Buncombe! Balderdash! Hogwash! Is that clear?

January 28, 1996|By Barry Rascovar

MARYLANDERS have been conned. They've been sold a bill of goods that doesn't make sense when you start to think it through. It is a simplistic solution to a highly complex problem, but one that too many politicians in Annapolis have latched onto -- even though they know better.

The con is that Maryland's economic future depends on slashing the state's personal income-tax rate (now at 5 percent).

This is the state business community's mantra. In fact, some of its representatives are almost manic about it. Maryland is a ''high-tax'' state, a ''tax hell.'' Cut taxes and corporations will line up to locate here.

As Mencken would put it, buncombe. Pure hogwash. But business leaders have seized on this easy answer -- much like the federal flat-tax red herring -- and decided this will lead to prosperity for Maryland.

It won't.

To even consider a tax cut at this time defies reality. It takes money to pay for a tax cut. From where? The state's financial situation is tenuous. Christmas sales were horrid, the blizzard cost the local economy a billion or more, forecasts of soft economic numbers this year already have to be lowered and there may be big aid cuts if Congress and the president ever agree on a federal budget.

A smoke screen

No wonder Gov. Parris Glendening failed to include a tax cut in his spending plan 10 days ago. He said he'd wait till March when new revenue estimates are made. That was a smoke screen. Those numbers aren't going to provide any comfort for tax-cutters.

No one has stepped forward with a way to eliminate $200 million in annual spending to make a tax cut possible, and for good reason. Maryland is struggling to balance its books. That's the top priority, as it should be. Lowering taxes isn't a sine qua non.

For starters, it's baffling how cutting the personal income-tax rate would make Maryland a pro-business state.

Now if the Chamber of Commerce were pushing for a lower corporate tax rate, that would make sense. The correlation between low business taxes and the state's business climate is pretty clear.

But what CEO is going to move his company to Maryland because his personal income-tax payments here might be 10 or 15 percent lower? How would he explain it to his board of directors? The CEO might benefit but the company wouldn't gain a thing.

Second, the myth that Maryland is a high-tax horror doesn't stand up to scrutiny. Impartial economic analysts rate Maryland in the middle in its overall tax burden. Yes, the income-tax rate is on the high side (but only when you lump in the local piggyback tax). What's not said is that Maryland's sales tax is on the low side and so is its corporate tax rate.

Take a look at two recent developments that tax-cutters point to as proof of the need for income-tax relief.

Bausch & Lomb announces it is shutting its plant in Garrett County and shifting the work to Texas because it is ''more business-friendly.''

Then USF&G -- a hometown corporation -- ignores Maryland and locates a big national claims center in Tampa because of Florida's more favorable climate.

In neither case would a cut in the personal income tax have had any bearing on the outcome.

Bausch & Lomb is a company in turmoil trying to slash costs and survive in the intense sunglass market. It never even attempted to find out how ''business-friendly'' Mr. Glendening might be if confronted by a threatened job loss in rural Garrett County. A lower Maryland personal income tax wouldn't have saved that company a nickel; the plant still would have closed.

No negotiations

As for USF&G, it never tried to negotiate a deal with Maryland officials, either. Chances are, they would have offered an attractive package, but other factors clearly were in play.

Would a cut in Maryland's personal income tax have altered that decision? Not in this lifetime.

Other steps are far more important. Economic-development secretary James Brady told a legislative panel last week that regulatory reform is far and away the No. 1 concern of corporate leaders. He called it the ''defining issue'' for them.

Aggressive and creative actions by state and local officials to work cooperatively and positively with companies is also important. So is money to help train a work force for specific needs of industry. And a better-educated labor pool.

That's where business lobbyists and spokesmen ought to be focused. But they're hung up on the notion of a fix-quick tax cut.

Fortunately, there's little danger this phony issue will resurface in March, given the worsening economic figures. But legislators can still make headway in giving Maryland a more pro-business slant if they ignore the siren call of single-minded corporate tax-cutters and concentrate on more subtle changes that will truly make companies feel at home.

Barry Rascovar is deputy editorial-page editor of The Sun.

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