January 25, 2012 | by Mark Lee
D.C., Md. push higher taxes, record spending

Maryland and the District of Columbia are poised to continue spending at shockingly rising levels, exacerbating their reputations as high-tax and anti-business environments.

If approved, residents and local businesses alike will bear increasingly burdensome taxes and fees. Virginia continues to reap the benefits as the region’s sole business-friendly jurisdiction – almost by just sitting there and grinning from ear-to-ear.

In recent days Maryland Gov. Martin O’Malley roiled members of the state legislature and rankled the public by revealing that he planned to introduce a slew of new taxes and tax increases during the current legislative session in order to maintain the state’s runaway spending.

O’Malley’s budget proposal pumps up spending by 6 percent and an increase of $1 billion, largely on the backs of small business and the middle class. It has even resulted in a new term to reflect the proposed capping of income tax deductions and phasing out of personal and business deductions for the “thousandaires” earning more than only $100,000.

Included in a broad range of potential new taxes and fees is a 17% increase in the state sales tax. Also plopped on the table is a plan to shift some expenses to the county level, which will result in higher local tax levies, allowing the state government to dump this burden downwind and accommodate its freewheeling excesses.

These proposals would make a pickpocket proud. They also serve to further accelerate deterioration of the small business environment in the state, inhibiting job growth and a healthy state economy.

In D.C., after deluding the public that last year’s huge budget deficits would result in city spending cuts and resolve the District to eliminate inefficiencies and waste in government operations, the current city budget being doled out represents a new record level of spending.

Enabled by retaining a local sales tax increase which had been scheduled to sunset and increasing income taxes on a new top bracket of earners, as well as scheming up even more fee increases, the largess for this rampant spending required only another resident and consumer shakedown. Ultimately, these unrepentant big spenders are allocating what is yanked from the hands of local small businesses and enterprise owners, the overwhelming majority of whom report profits as personal income.

Now that D.C. CFO Natwar Gandhi has projected a more than $42 million surplus in the current fiscal year, Mayor Vincent Gray has already proposed spending all of it – plus a couple million dollars more to boot.

While many other states are smartly reducing spending, lowering taxes, implementing efficiencies, downsizing government, demanding that public employees contribute to generous benefit and pension plans, and otherwise putting their financial houses in order, the two kindred jurisdictions north of the Potomac are behaving as outliers from another era.

D.C. Council member Jack Evans, representing the mid-city business area of Ward 2 since 1991 and chair of the Council’s Committee on Finance and Revenue, wants to put an end to such foolishness in the District.

Evans announced last week that he plans to introduce legislation to lower the city’s sky-high corporate income tax from 9.975 percent to match Virginia’s six percent rate at a lower percentage than Maryland’s 8.25 percent levy, also eliminating the same tax rate for unincorporated businesses to match both neighboring states.

He correctly posits that a more competitive business regulatory structure and a rolling back of the substantial disincentives and recent tax hikes will improve the District’s overall financial health and long-term business environment.

Last year the D.C. Council suddenly reversed course at the behest of Mayor Gray, hiking the top income tax rate to a fraction less than nine percent – falling heavily on local small businesses. This unexpected move further ensconced D.C. at the top of the tax scale for the entire country.

Evans sensibly wants to institute a progressive local income tax structure and lower rates across the board. This would provide both tax fairness for differing incomes and reduce the astounding local tax burden.

Of course, this would require city officials to put a stop to their ever more avaricious tax-and-spend habits. Perhaps a mayor and Council disfavored by ethical ill repute can be shamed into it. Let’s hope so.

Mark Lee is a local small business manager and long-time community business advocate. Reach him at OurBusinessMatters@gmail.com.

5 Comments
  • Maryland and DC are governed by non-sensical Democrat Party politicians who have no sense of fiscal discipline, and champion socialist Obama policies, including wealth redistribution, increased entitlement spending, and sustained/increased levels of spending for medicare/medicaid and SSI.

    Last week I listened to the State-of-the-State addresses by the governors of Idaho, South Carolina, and New Jersey. All are governed by Republicans and all are proposing reductions in property taxes, income taxes, and the like to stimulate economic growth; overall, fiscally-sound policies and approaches. We’ll never see those days in Maryland or DC.

  • The usual justification I hear is that the higher taxes will allow MD and DC to improve public services and thereby lure businesses from VA. So how’s that working out?

  • DC’s high tax is why the jurisdiction had the lowest population growth in the last year and a half. Oh, you mean it had the highest percentage increase during that period…ooops. Then again, Mark Lee claimed that the smoking ban would kill the local bar scene, so I think reality is a little more complicated than libertarian economic ideology would have us believe.

    • BTW, this figure is from the latest US Census figures and compares DC to all the other states (which makes the growth rate even more impressive). Also, Lee’s piece was written before the mayor’s office announced a budget surplus.

  • Gratefully all but one councilmember sent a letter to Gray opposing spending the newly “discovered” $240 mil surplus from the last budget. This is in addition to the previous news of the projected $40-some mil from the 2012 budget mentioned in this article (which could even go up and probably will). I hope that they will also pass a reduction in our very high taxes and give us some of our money back instead of just spending it like usual!

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