Are tax cuts in Maryland's future?

To paraphrase the British author Samuel Johnson, nothing focuses the mind like an imminent election.

After raising billions in new taxes during Gov. Martin O'Malley's tenure, state legislators have begun focusing their minds on next year's election and how best to retain their jobs.


Judging from recent public comments, top lawmakers have decided the best way is to cut taxes just before voters go to the polls.

In April, House Speaker Mike Busch, a Democrat, suggested, "If there's an increase in revenues that results [from economic growth], hopefully we can return some of that to the taxpayers."


A week later, Sen. Ed Kasemeyer, Democratic chairman of the powerful Budget and Taxation Committee, told the website that tax cuts are likely and that he believes "next year you will see it happen."

After increases in the sales tax, corporate tax, gas tax and income tax, voters can be forgiven for shaking their heads at lawmakers' newfound sympathy for taxpayers. But a more productive exercise would be to actually hold these lawmakers to their word.

In our view, a good way to lower taxes and benefit all is a gradual reduction in Maryland's corporate income tax, which is currently 8.25 percent. Here's why:

•First, low rates equal high potential for job growth. In a recent Forbes ranking of the best states for job growth, the 10 strongest states all have corporate tax rates drastically lower than Maryland's. One of them — Nevada — has no corporate income tax at all.

•Second, corporate tax relief has bipartisan support. Both Republicans and Democrats have recently introduced bills to lower corporate tax rates. Some want big cuts; others want smaller reductions. What matters is that respected leaders from both parties are putting their names behind sorely needed employer tax relief plans.

•Third, Maryland cannot choose its neighbors. We are stuck next to Virginia, a state that routinely outworks us in business creation and recruitment, employment rates and nonpartisan business rankings. Central to Virginia's superiority is its corporate tax rate, which stands far below Maryland's at 6 percent. Lowering Maryland's rate to be more competitive with Virginia's makes our state more attractive to entrepreneurs and job creators.

•Fourth, lowering the corporate tax rate could be an antidote to the federal government's clumsy sequestration policy. A large portion of economic activity in Maryland is derived from federal spending, mostly from businesses small and large that serve the National Institutes of Health, Department of Defense and other federal agencies. Revenue for these local businesses has dropped since sequestration, prompting layoffs for too many Marylanders. A reduction in corporate income taxes can soften the sequestration blow and help preserve and grow our job base.

•Fifth, we can afford it. Revenues to state coffers increased 5 percent in the fiscal year ending in June and are projected to increase another 2.4 percent in the coming year. We propose reducing the rate by 0.45 percent each year for the next five years, eventually matching Virginia's 6 percent rate. This incremental reduction would help keep and attract businesses and thus retain the jobs that are currently leaving Maryland.


More important, the money is put to productive use. It is returned to local businesses, empowering them to hire new workers, boost employee pay and benefits or invest in game-changing innovations that benefit us all.

Maryland lawmakers are proving Samuel Johnson right. For voters, the concern shouldn't be the motivation driving lawmakers to consider tax relief. Rather, their priority should be calling their elected representative to make sure they do it to strengthen our economy and job base.

Christopher B. Summers is president of the Maryland Public Policy Institute, a nonpartisan research and education organization that focuses on state policy issues. He can be reached at