- Budget Reform /
- Charter Schools /
- Economic & Fiscal Policy /
- Education /
- Regulation /
- Taxes /
It’s Not Too Late for the General Assembly to Change Course
Maryland’s General Assembly is officially back in session. As state legislators prepare for another round of political battles and monumental decisions, one question dominates: will 2020 be any different?
In recent history, the Assembly has focused primarily on spending, taxing, and regulating. The state’s legislative milestones over the years have included a $15 mandatory minimum wage and a paid sick leave law. These laws make it challenging for Gov. Larry Hogan to fulfill his promise of improving Maryland’s business climate.
Unfortunately, the outlook for 2020 is not any more positive for reducing taxes. In fact, funding the $32 billion education overhaul, as recommended by the Kirwan Commission, will be the most central theme this year in the Assembly.
Reinstating the millionaire tax, imposing a 10 percent tax on digital ads, legalizing sports betting, and cutting tax credits and incentives are just few of many ideas that have been proposed as a way to fund the Kirwan plan. While not all of these ideas are bad, some of the proposals would further worsen Maryland’s already dismal tax climate.
For instance, Maryland’s millionaire tax of 2008-2010 has been nationally cited as a failed experiment. Within three years of enactment, 40 percent of the state’s millionaires moved away, taking $1.7 billion of taxable income with them. It is not realistic to expect different results from the same failed experiment of just a decade ago.
In addition, Maryland could become the first state in the nation to impose a hefty 10 percent tax on social media companies such as Facebook for hosting ads that target Maryland IP addresses. In a state that is trying to position itself as a technology hub by handing out millions in tax incentives every year, penalizing tech companies to raise money for the Kirwan plan also seems counter-productive.
But given the state’s already-flawed approach to fixing the state’s education crisis, it is no surprise that bills backing its financing are also suboptimal.
The Kirwan plan proposes that Maryland spend an additional $4 billion on education per year on the premise that insufficient funding is the cause of academic underperformance. Yet, Maryland is the 14th-highest education spender in the nation on a per-pupil basis, and children in numerous states that spend less than Maryland far outperform Maryland’s students.
That said, when additional education money is spent more wisely, for instance to improve teaching quality, school choice, or school curriculums, more spending may be justified to improve education for our children. But not only do the Kirwan recommendations not focus on achieving these goals, following them would inevitably hurt Maryland’s fiscal health and long-term economic competitiveness.
While Maryland legislators claim they want to avoid general income or corporate tax hikes to fund the Kirwan plan, they will inevitably resort to such options when specific tax hike schemes fail to support the Kirwan plan.
As such, this year’s General Assembly won’t look any different from past sessions that focused on spending, taxing, and regulating. The only way to change the course is if state legislators come to their senses and reject the proposed bills that will continue to hurt Maryland’s businesses and taxpayers.
Marylanders already face high tax burdens, and their children do not receive good returns from that investment. Further increasing tax burdens for Maryland residents and corporations without tackling the problems plaguing the state’s education system would be the worst possible outcome of the 2020 General Assembly.