Separating fact from fiction on tax cuts and spending cuts

“Fallacies do not cease to be fallacies because they become fashions.”

—G.K. Chesterton

With the gubernatorial campaign in full swing, and the Maryland General Assembly’s legislative session less than two months away, we’re going to see a lot of talk from state politicians about tax cuts and spending cuts. Most of what you’ll hear or read about those issues will be pure prevarications.

At a forum on state manufacturing, Democratic and Republican candidates supported the idea of cutting the state’s corporate income tax rate. Attorney General Doug Gansler, a Democrat, and Republican candidates Harford County Executive David Craig, Del. Ron George and Charles Lollar all support some form of reduction in the corporate income tax rate.

 Given Maryland’s dismal business climate, cutting the corporate tax rate is a good idea to attract businesses and foster much needed economic growth. Maryland’s current rate is 8.25 percent compared to neighboring Virginia’s, which is 6 percent. Gov. Martin O’Malley and the General Assembly increased the corporate income tax rate as part of a billion-dollar package of tax hikes during the 2007 special legislative session. They argued the hike in the corporate rate was needed to plug the state’s structural deficit.

(Quick aside: cutting the personal income tax rates is an even better idea since many of Maryland’s small businesses are pass-through entities that pay the personal income tax rates.  Maryland small businesses face the 7th highest marginal tax rates in the nation, according to data compiled by the Tax Foundation.)

One of the “arguments” against cutting the corporate income tax rate comes from Lt. Governor Anthony Brown, the Democratic machine’s pre-ordained successor to Governor O’Malley. Brown, who skipped out on that manufacturing forum, criticized Gansler and the Republicans’ proposals as “a $1.6 billion corporate tax giveaway.”   

Brown is attempting an intellectual stolen base here. A tax cut is not a “giveaway.” A tax cut is government limiting itself from taking even more money from the corporation or individuals who earned it themselves. To call a tax cut a giveaway presumes that the money already belongs to the government, not to those who earned it.  

Got that, Maryland businesses and taxpayers? The man who wants to be your next governor believes your money already belongs to the government.

That Brown’s first concern about tax reform is not the taxpayer but government revenue and the Democratic special interests and rent seekers that can't exist without it belies the attendant fallacy about spending cuts. 

 Governor O’Malley continues to tout, as part of his comical presidential run (he barely cracks 1 percent in the polls), that his administration cut spending more than any administration in Maryland history. And it won’t be long before Anthony Brown latches on to that meme.

That the O’Malley-Brown administration cut the budget must be news to the bean counters at the Department of Legislative Services. According to their data, O’Malley’s fiscal year 2014 budget spends $38 billion, whereas Bob Ehrlich’s last budget spent $29 billion. That means O’Malley has increased state spending by $8 billion, a 30 percent increase. That includes all the credit card spending O’Malley did by swapping out cash for bond debt.

Use an accounting gimmick to count reductions to overall spending increases as cuts, add in a little mainstream media complicity, and voila: You’ve got a the fallacy of cutting the budget more than any other administration in history. And despite these, ahem, “cuts,” that pesky structural deficit just won’t die.

O’Malley once tweeted “You have to have the guts to make the cuts,” prompting Change Maryland’s Larry Hogan to respond by calling O’Malley “gutless.”  

This elastic definition of spending cuts is not limited to Maryland Democrats infesting Annapolis. U.S. Senator Ben Cardin is also a purveyor of this prevarication.

In September, “our friend” Ben tweeted that the House Republicans voted to “gut SNAP” the Supplemental Nutrition Assistance Program. By “gut” Cardin means increasing SNAP spending by 57 percent.  

According to the Congressional Budget Office, the House GOP plan spends $725 billion on SNAP over the next decade. SNAP spending between 2003 and 2012 totaled $438 billion. The GOP bill increases spending by 57 percent. Democrats wanted to spend $764 billion over the next 10 years: hence the gnashing of teeth and rending of cloth over heartless Republicans “gutting” SNAP.  

Keep these deceptive gimmicks in mind the next time you see a Maryland Democrat complaining about tax or spending cuts. 

--Mark Newgent

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