Bad for business?

Our view: Maryland gets criticized for its taxes and regulations, but it nonetheless led the nation in job gains last month

April 25, 2010

Marylanders would have every right to be confused by the most recent figures from the federal Bureau of Labor Statistics. For years they've been hearing from business groups and conservatives that the Old Line State seems hell bent on killing jobs. If it's not a complaint about environmental or labor regulations, it's a cry that excessive taxes of one kind or another would drive all businesses across the border to Virginia. The governor's feud with Constellation Energy would scare off businesses from relocating here; corporate taxes and millionaires taxes would send existing companies packing; and cigarette taxes would ensure that we have no convenience stores within an hour's drive of the state line. Maryland, naysayers are quick to note, comes in at 45th in the Tax Foundation's most recent rankings of business friendliness.

How, then, do you explain a gain of 38,000 jobs in one month? That marked the largest job gain of any state in the U.S., one-fifth of the national total, and the second largest one-month gain in the 70-year history of state employment statistics.

Clearly, there must be a catch. Some have suggested that we didn't really gain all those jobs, it's just that the snowstorms in February made it look like we had lost more jobs than we did, and this just amounted to an evening-out. Maybe, but we lost fewer than 13,000 jobs in February. Even if we assume all of that was "Snowmageddon"-related, Maryland would still have had the biggest jobs gain in the nation this month. The same cannot be said of Nos. 2 and 3 on the job gain list, Virginia and Pennsylvania. Our neighbors to the north lost 15,200 jobs in February and gained 22,600 in March, for a net gain of just 6,600 jobs on an employment base that's more than twice as large as Maryland's. Virginia lost 31,400 jobs in February but only gained back 24,500 in March.

Maybe it was all government sector hiring? Nope. Maryland gained fewer than 5,000 government jobs in March. Virginia, for those keeping score at home, grew its government sector by about the same amount. And even if some of it was government sector hiring, so what? Those who criticize Maryland's business climate like to pooh-pooh government sector jobs, as if they don't count because we get them simply by virtue of our proximity to Washington. By this same logic, perhaps we should discount all the jobs related to Hawaii's tourism industry because of its proximity to gorgeous views of the Pacific, or Florida's agriculture industry because of its proximity to the sun. Texas has oil, and Maryland has the federal government; either of us would be fools not to take advantage of it.

And Maryland has. Successful efforts to steer the federal base realignment process will bring thousands of new military jobs to the state — and many times that in related industries and support services. The first jobs from BRAC, as the realignment is known, aren't due to arrive in Maryland until the fall, but their effect is already being felt. Robert O.C. "Rocky" Worcester, the president emeritus of Maryland Business for Responsive Government and a longtime critic of Maryland's business climate, admits to catching a bit of the BRAC fever himself. "I went to Harford County for a meeting with businesses, and I've never seen 250 people drooling all at the same time," he says. "They are definitely standing at the ready for the largesse to hit."

Kathleen T. Snyder, the president of the Maryland Chamber of Commerce, says she was taken aback by the size of Maryland's job gain in March but not by the fact that things are looking up. She says small businesses in particular see a light at the end of the recession tunnel and are looking to start hiring again in the coming months. "In going around the state and talking to small businesses, there has been a different sense of some optimism," she says. "I hear my businesspeople saying Maryland is going to come out of the recession faster than others."

If you look at the world through the eyes of the Tax Foundation, that would be hard to believe. But if all it took to generate jobs was a lower tax rate, it would be hard to explain why Maryland has, throughout this recession, lost a smaller percentage of its job base than the nation as a whole or even than Virginia, the state to which we are most often unfavorably compared. If all that mattered was that Maryland's corporate tax rate is 8.25 percent and Virginia's is 6 percent, it would be hard to explain why Maryland is still in the running for the headquarters of Northrop Grumman, the aerospace firm that's looking to relocate to this region.

Our highly educated work force, generally good public schools, research universities, well-planned communities, open spaces and functional transportation network count for something, too. The Tax Foundation says we're 45th, but Forbes, which considers factors beyond tax rates, ranks our business climate 12th, ahead of Delaware and Pennsylvania (but, admittedly, behind Virginia, which comes in at No. 1).

March's stellar job figures certainly aren't enough to declare the recession in Maryland over; after all, one month a trend does not make. But the idea that Maryland could lead the nation in employment gains shouldn't be a shock, either. The gains posted last month across a wide variety of industries suggest that as the economy turns around, Maryland businesses are fully prepared to take advantage of it.

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