(October 21, 2009) As $300 million in pending budget cuts loom on the horizon and $2 billion-plus deficits appear to be the rule for the next few years, the union representing Maryland state workers presenting a list of demands about as realistic as Grimm's Fairy Tales. Their proposals are either shockingly self-serving, short-sighted, or completely naïve - or all three.
The Maryland branch of the American Federation of State, County and Municipal Employees, comprised of 30,000 state workers, believes government services are above being subjected to scrutiny and spending reductions, even if they are inefficient or ineffective, so they want to tax Marylanders more than they already are. Perhaps they aren't content with Maryland having the 4th highest individual state and local tax rate in the nation; they want us to be number one! That seems to be the only kind of competition in which collectivists are eager to engage.
"It's OK," they tell us, "We only want to tax the rich and the corporations." You mean the producers, innovators and entrepreneurs that create and run businesses that pay taxes and employ people so they can pay taxes, too? The ones without whom government couldn't afford to keep the lights on, much less deliver essential services to the people?
The union wants to make the millionaires' tax permanent, even though it collected $100 million less than expected and the state has one-third fewer millionaires than it had the year before the tax was enacted. While much of the drop in the number of millionaires can be attributed to the recession, there is no denying the fact that Maryland is an inhospitable state for people who make money, and those who make a lot of money have options the rest of us don't have.
I have a friend who lives in Calvert County and does business in Prince George's County, and he does pretty well for himself. He and his wife are also moving to Florida, where he has a second home. It's not just the Florida weather that's attracting them; they can save a ton of cash and have a comfortable retirement there. Christopher Summers, president of the Maryland Public Policy Institute, was quoted in a Wall Street Journal article, saying "Marylanders with high incomes typically own second homes in tax friendlier states like Florida, Delaware, South Carolina and Virginia. So it's easy for them to change their residency."
The Baltimore Sun interviewed another former Maryland millionaire who moved across the river to Virginia and scoffed at the notion that others like him would gladly pay the extra 1% to 1.5% in taxes:
"Are you kidding me? I grew up poor. A $32,000 tax difference is VERY real, even for someone in my position. That's how much we saved in 2008, filing in Virginia and not in Maryland…The bottom line is that Maryland...lost more than $150,000 in [total] annual income taxes from my family alone that would not have been lost if it were not for the O'Malley administration's confiscatory extra tax grab."
Even the governor of New York recently admitted they were wrong in implementing a millionaires' tax. "You heard the mantra, 'Tax the rich, tax the rich,"' Gov. David Paterson said. "We've done that. We've probably lost jobs and driven people out of the state." The powers that be in Maryland are stubbornly refusing to learn that lesson, tapping their heels together and chanting, "There's no place like home, there's no place like home," hoping to wake up from a bad dream.
The union also proposes a change to corporate tax law to allow "combined reporting," meaning that multi-state corporations who move profits to subsidiaries in low-tax states would have to report and pay taxes on that income in Maryland, effectively treating a business composed of a parent corporation and its separately-incorporated subsidiaries as a single corporation for tax purposes.
Income estimates of $109 million to $170 million in additional revenue in 2006 had this law been in effect are misleading, however, because 2006 was a record year for corporate income tax collection. Thousands of corporations may end up actually paying less in taxes as a result of closing this so-called "loophole," and some types of businesses will suffer more than others.
Moreover, this proposed change to the tax laws adds yet another brick to the wall that tells businesses that Maryland doesn't want them or the jobs they create. The cumulative benefits of this policy require more study and less rushing to judgment.
Don't think those of us who aren't millionaires or don't run multi-state corporations are spared from the union's "tax until you bleed" proposals. They want tax increases on gas and alcohol, and they want to impose taxes on various Internet sales. If they have their way, driving to the liquor store and buying a 12-pack so you can drown your sorrows in the midst of the recession just got a little more expensive. If you're an incurable Internet shopper like me, your bill is going up.
They also want to tax more services (e.g., auto repair, haircuts, accounting) since many are currently exempt from the state's six percent sales tax. Incidentally, that sales tax is often more than six percent since Maryland, unlike many states, rounds up to the next highest penny even if the calculated tax shows less than half a penny is owed.
For example, if you pay $1.01 for an item, 6% of that is 6.06 cents. In Maryland, however, you're going to pay 7 cents on that item because they round up to the next penny if the amount is higher than a round number, no matter how much higher. The state comptroller's office estimates this "new math" nets the state an extra $18 million a year. That must be how they do accounting in fantasy land; I assure you, that's not how they taught us to round up in our elementary school math class.
Oh, yes, the union also proposes draining the state's rainy day fund down by more than half. "It is time to dip into the rainy day fund because it is raining out there, and we need some shelter from the storm," said Patrick Moran, the union's state director.
Given Maryland's love affair with taxes and spending, don't think for one minute that these proposals won't get a serious hearing in Annapolis, especially after the election when they think they're safe from the voters' wrath.
I understand state workers wanting to keep their jobs; I know first-hand the pain of being laid off or furloughed, and the helplessness of not knowing if you can provide for your family.
When will we snap out of the daydream, however, that says government taxing and spending is the only path to fiscal wellness? If we don't have the robust economy that comes from low taxes and limited regulation, thereby growing existing businesses, attracting new businesses and creating jobs, we won't have additional income to tax or money in the budget to spend.
Maryland's barely disguised hostility to the "makers" in our society, the folks who create wealth and deliver benefits to all of us through increased employment and expanded corporate and individual income, means the "takers," the redistributors of income and their constituents, won't have anyone from whom to take.
The economy is not a zero-sum game where we must take from some and give to others because there's only so much to go around. The most effective, most humane system of economics ever devised has been and always will be capitalism, which generates more wealth and expands the economy to everyone's benefit.
That's not a fairy tale - it's a fact. It's time for Marylanders to leave behind the fables about taking from the rich and giving to the poor, and start learning the real-world lessons of history and economics that made America the most prosperous nation the world has ever seen.
Ron Miller, of Huntingtown, is a conservative blogger and activist, former and future candidate for the Maryland Senate, and communications director for the Calvert County Republican Party. Ron is a regular contributor to RegularFolksUnited.com, RedCounty.com, and ProLifeUnity.com. You can also follow Ron on his website TeamRonMiller.com, as well as Twitter and Facebook.