to deal with it.”

“Everyone is really happy about that. Every local government is thrilled,” the governor said.

About the vetoed transportation bill, “They keep saying: ‘It’s not really binding.’ Well, that’s true.”

“It mainly takes power away from the local governments who were the ones who decided on these projects.”

“The bill says we have to score it. And we may score it and say, ‘If we follow the legislature’s stupid guidelines, none of the roads in the state would be built.’ Here’s our scoring. But we’re going to ignore this scoring and we’re going to build all the road that are the top priorities.”

“And we’ll be able to say every time we do a road opening, that Senator So-and-so and Delegate So-and-so didn’t want us to build this road in your district but we’re going to do it build this road anyway.”

Are you going to invite them to the ribbon cutting for new road projects?

“No, we will not invite them to the ribbon cutting. It’s just a stupid thing for them to do. I don’t I have no idea other than politics what their possible motivation could be.”

(Gov. O’Malley and other Democrats would sometimes complain that Republican legislators would show up for opening ceremonies of highway projects funded by the gas tax hike they didn’t vote for.)

Mandating for his own programs

Hogan had proposed a bill relieving governors from some mandates that control over 80% of the discretionary general fund budget. That legislation has gone nowhere.

Yet, while he vetoed the transportation scoring which he concedes in its present form doesn’t actually force him to do anything, he allowed several bills with new mandates to become law without his signature.

“We’re not thrilled with mandated spending, but in many cases we supported the program,” Hogan said.

He found a five year mandate for spending to demolish boarded up homes in Baltimore both amusing and superfluous.

“The blight stuff is my baby,” Hogan said. “I dreamt it up myself, personally. I got people working on it for a year. We went and announced it” in the fall with the mayor and other Democratic officials. He worked out an memorandum of understanding with the city and put funding in a supplemental budget.

Then the legislature comes along and says, ” ‘We’re going to mandate that you do your own program.’ Thanks. We don’t like mandates, but thanks for making me spend the money that I wanted to spend.”

“It was my idea. There was no reason to veto them, there was no reason to pass them.”

Be the first to stop gerrymandering

The governor set up a commission to recommend changes for drawing new congressional and legislative lines. It recommended an independent, nonpartisan commission. Perfunctory hearings were held, but the bills have not even come up for committee votes. Democratic leaders refuse to act unless Republican-controlled states take similar actions to curb gerrymandering, drawing district lines for partisan gain.

“I’d love to see a 50-state solution,” said Hogan. “I’d love to see the federal government act. I’d love to see other states that are Republican act.”

“But why can’t we be the first? Everybody makes an excuse about why we can’t do it. If we were to take action, it would be something the rest of the country could look to. The other states would say maybe we should do it too.

“There’s growing support for this in Democratic states, in Republican states, and all across the spectrum. The president keeps talking about. I’ve reached out to him. Everybody talks about it but then they don’t actually want to vote for it. I think we just have to get it done instead of waiting for somebody else.”

Will Hogan bring the proposal back next year?

“If it doesn’t happen, we’ll probably come back and fight some more. It’s an issue I really care about.”

Trading legislatures

Gov. Larry Hogan. Photo by Rachel Bluth, Cpaital News Service

Democratic supporters of change in gerrymandering have proposed Maryland enter in a compact with Virginia or Pennsylvania to sign a compact to make their redistricting nonpartisan too. Both states have Democratic governors and Republican controlled legislatures, which gerrymandered congressional districts in favor of the GOP; Maryland did the opposite. Asked about a potential deal, Hogan said he has discussed a different tradeoff with Virginia’s chief executive.

“I joked with Terry McCauliffe about trading legislatures. We talked about that yesterday at the Nats opening day. He was saying to me. ‘You know I have a bunch conservative Republicans and they’re giving me hell down in Richmond.’ And I said, ‘You know I have liberal Democrats, and I’d love to trade.”

“Maybe we should try that for at least a day. But we haven’t discussed a compact.”

Hogan was reminded that’s an issue where he actually proposed giving up his own power to redraw lines in favor of an independent nonpartisan commission. It might pass easily in the first year of the second term Hogan would like to win, since he would draw the lines in 2021.

“I made that argument to President Miller myself,” Hogan said. “‘I understand you want to maintain the power yourself. But you understand, Mike, that I’ll be drawing the districts. I’m trying to give up my own power.'”

“I’m betting that in 2019, you’re going to pass this thing unanimously,” Hogan told Miller, laughing as he recounts the story.

Who wins and loses

“Almost everything we’re pushing for and fighting for are things that most people support,” Hogan said. “70, 80, 90 percent of the people agree with us on all those issues on every poll that’s ever taken. The media has this [theme]: it’s the legislature versus Hogan, do I lose or do they lose; do we win or do they win?”

“It’s the 60, 70, 80 percent of the people that lose. If you’re an elected representative, you’re ignoring 90 percent of the people that you represent.”

“I don’t think the people are going to be happy that they keep shooting down all the things that we’re proposing. It doesn’t hurt me, it hurts those people,” such as the retirees not getting an added personal exemption on their income taxes, or the small businesses who will still have to pay a $300 annual registration fee for the privilege of doing business in Maryland.

Very pleased

“I’m very pleased with where we are at this point” in the General Assembly.

Frictions are natural, he said. “I came here to change things. And there are folks who want to protect the status quo.”

“It’s the way the system is intended to work. The people voted for checks and balances. We didn’t get everything we wanted and neither did they. But I think the citizens of Maryland are getting a pretty good deal. They seem to be happy. I think it’s because they feel we’re getting things done.”

With the legislature in its final hours, “We’re just trying to get this thing wrapped up, to get some things done. The show is pretty much Miller and Busch downstairs. Our work is pretty much done. We’re here to help in any way we can.”

Gov. Larry Hogan, left, interviewed in his State House office by MarylandReporter.coms Len Lazarick. Photo by Rachel Bluth, Capital News Service

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By Len Lazarick

Len@MarylandReporter.com

Tax breaks to encourage new manufacturing operations in Maryland are dead for this session, after the Senate Budget and Taxation struggled to come up with compromises that would please all sides, especially current manufacturers.

The committee was working on SB181 sponsored by Sen. Roger Manno, with all but three members of the Senate co-sponsoring the legislation. The prospects of the legislation seemed to get an extra boost when Gov. Larry Hogan made a similar package of tax breaks creating Manufacturing Empowerment Zones, SB386, one of his top legislative priorities.

The key elements of both bills were eliminating the corporate income tax for any new manufacturer in Maryland, and eliminating the state personal income tax for any new employees for a similar period. Counties could also waive property taxes.

Hogan’s bill applied only to Maryland’s poorest jurisdictions — Baltimore City, far western Maryland and the lower Eastern Shore. Manno’s bill initially applied to the whole state, but he had agreed to make it a pilot program in seven counties.

But Manno, D-Montgomery, and Sen. Andrew Serafini, R-Washington, a key ally on the committee, met with B&T Chair Ed Kasemeyer Thursday morning, and they determined to hold the bill.

The committee had already held three work sessions on Manno’s bill. One of the key sticking points was the tax exemption for employees. Manufacturers currently operating in Maryland had told the committee this would allow new businesses to poach their key employees.

Sen. Ed DeGrange, a B&T subcommittee chair, said at a work session Wednesday that he had heard from businesses that “they actually are harmed” by the tax breaks and he was concerned.

Among several competing compromises, Manno agreed at that session to have the income tax exemption apply only to workers making less than $15 an hour, but that may not have been enough of a concession to move the bill.

“I was unwilling to move from my position that the workers receive the same benefit as the corporation,” Manno said.

The post Tax breaks to promote manufacturing dead for session appeared first on MarylandReporter.com.

By Len Lazarick

Len@MarylandReporter.com

The Senate Budget and Taxation committee approved a tax relief package that will save Marylanders about $100 million a year when fully implemented.

The dollar amount was based on the total proposed in Gov. Larry Hogan’s package of tax reductions, but it was based more on the recommendation of the Augustine business competitiveness commission to reduce the top tax rate.

Taxpayers with adjusted gross income over $100,000 would save 1-3% a year, the working poor making $50,000 would save about $375 a year through an Earned Income Tax Credit, and taxpayers in the middle would get higher personal exemptions, saving $16-20 per person.

“We thought if possible everybody should be included,” said Ed Kasemeyer, chair of the committee. But he said the committee needed to “be prudent on how much” to reduce taxes and “be cognizant of the future economy of the state.”

“The proposals we’re making aren’t incredibly significant,” Kasemeyer admitted, and they provide that the tax relief would stop “if the economy goes south” and state revenues decline.

Passes 11-2, with two liberals opposed

After discussing some options, the committee approved the package 11-2, with only its two most liberal members opposing the bill, SB840, a heavily amended version of the Augustine commission earned income tax credit.

“It’s not the prudent approach we should be taking,” said Sen. Rich Madaleno, the Montgomery Democrat who is vice chair of the committee.

Madaleno said that the “big takeaway” from the testimony of Moody’s Analyst economist Mark Zandy earlier this session was that Maryland should be maintaining its investment in human capital (education) and physical capital (transportation).

“Those are the things we need to keep ourselves competitive and strong,” said Madaleno, who was joined in his dissent by Sen. Roger Manno, another Montgomery County Democrat.

Kasemeyer, D-Howard, who served on the commission created to help make Maryland more competitive, said its conclusion was that “our top rate was out of line.”

“Once again the guy in the middle doesn’t get any benefit,” he said. That’s why the committee resolved to raise the personal exemptions for middle income households.

‘Giveaway to the wealthiest’

Benjamin Orr, executive director of the progressive Maryland Center on Economic Policy, called the committee package “a giveaway to the very wealthiest Marylanders, at the expense of everyone else. It can’t legitimately be called middle-class tax relief.

“Strengthening the Earned Income Tax Credit to help working people who struggle to get by on low wages is an important and welcome step that shouldn’t be paired with a tax break that gives the greatest benefit to millionaires,” Orr said.

The committee did not share it work sheets with reporters or observers during their work session.

According to Orr’s analysis, strengthening the EITC, as the committee recommended, would help hundreds of thousands of low-wage workers who currently receive little or no benefit from the tax credit. They would receive an average credit of about $375, once the credit is fully phased in. Currently the average credit is around $75, with people under 25 not receiving any credit at all.

Middle income individuals and families would only save about $16-$20 off their tax bills once the changes were fully phased in. Because this would be phased in over four years, that means they only save a few dollars per year, at a cost to the state of about $10 million per year, according to legislative staff at the work session.

Orr said the top 1% of taxpayers, who have an average income of $1.6 million, would save more than $2,500 off their tax bills, on average, when the reductions are fully phased in.

UPDATED 3/17, 11 p.m.: The House Ways & Means Committee brought its version of the expanded Earned Income Tax Credit to the floor Thursday evening, but delayed its implementation to calendar year 2018. Single people making under $36,890 would now qualify for the credit.

Unlike their Senate colleagues, the House committee has not passed any other broad income tax relief and shows no inclination to do sore.

The governor had proposed targeted tax relief for businesses, manufacturing and retirees, along with an accelerated EITC, which has always had strong bipartisan support.

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