- - Friday, March 7, 2014

Maryland, one of the bluest of blue states, is the poster child demonstrating that taxing the rich fails to balance the state budget.

Yet Democrats, who have complete monopoly control on all branches of state government, continue to think that doing the same thing over and over will lead to a different result.

Because of its proximity to Washington, D.C., Maryland is one of the wealthiest states in America. Still, it is plagued by fiscal woes. In a vain attempt to eliminate Maryland’s structural deficit, the administration of Gov. Martin O’Malley and Lt. Gov. Anthony Brown has raised taxes, tolls and fees more than 80 times since 2007, while increasing overall government spending by $9.6 billion, or 32 percent, over the same period.

This oppressive tax-and-spend climate is hurting Maryland’s families and forcing many of them to leave the state.

Wealthy and middle-class citizens have been fleeing Maryland, thus denying the state the ability to tax any of their income. Small businesses are moving their jobs to friendlier states.

Between 2000 and 2010, 66,000 people left the state, taking $5.5 billion with them. Maryland has also lost at least 6,500 small businesses.

The best way to create more revenue is not with higher taxes, but by putting more people to work in well-paying jobs. No state can afford to lose the people who have the capability of creating these jobs, growing the economy and putting more revenue into state coffers.

Maryland should have learned a lesson when it passed the “millionaires tax” in 2008, raising their tax rate to 5.75 percent (including the local “piggyback tax” totals a high of 9.5 percent). Instead of the expected revenue increase. the following year Maryland revenues plummeted.

A Bank of America-Merrill Lynch analysis of federal tax-return data found that Maryland lost $1 billion of its net tax base owing to residents moving to other states.

No tax is more destructive to job creation than a progressive personal income tax. CEOs recognize that locating a corporation in Maryland will subject their own personal paycheck to one of the highest income-tax burdens in the country.

Among the litany of high-profile companies that have bypassed Maryland in recent years are Volkswagen North America, Hilton Worldwide, Northrop Grumman, SAIC and Computer Sciences Corp.

Perhaps even more important, 94 percent of small businesses — the mother lode of job creation — pay the taxes from their businesses, not as corporations but as individuals through their personal income-tax level. As the taxes on the “rich” go up, these small businesses are squeezed in their ability to expand or even survive.

Recognizing that 62 percent of net new jobs in America have been created in the nine states with no personal income tax, Maryland House Republicans recently proposed the Income Tax Relief Act of 2014 (HB 326).

Their proposal would cut Maryland’s income-tax rate by 10 percent over the next three years. This across-the-board cut would bring much-needed tax relief to all Marylanders, regardless of their income or tax bracket.

An even bolder plan was announced on the same day by a Republican gubernatorial candidate, Harford County Executive David Craig.

He proposes to put the state on a glide path toward a zero state income tax by phasing in reductions — first to 4.25 percent rate for all taxpayers, and in the second phase, cutting the rate to 3 percent. This would amount to a total saving of $2.55 billion, or $750 for single taxpayers and $1,500 for married couples.

These deductions do not include additional savings from Mr. Craig’s proposal to also increase personal exemptions from the current $3,200 to $5,000.

Another gubernatorial candidate, businessman Charles Lollar, has also proposed elimination of the personal income tax, but has not laid out specifics of his plan.

Predictably, Democrats and the liberal press immediately attacked the Republicans for proposing tax relief for “the rich.” As they have demonstrated, “rich” means an income for single-filers in excess of $100,000 and for joint-filers of more than $150,000.

Clearly, Democrats and the liberal press have blinders on with respect to the connection between high income taxes and the suppression of economic activity.

Until Maryland changes its tax policy, it will continue to be increasingly dependent on a deeply indebted federal government to provide jobs and keep its economy afloat. How is that going to work out?

Ellen Sauerbrey is a former Republican nominee for Maryland governor. Dee Hodges is president of Maryland Taxpayers Association.

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