By Erin Cox, The Baltimore Sun
12:03 PM EDT, May 10, 2014
As Maryland looks to re-energize its economy amid federal budget cuts and slow growth in the aftermath of the recession, the three Democrats vying to be the next governor each developed distinct — and detailed — plans for how to improve Maryland's business climate and promote job creation.
The party's dominance in state politics means that whomever emerges from next month's primary will be favored to win the general election, but several economists said none of the candidates' plans would provide a silver-bullet solution to the state's economic woes.
"Overall, every plan has something good in it," said Richard Clinch, a research economist at Battelle Memorial Institute, who has been following the state's economy for decades. "None of these plans go at the core of what Maryland needs, which is a comprehensive look at our tax and regulatory climate."
While Republicans sound consistent party themes about the need for broad and immediate tax relief, the Democrats present approaches that economists say have significant differences. And with the worst effects of the recession appearing to wane, the next governor could have a significant effect on how the state moves forward, experts said.
"The economy is finally getting to the point where we don't have to talk about increasing taxes to keep Maryland government funded," Clinch said.
Front-runner Lt. Gov. Anthony G. Brown's 17-page plan for the economy, released last week, takes what experts called a middle-of-the-road approach compared with those of his two opponents.
The primary theme of Brown's plan is to invest in physical and human infrastructure to create business incentives for specific industries and boost job prospects for residents.
Brown's five-part plan includes a series of tax credits and incentives, new programs and job-training proposals. For example, he suggests setting aside $8.5 million over four years to create a "workforce intermediary center" to train workers and connect them to businesses, and $1 million to create a micro-loan fund for small businesses.
He would cover the entire plan's $112.3 million price tag primarily with money derived from two major transportation projects: the Red Line in Baltimore and the Purple Line in the Washington suburbs. Brown estimated that the new jobs, construction and economic activity associated with the Purple Line alone would generate $24 million a year for state coffers.
Brown also suggested forming a commission that would look at overhauling the state's tax structure but did not suggest cutting or reducing any specific taxes. In debates and public forums, Brown has said that he doesn't see a need in the near future to raise any taxes.
Attorney General Douglas F. Gansler, who is trailing Brown in the polls, has drawn attention for his proposal to gradually cut the state's corporate income tax rate from 8.25 percent to 6 percent, which would match Virginia's rate. He would couple it with closing loopholes that now allow some corporations to avoid paying taxes in Maryland.
Gansler, who has an undergraduate degree in economics from Yale University, has said that cutting the rate would increase economic activity in the state and would ultimately encourage businesses to stay here, generating more tax revenue.
Gansler's 30-point plan, presented in February, involves a broad array of incentives and programs, including raising the minimum wage to more than $10 per hour by 2015, three years faster than the plan approved by the General Assembly this year.
He would discount tuition for degrees leading to jobs in high-demand industries, so students majoring in cybersecurity, for example, would pay less for their education. Gansler also would encourage new manufacturing businesses by giving start-ups a two-year reprieve from state taxes provided that they promise to stay in Maryland for at least five years. And he would create a "one-stop shop" online portal that makes it easier for small businesses to identify and take advantage of tax credits, which he said would encourage small companies to hire more workers.
"It's a plan built around one core truth: Maryland needs more jobs," Gansler said when he released it.
Anirban Basu, an economist and CEO of Sage Policy Group, said that while both plans generally would be good for the state's business climate, they reflect a philosophical divide between the candidates.
"Anthony Brown is much more tilted to government intervention in the economy, that government can help," Basu said. "Douglas Gansler is more saying that government should get out of the way when it can. ... I don't think business people would agree on the proper approach, certainly in Maryland, where many of our top business people are politically progressive."
Gansler's communication's director, Katie Hill, contested Basu's characterization, saying the plan is less about the government getting out of the way and emphasizing that "the government should partner with the private sector."
Del. Heather R. Mizeur of Montgomery County, meanwhile, has offered a plan to raise the tax on millionaires and revamp so-called combined corporate reporting, which allows some corporations that do business in Maryland to avoid paying corporate taxes.
She would use the extra tax revenue — she estimates it at $200 million — to provide moderate tax relief to small businesses and families making less than $250,000 a year. But she also would call for businesses to eventually pay a mandatory minimum "living wage" of more than $16 an hour, as well as for paid sick leave for all workers.
"My vision on economic development doesn't pit workers against businesses, it acknowledges that we need something for both," Mizeur said in an interview. She said her plan places "a very strong emphasis on closing the income inequality gap."
Richard Vatz, a conservative blogger and professor of political rhetoric at Towson University, said that politically, the differences among the plans translate into a simple message for voters: "Gansler clearly has more sympathy for business than Brown or Mizeur.
"These are prototypical Democratic plans," Vatz said. "The one exception is Doug Gansler floating around that he wants to cut the corporate income tax rate."
The four Republicans vying for their party's nomination are united behind the idea of lower taxes and fewer regulations in the state, but some go further than others in rolling back Maryland's tax burden.
Larry Hogan, a real estate business owner, told The Baltimore Sun that he supports lower taxes, but he offered no specific plan.
"We don't need to have the lowest tax and regulatory structure in the nation, but we can no longer afford to be among the highest," Hogan said.
Harford County Executive David R. Craig has proposed eliminating both the income and estate taxes entirely, as well as lowering the gas tax and tolls. Any revenue losses, he said, would be offset by budget cuts and increased government efficiency.
Charles Lollar, a business executive from Charles County, also has called for phasing out the personal income tax over five years, and he wants to eliminate what he called "multibillion-dollar boondoggles like the Purple Line."
Anne Arundel County Del. Ron George, who owns a jewelry store, has a 10-point economic plan that calls for an immediate 10 percent cut in the income tax rate and dispatching more auditors to uncover government waste.
With the June 24 primary election less than seven weeks away, not much has been made of the candidates' economic policies, in debates or elsewhere — to the frustration of at least one business group.
After Wednesday night's televised Democratic debate, which focused more on the failed Maryland health exchange and questions of character, the Maryland chapter of the National Federation of Independent Business lamented that the candidates did not do a better job spelling out how they would help small businesses.
"The candidates this evening spent almost as much time debating the name of the Redskins as they did the economy, and we think that's disappointing," the group's director, Jessica Cooper, said in a statement. "We heard some talk of corporate tax cuts and targeted tax cuts for high-tech firms, and with all due respect, I think they miss the mark. Most small businesses pay income taxes, not corporate taxes, and most aren't in the high-tech sector."
But parsing the precise impact of each candidate's plan is tricky business, Basu said, and it's complicated by a simple truth of politics.
"There's always a question of whether they're going to do what they say they're going to do."
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