At last, Maryland faces fiscal reality

Forum Extra

September 28, 1992|By Ellen R. Sauerbrey

EARLY in July, after Marylanders grimly celebrated a fiscal new year with the largest tax increase in the state's history, the director of the Carroll County Office of Economic Development received a most unwelcome piece of correspondence. It was from the Boston Consulting Group, an international firm that advises big companies on the best places to do business.

"I have taken Maryland off my recommended states for investment for my Fortune 1000 clients," the letter read. "The new tax increases passed this spring make a 9.65 percent marginal tax rate on personal income possible. Maryland is just not competitive anymore. Good luck!"

A few weeks later, I received a letter from a Timonium businessman -- mailed from his new home in New Freedom, Pa. He wrote to tell me that the tax and business climate here had finally driven him out of the state. He ended his letter: "May God save Maryland."

These two stories boldly illustrate what policy makers in Maryland apparently fail to understand: that their tax and regulatory decisions can and do have a major impact on the personal and business decisions made by current and would-be citizens.

Maryland has the unfortunate distinction of being the fourth worst in the country in the number of jobs lost over the past year. Perhaps it is no coincidence that the poorest performing states are New York -- America's No. 1 Tax Hell -- and New Jersey and Connecticut, both of which have shot themselves in the foot with large tax increases. Now, so have we.

We are suffering a major tax revenue shortfall because job loss translates to fewer tax dollars entering state coffers. State budget analysts predict that a large number of the jobs that have been lost will not be coming back. Unemployment claims lag well behind what would be expected given the magnitude of job losses. Many of those jobs, and those workers, have migrated to other states.

After years of dodging the bullet with budget gimmickry, political reality is finally forcing the governor and the Democrats' fiscal leadership to talk about downsizing and redefining the role of government. That job will be much harder now than it would have been a year ago, because it is much more difficult to cut growth in government once it is in place than it would have been to prevent that growth from occurring. There are no more special funds to raid, and another tax increase is out of the question. There are no other options. It remains to be seen if the mind set to really reduce the size of government has finally taken hold.

It is long past time to redefine both the mission and structure of state government. The best way to accomplish this would be a hands-on strike force, including competent managers from the private sector, to go into every state agency and carry out an intense performance audit. Every state program should be looked at to determine if it is necessary, if it is affordable and if it is effective. If it fails that test, it's got to go.

Ellen R. Sauerbrey is the minority leader of the Maryland House of Delegates. She represents the 10th District in Baltimore County.

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