Dayhoff Soundtrack: Peter Franchot's commentary on the Special Taxing Session

Monday, May 14, 2012

Peter Franchot's commentary on the Special Taxing Session

Today, the Maryland General Assembly will reconvene in a special session, and is expected to pass a Fiscal Year 2013 budget by raising income taxes on middle-class families throughout the State. I have high personal regard for my former colleagues in the legislature, and I sincerely appreciate their desire to sustain our state’s longstanding commitment to priorities such as education and health care. As Maryland’s Chief Fiscal Officer, however, I respectfully believe this is simply the wrong approach at the wrong time, for the following reasons.

First and foremost, Marylanders are still struggling to balance their personal household budgets, provide for their families and build a secure future in an economy that remains exceedingly fragile, and which has yet to truly recover from our nation’s financial crisis.

According to the U.S. Bureau of Labor Statistics, for example, Maryland ranked 47th in the nation in average private sector weekly earnings during that period, and was just one of nine states to experience a decline. Finally, despite recent report of job growth, we must still create nearly 150,000 additional jobs in Maryland just to return to pre-recessionary levels. While we can share optimism that Maryland’s job figures will continue to trend in the right direction, so too must we acknowledge that far too many people remain unemployed or underemployed, have settled for lower-paying jobs and are therefore taking home smaller paychecks.

At the same time, Marylanders have seen the value of their homes – for many, their primary source of personal equity and mobility – continue to decline. According to the Maryland Association of Realtors, the median price of existing homes in this state has fallen from $323,838 to $225,601 – a drop of about 30 percent.

None of this bodes well for an economy that is powered by consumer activity. Needless to say, people who have lost jobs, are underwater on their mortgages or feel as if they are barely making ends meet simply will not be putting money back into the Maryland economy. It should also go without saying that the worst thing we can do to a struggling, consumer-powered economy is dig deeper into the pockets of consumers who are already strained financially. We cannot afford to jeopardize the long-term health of our economy for the sake of a questionable, short-term budget fix.

Second, this will serve as merely the latest in a long and seemingly endless line of changes to the State of Maryland’s tax code. Over the past five years, Marylanders have seen an increase in the State’s personal income tax rate, a reduction in the amount of personal exemptions for individual filers, an 18 percent increase of the corporate income tax rate, a 20 percent increase to the motor vehicle excise tax, a 20 percent increase to the sales tax, a 50 percent increase of the sales tax on alcohol beverages, the adoption and subsequent repeal of a computer services tax, the adoption and sunset of a special tax bracket on high income earners, and the adoption and sunset of an unprecedented set of new filing guidelines for Maryland corporations.

In my travels throughout the State, the one thing I hear above all else is a desire for a stable tax climate – one that allows both businesses and families to budget responsibly and to engage in sound, long-term financial planning. By comparison, the process by which we adopt changes to our tax laws appears, far too often, to be arbitrary, improperly vetted and highly politicized. This does little to reinforce Maryland’s hard-earned reputation as a desirable place to live and conduct business, and it does even less to inspire public confidence in our state government.

My final objection to this strategy of resolving our fiscal challenges through tax increases – as well as through slots, which I understand could be the topic of yet another special session – is that it simply won’t work. Most will recall that the legislature convened for a special session in 2007. That special session led to the largest tax increase in history, which was intended to resolve our state’s structural budget deficit, and the adoption of a statewide slots program that was designed to generate $600 million for education.

As we all know, neither of those outcomes occurred. We still have a structural budget deficit and, more than three years after slots were legalized in Maryland, we have still spent far more taxpayer dollars to buy the slot machines than we’ve actually raised for our public schools. I simply do not believe it would be wise to repeat history and expect a different outcome this time around.

In closing, I would respectfully ask that in the future, you expect better from your state government. I would ask that you reject this patently false choice between destructive tax increases and thoughtless cuts to education, health care and public safety.

Instead, I would ask that you demand that our state government follow the lead of working families throughout Maryland by living within its means. We must seize this opportunity to deliver a better product to the taxpayers of Maryland for less money through technology, sensible priorities, innovative management and a renewed commitment to old-fashioned customer service. We must also remember that Maryland’s fiscal well-being depends entirely on the strength of our economy, and that a true economic recovery cannot be achieved through state government spending, but rather, through meaningful private sector growth.

While I do not believe this special session will yield a positive outcome for the taxpayers of Maryland, I do believe that our best days are still ahead of us. It remains an extraordinary privilege to serve as your Comptroller, and I look forward to working with you in the coming years to build a truly prosperous state and a government that is truly worthy of the people we serve.
Peter

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