Twenty-eight years ago, as a second-year lawmaker in Maryland, I lamented my state’s leap into the corporate welfare sweepstakes. Maryland had just lost a bidding war with Pennsylvania for New York’s Eastman Kodak. To “compete” more effectively in the future, the legislature established a “Sunny Day” fund for bankrolling more generous future subsidies.
This new fund, the Economic Development Opportunities Program Fund, came with an interesting twist. Cash from it could go to companies already located in Maryland. Just by threatening to exit Maryland, any corporation in the state could pick up sweet millions in state tax dollars.
Maryland corporations today don’t even have to bother making a threat to pick up cash from the Sunny Day fund. They just have to ask.
Northrop Grumman did just that. This month, Maryland’s Republican governor, with strong support from Maryland’s Democratic legislative majority, handed Northrop Grumman a $57.5 million tax-dollar giveaway that included a $20 million payout from the state’s trusty old Sunny Day fund.
Northrop Grumman has no plans to leave Maryland and throw Marylanders out of work.
“We aren’t going anywhere,” a company official told lawmakers in Annapolis this winter.
Northrop Grumman isn’t promising to create any new jobs in Maryland, either. Under the terms of this latest subsidy, the company has to maintain only 90 percent of its current 10,000 jobs in the state and invest $100 million in capital, which it was planning to do anyway. Northrop Grumman, in other words, could lay off 10 percent of its in-state workforce and still collect millions of tax dollars from the citizens of Maryland.
The ultimate irony here? The new subsidy package includes a provision for a “tax credit” — essentially a tax refund — for Northrop Grumman.
One state senator asked a Northrop Grumman executive how much in Maryland corporate income tax the company pays.
“It’s complicated,” came the reply. The official went on to describe the $100 million in property, payroll and other taxes Northrop Grumman paid last year — and never proffered a figure for the company’s state income tax liability.
The real answer seems obvious: Northrop Grumman, a corporate giant with $1.9 billion in profits last year, likely pays no corporate tax to Maryland. I suspect Northrop Grumman diverts its Maryland revenue to shell companies incorporated in other states.
So there you have it: Maryland taxpayers are giving $57.5 million to a company that isn’t threatening to leave the state, isn’t required to create additional jobs and, in all likelihood, isn’t paying its fair corporate tax share. What a deal!
How does the Democratic Party leadership of a historically blue state like Maryland — we haven’t had a Republican legislative majority in either chamber in nearly a century — justify a deal like this? Not very well.
On the state Senate floor, I asked lawmakers eager to help out Northrop Grumman an obvious question. If this deal went through, I wondered, how could we say no to the next corporate heavyweight that comes to us for a handout? No one had an answer.
It seems that some Democrats still haven’t gotten the message that the corporate-friendly, Republican-light path gains us nothing. Sharp critiques of corporate welfare are clearly resonating powerfully with large segments of our society, as the presidential candidacy of Sen. Bernie Sanders (I-Vt.) shows. Yet a strange tone-deafness has befallen our blue-state leaders.
With millions of Americans upset about corporate welfare, our leaders remain fixated on what amounts to socialism for the rich. Where could we be 28 more years down the road? I shudder to think.
The writer, a Democrat, represents Prince George’s County in the Maryland Senate.