1:25 PM EDT, September 9, 2013
Raising Maryland's minimum wage has faced tough going in Annapolis ever since Robert L. Ehrlich Jr. left office. It was the Republican governor's steadfast opposition to raising the minimum wage that spurred Democrats to support an increase in 2005 — and then override his veto. Since then, interest in setting wage levels has been, shall we say, minimal.
So it came as a bit of surprise to hear Senate President Thomas V. Mike Miller jump on the bandwagon last week, announcing his support for raising Maryland's minimum wage, particularly given that such a proposal died in the Senate Finance Committee on an 8-3 vote just months ago. Suddenly, it's become a front-burner issue.
Ah, but there's a catch. It's not enough that Democratic governors and state legislatures across the country (not to mention President Barack Obama) have seized on the minimum wage as a winning issue in recent months given the growing gulf between rich and poor in the U.S. At a time when Republicans in Congress want to cut back on food stamps to the working poor, the minimum wage is tailor-made for an election year. But Senator Miller says he expects the bill to be tied to a decrease in Maryland's corporate tax rate.
Perhaps Maryland should decrease that corporate tax rate, but what that has to do with the minimum wage is hard to discern. Only in the political calculus of Annapolis where horse-trading and special interest-pleasing go hand-in-hand might there be a connection. Big business hates the minimum wage, but they'd love to see a tax cut. Bingo. Get votes and campaign contributions in one fell swoop.
But moments like this are when Maryland taxpayers should hold their wallets most tightly. The fourth year of a political term is what one might call the giveaway season. Historically, it's when the General Assembly (and governors either running for re-election or on their way out and thus unconcerned with the consequences) pull out the crowd-pleasers but pay far less attention to the long-term fiscal impact of those goodies.
Tax cuts and big-ticket spending are the standard devices. Gov. Parris Glendening and the legislature approved the Thornton plan for K-12 education aid in 2002 without the means to cover its $1.3 billion price tag. As governor, Mr. Ehrlich decried that bit of fiscal irresponsibility — even after he boosted spending by a record 12 percent in 2006 when he ran for re-election.
Gov. Martin O'Malley did the reverse in 2010. He didn't spend big bucks or cut taxes — the recession precluded such possibilities — but voters may recall he waited to discuss tax increases needed to balance future budgets until after the ballots were counted.
Lowering the corporate tax rate without some off-setting budget choices sounds suspiciously like a return to form. The uncertainty surrounding the federal sequester and the impact those across-the-board budget cuts are having on Maryland's economy (and future tax collections) makes that choice all the more risky.
Since Senator Miller's announcement, Governor O'Malley has indicated he, too, will support a minimum wage increase, but he was cool to the idea of a corporate tax cut. We prefer the more open-minded direction offered last week by the Greater Baltimore Committee which has called for a study not only of the state corporate tax but of all the taxes that affect Maryland businesses. Their goal: To boost the state's economy, job creation and competitiveness through a broad, thoughtful and likely revenue neutral approach to tax reform. The study group's findings won't even be known until next May, well after the 2014 legislative session has concluded.
As for the minimum wage, we would advocate what we have endorsed for years — raise it to a level that is both fair and prudent and maintain it there. That's been the goal for the minimum wage in this country since 1938, but the standard has often lost ground to inflation. Washington's inability to address this issue (after some modest catch-up increases in 2007, 2008 and 2009) has left it to states (especially those with higher costs of living) to set the standard.
The goal must be to find an equilibrium, a level that is not job-destructive but which offers people a reasonable opportunity to make a living. Ideally, such a wage would help get more families off welfare and inject more spending into the economy. Nearly half the states enforce a minimum wage above the federal $7.25 per hour level, and that includes a handful of "red" states like Alaska, Arizona and Montana.
Will this cure all that ails the economy? Absolutely not. A relatively small percentage of the workforce earns the minimum wage today. But it clearly isn't harmful either. Vermont has one the nation's highest minimum wages ($8.60 per hour) and one of the lowest unemployment rates (4.6 percent as of July).
A fair day's wages for a fair day's work (unskilled labor included) isn't socialism, it's the social contract upon which a robust free-market economy depends. Business groups may grouse, particularly if they aren't given the stocking-stuffer of a tax cut next Christmas, but compassionate wages that might actually cover the minimum amount of food, clothing and shelter needed to live are good for the soul and, ultimately, good for the economy, too.
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