There is no real honeymoon in a forced marriage, which is what Republican Gov. Larry Hogan has with a dominantly Democratic legislature. The two just have to find a way of living under the same State House roof — without killing each other.
Despite soothing bipartisan pledges following the Nov. 4 election, the weeks after the Jan. 21 inaugural were almost predictably tense, especially after Hogan released his fiscal 2016 budget.
It took about a week for the opposition to get their act together, and then the pots and pans started to fly at the governor, especially after his Feb. 5 State of the State address.
Right after he finished his speech, one Republican lawmaker quipped that the Democrats were heading to the nurse’s station. They wanted to have their hands checked out after sitting on them for an hour.
The speech was only a half-hour long, and some Democratic legislators did give up a smattering of applause here and there. Mostly, they sat in stony silence as their Republican colleagues jumped to their feet repeatedly, clapping and even cheering, as Hogan recycled much of his campaign rhetoric, then detailed a legislative program to implement some of his promises.
Senate President Mike Miller, smiling at the outset, was scowling by the end. Afterward, Miller called it “horrible” and said the governor was trashing Maryland and offering up campaign promises he couldn’t fulfill.
House Speaker Michael Busch was more restrained but equally critical, saying, “You campaign with slogans, but you govern with facts.”
Sen. Guy Guzzone of Howard County called it “the worst speech ever.”
Tired of Stump Speech
Democrats have grown tired of Hogan’s repetition of his standard stump speech that he continues to use with variations depending on the setting. He used parts of it in his inaugural address, then lifted them again speaking to a tech council dinner, and has continued to use parts in talking to other business groups.
The new governor dishes out what is red meat for his supporters, but totally inedible to these Democratic vegetarians. They’re tired of the slogans that blame them implicitly for what is wrong with the state, including high taxes, overspending, over-regulation, businesses closing and people wanting to leave.
Their basic point is that you shouldn’t trash talk the home team, no matter its record.
A little more than a week later, the Thursday’s interim report of the Economic Development and Business Climate Commission (set up by Miller and Busch last year) shows they may have more common ground than they expect.
Maryland ranks poorly on business climate, the commission conceded, and there is “a perception that the state is unfriendly to business.”
The commission chose to defer detailed discussion of Hogan’s most persistent complaint: Maryland’s taxes are too high and too many.
But in its executive summary, the commission “observes that the state’s tax policies serve as a deterrent to businesses considering expanding in, or relocating to, the state and impede the economic viability of existing businesses.”
Later in the report, it said: “Among the more tangible competitive disadvantages from which the state suffers nationally is its comparatively high corporate tax burden. … Corporate income taxes have become a lightning rod for businesses considering moving to, or growing in, the state.”
Competing Poorly for Jobs
Democrats have liked to compare Maryland’s job growth with its neighbors in Virginia and Pennsylvania.
“Bluntly stated, Maryland has been competing relatively poorly among a poorly competing group of states,” said the commission report.
One chart is particularly telling: It shows Maryland’s job growth of just 0.5% during the past six years, far below the growth of the 15 fastest growing states. Those include not just conservative, low-tax Texas and Utah, but far lower growth rates than high-tax Massachusetts, New York, Washington and Minnesota, as well.
The commission also recommends that state agencies and employees improve customer service, much as Hogan did more bluntly in his State of the State speech. “The most significant action needed to enhance Maryland’s business competitiveness does not demand additional funding or action by others,” the report concluded. “Rather, it demands a cultural change within the state, away from its perceived image of being unfriendly to business.”
To do this, the commission recommended creation of a secretary of commerce in the governor’s office, a kind of business czar to get agencies cooperating on a business-friendly agenda.
But despite its acknowledgement of taxes as an issue, the commission still couldn’t resist flirting with higher taxes to pay for the education and apprenticeship programs it recommends: “Increased government efficiency and higher taxes on nonessential items (alcohol, tobacco, soft drink, etc.) and gasoline (having declined $1.76 per gallon since its peak price at the pump) seem worthy of exploring.”
Notable things about this list of nonessentials and one energy essential is that the taxes on booze, cigarettes, cigars and gas were all raised in the past four years.
Hogan is absolutely firm that he will veto any new taxes sent to him. The biggest tax bombshell in his legislative agenda includes eliminating the automatic increases in the gas tax passed in 2013. This will reduce the amount of funding coming into the Transportation Trust Fund. Democrats fear this cut in revenues will spell the death of the Purple and Red light rail lines.
The gas tax is one of the most regressive of the sales taxes, since virtually every business and worker, even those at minimum wage, must pay it in some fashion. Of course, everybody uses roads, highways and bridges — but only about 8% of the population uses mass transit.
Two other tax cuts on Hogan’s announced agenda also impact business. He wants to repeal the rain tax, officially called the stormwater remediation fee, which severely impacts businesses with large buildings and parking lots.
Environmental groups, which despise the nickname, are adamant against repeal, and Miller says full repeal is unlikely.
Busch and other leaders say the nine counties and the city already have enough flexibility to change the tax as they see fit.
Even if the state were to repeal the mandate it imposed on Howard, Anne Arundel and eight other jurisdictions to meet federal pollution standards for stormwater, the federal requirement would remain and the individual counties would have to repeal or modify the rain taxes they passed.
The personal property tax is particularly annoying for small businesses. The state no longer collects a tax on property, such as equipment and inventory, owned by businesses, but the counties still do.
Hogan would eliminate the tax on property totaling less than $10,000. This costs the state nothing, but eliminates the major paperwork entailed. Many firms spend several hours completing the annual forms or pay an accountant to do it for them. The eventual tax bill is often lower than what it costs to fill out the forms; in return for the loss of personal property taxes, the counties will get back more highway user revenues.
This tax repeal, too, has been pronounced dead on arrival. (By the way, Howard County’s Sen. Ed Kasemeyer and Mary Ann Scully, president of Howard Bank, served on the commission.)