Is Md. bad for business? It is, according to a consensus view of taxes, red tape

No one bothers to call

3 Alarms went off when state was ignored for a computer chip plant

January 14, 1996|By Jay Hancock | Jay Hancock,SUN STAFF

The disdain was painful. IBM and Toshiba could easily have put their $1.2 billion, 4,000-job computer chip plant in Maryland.

Maryland has good factory sites, a smart work force, a decent computer industry, a fine airport. It's not far from an important IBM lab in upstate New York.

But they didn't. They didn't bother to call Maryland.

In August, IBM-Toshiba picked Northern Virginia, a few miles south but, in the minds of many business managers, another planet.

It was another unpleasant piece of evidence supporting the growing consenus that Maryland is not good for business.

As federal spending evaporates and private companies move jobs elsewhere, state Chamber of Commerce president Champe C. McCulloch ranks Maryland in "the bottom third" of all states in economic friendliness.

Perhaps such talk from a chamber leader isn't unusual.

But Parris N. Glendening, the Democratic governor, has called Maryland "not competitive in mid-Atlantic states, not competitive on the East Coast and, in fact, not competitive internationally."

Even labor leaders like Kevin O'Connor, vice president of the AFL-CIO of Maryland and the District of Columbia, concur that "the state could make it a lot easier for businesses to actually transact business in Maryland" by speeding permit processes and streamlining some regulations.

Plainly, something's wrong.

Lulled by federal dollars, hobbled by an obsolete tax system, focused for decades on "quality of life" -- rather than economic growth -- Maryland is unequipped for the harsh new era in which it has awakened, a broad review of economic and political data suggests.

The General Assembly will consider tax cuts, company tax credits, environmental regulatory changes and streamlining of permits this session.

But even if many of the bills are passed, Maryland will still be trying to catch up to other states' programs for tax credits, research development, grants, loans and other incentives to lure or retain companies.

Meanwhile, places such as Virginia and New Jersey are aggressively moving on to what economists call the next wave of competition: broad, genuine deregulation, permit-schedule acceleration and user-friendly bureaucracies.

"The big trend of the 1990s is going to be regulatory reform," said Richard P. Clinch, program manager for the Maryland Business Research Partnership, an economic development think tank financed largely with business dollars.

On top of all that, Marylanders revere a law -- the closed-shop provision for unions -- that many people argue boosts living standards and protects working families. But the politically explosive statute also sends many of the world's most prosperous, growing companies straight to other states, business executives say.

Maryland is not without stunning advantages, many of which get overlooked amid the criticism.

It has one of the lowest corporate income-tax rates on the East Coast, according to the Tax Foundation. Workers' compensation a large employer cost -- is 36 percent lower here than the national average. Maryland is No. 1 in the country in the amount of university research and development, according to the Corporation for Enterprise Development.

The state "still enjoys a really healthy level of development capacity -- the basic building blocks of your economy," said William Schweke, program director for the Corporation for Enterprise Development, a research group whose supporters include various labor groups. "Labor force. Ports. Airport. Universities. Transportation. All these things are its strongest asset and really distinguish the state from many other states."

They may not be enough. In measures that matter most -- employment growth and company relocations -- Maryland is losing.

The point was driven home again last week when Bausch & Lomb, Garrett County's biggest private employer, said it would move its 600-worker sunglass lens factory to Texas.

Why? Texas is more "business friendly," the company told local economic development officials.

Maryland's business drought and present alarm are largely the result of a constricted federal spigot: fewer defense dollars, fewer consulting dollars, fewer direct federal employees, fewer state-aid dollars. Factories have been closing for years, but in the shower of federal funds few noticed.

"We no longer have the luxury of relying on the public sector employment engine," said Maryland House Speaker Casper R. Taylor Jr., an Allegany Democrat. "We have got to rely on the private-sector economic engine."

The engine has been sputtering.

The number of jobs in the United States has grown by about 5 percent in the past five years. Virginia employment has grown by more than 5 percent in that time, North Carolina's by more than 8 percent, U.S. Labor Department figures show.

Maryland's employment has shrunk by 0.1 percent.

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