Pay attention to Maryland, because if Maryland can change, so can the country. Known as the Old Line State, Maryland should for the last six years have been called the Front Line State, because it has been in the front line adopting every federal public-policy experiment since the Obama administration came into office. Whether the issue is expanding Medicaid and launching a dysfunctional state health exchange under Obamacare, accepting stimulus funds, supporting minimum-wage hikes, or embracing an EPA mandate that taxes rainwater on rooftops, state leaders have rushed to enlist Marylanders in pushing the Obama agenda.
Not so fast.
After eight years in office, Governor Martin O’Malley was term-limited, but his lieutenant governor, Anthony Brown, was poised to take over. Instead, Republican Larry Hogan just became governor-elect, saving us from a third term of one-party monopoly rule. Hogan, in one of the most stunning electoral upsets in the nation, did something else unthinkable: He forced Brown to take positions outside Democratic-party orthodoxy in this deep-blue state, including taking a no-new-taxes pledge and promising to position Maryland as the best business climate in the nation. These are Hogan’s own goals, but much work is ahead.
Already-enacted tax, fee, and toll increases will bloat state coffers in perpetuity unless they are rolled back or repealed. This will require cooperation from a Democrat-led General Assembly, which is no small task given the longest-running senate president/house speaker duo in the country. From 2007 to 2018, Marylanders will have paid nearly $20 billion in additional taxes, fees, and tolls stemming from 40 separate O’Malley–Brown increases — an amount that is over and above the tax burden as it existed before 2007.
What might be the effect of all this taxation? Maryland experienced the largest taxpayer-migration exodus in the Mid-Atlantic region between 2007 and 2010, according to the IRS, with a net out-migration of nearly 31,000 residents. In all, Maryland lost $1.7 billion in taxable incomes to other states and saw the seventh-highest net negative migration in the nation during this period. The latest IRS figures show that the state lost another $232 million in incomes during 2010 and 2011. The IRS also identified Maryland’s key competitor in attracting taxpayers: Virginia is now home to about 12,000 former Marylanders, taking $390 million in taxable incomes in just three years.
This is where Maryland’s dismal business climate comes in. The state has a long-running inferiority complex when it comes to competing for jobs with Virginia, and for good reason. During O’Malley’s tenure, Northrop Grumman re-located its corporate headquarters from California, selecting Virginia over Maryland. Just last month, government contractor Bechtel announced over 1,000 jobs will be leaving Maryland and heading to our southern neighbor.
In a dozen major business-climate comparisons from media outlets, site-selection consultants, financial-services firms, and think tanks, Virginia cleans Maryland’s clock. Lower taxes, a better regulatory environment, and comparable schools and quality of life are the reasons. Hogan has his work cut out for him here — an election will not change this miserable picture overnight. Whatever the future holds, however, this much is clear: Change has begun.
Hogan is credited with packaging fiscal and economic statistics culled from official government sources in a way that illuminates, from a Maryland perspective, the number-one issue across the nation — the economy and jobs. There was no incentive for the O’Malley–Brown administration to list its tax hikes or check with the IRS on the status of Maryland’s bleeding tax base. As a result, Hogan’s research made statewide and even national news. Furthermore, these reports did not take throngs of state-government employees to produce. They were researched and written by an independent policy analyst during the exploratory phase of Hogan’s campaign. They are now the basis of a governing mandate. So where does Maryland go from here?
Under the old model, public policy was an inside game. Career politicians and lobbyists dictated measures behind closed doors. That model has crumbled. Technology has freed citizens and organizations to access and analyze data anytime from anywhere, and to advocate policy changes on the basis of their findings. The inside game has lost ground to the outside game, in which nonprofit organizations and individual policy analysts can build movements on the strength of their ideas. Hogan will surely need eight years to undo the damage of O’Malley’s eight years. The new governor will need political support to enact his agenda, but that will come as the scrutiny of Maryland’s self-inflicted economic wounds continues.
As former Obama adviser Anita Dunn said, “The outside game drives the inside game.” Having been a part of two presidential election victories, she speaks from experience.
— Christopher B. Summers is president of the Maryland Public Policy Institute, a nonpartisan public-policy research and education organization that focuses on state policy issues. He can be reached at email@example.com.