When it comes to encouraging prosperity, the Old Dominion is trouncing the Old Line State. The American Legislative Exchange Council this week released a “Rich States, Poor States” report that modeled the 50 states and ranked the economic outlook in each. Virginia secured a third-place slot while neighboring Maryland lagged midpack at 21. That’s no accident.
“Virginia is the best state in America in which to do business,” Virginia Gov. Robert F. McDonnell told The Washington Times. “We are keeping taxes low and litigation and regulation to a minimum. Our fiscal discipline gives us a great story to tell to CEOs and entrepreneurs looking for the best place to do business in a competitive global marketplace.” Since the Republican governor took office last year, he has been trimming the state government and holding the line against the impulse to close budget gaps by raising taxes.
Maryland cannot make the same claim. With the sixth-highest personal-income-tax rate in the country, Maryland is a less attractive place to set up shop. “It’s an unavoidable fact that Maryland’s business community competes with other states,” former Maryland Gov. Marvin Mandel, a Democrat, told The Washington Times. “By any objective measure, Virginia is a formidable competitor and demonstrates how government policies can promote the private-sector growth necessary for job creation.”
Mr. Mandel serves as co-chairman of Maryland Business for Responsive Government, which this week released a scorecard analyzing General Assembly votes. The “Roll Call” report identified a substantial increase in the number of anti-business lawmakers based on the number of votes in favor of legislation that would increase the cost of doing business in the state.
Maryland is still reeling from the effect of the 2007 special session’s $1.4 billion tax increase. The Tax Foundation last year ranked the state a dismal 44 in terms of business-tax climate and noted that “highest-in-the-nation county-level income taxes” contributed to this burden. Virginia fared much better at number 12. Virginia also enjoyed a Top 10 ranking from Chief Executive magazine’s report on the best states for business, while Maryland came in at a lackluster 37.
There is an element of subjectivity in any ranking system, but objective data tell the same tale. In the past decade, Maryland’s absolute domestic migration counted a loss of 100,000 people. Virginia, by contrast, picked up 175,000. That’s a very real vote of confidence for a state that’s right-to-work and low-tax and has a governor committed to improving the state’s fiscal management. The reward for these policies is found in Bureau of Labor Statistics figures that show a greater percentage of Virginians have jobs and the job growth rate is higher.
The same lessons can be drawn from elsewhere in the country. Big-government states such as New York, California and Illinois all performed poorly in terms of economic output, personal income growth and employment. Those that focused on cutting red tape fared better. The only surprise is that such outcomes aren’t obvious to everyone by now. Empowering bureaucrats to control the lives of others has never worked in any place at any time. Virginia’s gotten the message. Now it’s Washington’s turn to learn.