- The Washington Times - Wednesday, March 26, 2003

A frustrated Dennis O. Kane considered moving his Bethesda construction company to Northern Virginia last fall, figuring he would pay lower taxes and encounter less red tape on the other side of the Potomac River.
But then GOP gubernatorial nominee Robert L. Ehrlich Jr. pulled even with his Democratic rival in the polls. Maryland's business climate looked more inviting, so Mr. Kane built his new corporate headquarters in Rockville.
"At the end of the day, I know it costs me more to do business in Maryland, and that bothers me. But at least now I believe I'll be getting more bang for my dollar," said Mr. Kane, whose brother John is chairman of the state Republican Party.
Since Mr. Ehrlich took office in January, he has discovered it won't be easy to fulfill his campaign pledge to make Maryland friendlier toward businesses.
Some business leaders had hoped Mr. Ehrlich would cut taxes in his first year, but a $2 billion gap in the state budget has forced the governor to consider boosts in some taxes.
Mr. Ehrlich told editors and reporters at The Washington Times last week that he will reluctantly consider raising property taxes, though he vowed to strongly resist a corporate-tax-increase package in the House that calls for more than $200 million in higher fees and closed tax shelters.
Some of the business-related challenges facing the new governor are political. Mr. Ehrlich is Maryland's first Republican governor in more than 30 years, but Democrats retain control of the state legislature.
Earlier this month, Senate Democrats rejected Mr. Ehrlich's nominee for environmental secretary, Lynn Buhl, saying the former automotive-industry lawyer was not committed to enforcing the state's envrionmental regulations.
Despite the setbacks, Mr. Ehrlich said he is committed to easing regulations that burden small businesses and big corporations alike.
"When a business acts badly, they are going to be brought to terms. But guess what? It's not going to be the 'gotcha' mentality that until Nov. 5 reigned in the state. And that is equally important to the business community as taxes. Maybe more so in this state, at this time," he said.
Business leaders say Mr. Ehrlich's predecessor, Parris N. Glendening, never fully committed himself to improving the business climate. Mr. Glendening, a Democrat, cut income taxes and used a $44 million incentive package to keep Bethesda hotel giant Marriott International Corp. from fleeing the state, but he also waffled on transportation projects important to businesspeople.
"I think the Glendening administration was not bad for the state, but it wasn't particularly good, either," said Kathleen D. Snyder, president and chief executive of the Maryland Chamber of Commerce.
Some economists say Maryland's problems aren't dire to begin with. They point out that the state's unemployment rate is generally below the national average, and Maryland has a history of weathering recessions better than neighboring states.
Maryland ranked seventh in job growth in 2002, according to data the state released yesterday.
"The new governor has a lot to work with," said Richard P. Clinch, director of a University of Baltimore research program that studies Maryland's business climate.
The state invested heavily in higher education during the 1990s, a key goal of employers concerned about the quality of the work force, Mr. Clinch said. Maryland is also home to leading federal research facilities such as the Goddard Space Flight Center in Greenbelt and the National Institutes of Health in Bethesda that produce private-sector spinoff technologies and products, he said.
Aris Melissaratos, a former Westinghouse Electric Corp. executive whom Mr. Ehrlich tapped as his new secretary of business and economic development, said whether or not the state is actually bad for business doesn't matter. What matters is whether the perception is there, he said.
"It may be perception; it may be reality; but nevertheless it's there," Mr. Melissaratos said.

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