What’s more, nearly 6,500 small businesses went under or left Maryland. Census Bureau economic research quantifies these firms as having one to 99 employees during 2007 to 2010. Maryland’s loss of small businesses is about the same as Delaware — the worst in the region, as a percentage of such firms that existed in 2007. Delaware lost 4.72 percent; Maryland, 4.71 percent; West Virginia, 4.51 percent; Virginia, 3.66 percent; and Pennsylvania, 2.64 percent.
The District, on the other hand, experienced a 2.59 percent gain in small businesses.
With the loss of businesses, however, Maryland is not powering forward on job creation according to the Labor Department. On the contrary, Maryland has lost more jobs than any other state in the region except for Pennsylvania, where each state lost nearly 40,000 and 60,000 jobs respectively from 2007 to 2010. Pennsylvania is a bigger state, and on a percentage basis Maryland again lags the region. Moreover, in the widely watched unemployment rate, Maryland’s 7.1 percent level in August contrasts sharply with Virginia’s 5.9 percent. (D.C.’s jobless rate is 8.8 percent.)
Elected officials are taking notice. D.C. Council member Jack Evans (D-Ward 2), in widely reported remarks this spring, said, “Thank God Maryland keeps raising their taxes.” Virginia Gov. Robert F. McDonnell (R), in a joint appearance on CNN with Maryland Gov. Martin O’Malley (D) in July, said, “Businesses and people are fleeing Maryland for Virginia” because of dramatic tax increases. Political rivalries aside, these elected officials see Maryland’s tax increases as an economic development opportunity for their jurisdictions.
They have a point. Since 2007, Maryland has increased taxes and fees 24 times, removing an additional $2.4 billion out of the economy each year, according to fiscal policy reports from the General Assembly. Economic producers, ranging from Fortune 500 corporations to sole proprietors, evaluate the tax burden in determining where to relocate, expand or start up a business. Maryland’s tax burden puts us at a competitive disadvantage.
Yet there are other ways for states to compete in economic development, especially in a new economy built on the skills of knowledge workers. Virginia’s Dulles Technology Corridor and North Carolina’s Research Triangle, however, can boast of an educated workforce as much as the Interstate 270 Tech Corridor can. What can be done?
Policymakers have direct and immediate control over tax policy. A competitive tax code will result in an economic engine firing on all cylinders which will result in improved performance on growing the tax base, businesses and jobs.
Jim Pettit analyzes state policy for Change Maryland, a nonpartisan organization that advocates for fiscal responsibility in government. Change Maryland founder and Chairman Larry Hogan is a former cabinet secretary to former Republican governor Robert Ehrlich.