Legislators Fear Md. Business Climate Causing Problems

OCEAN CITY – Maryland’s unfriendly business climate is as much to blame for the state’s ongoing fiscal malaise as any other leading indicator, state lawmakers told Ocean City business leaders on Wednesday.

Several Lower Shore representatives in Annapolis met with members of the Ocean City Economic Development Committee (EDC) on Wednesday for their annual broad-based discussion of several topics of local interest as the 2010 General Assembly session approaches. Invariably the discussion reverted back to the recession and the state’s economy, including a considerable amount of debate about Maryland’s unfriendly business policies.

Senator Lowell Stoltzfus told EDC members the most recent ranking of the states with the most business-friendly tax policies for 2009 had Maryland in the bottom five in the country at 45, down from 24th in 2008. Maryland dropped 21 positions, representing the largest move among the 50 states in the country. The next largest drop was Indiana, which went from 11th in 2008 to 14th in 2009.

“I’m concerned about the future, not only for this year or the next,” he said. “I’m concerned we’re going backward in a very dramatic way. The Cato Institute voted us dead last in terms of having a friendly business climate.”

While Maryland isn’t ranked last in terms of business-friendly tax policies, it did suffer the largest drop from 2008 to 2009. The state’s ranking went from 27 in 2006 to 29 in 2007, then moved up to 24 in 2008 before dropping like a lead balloon in 2009 to 45. The 21-position drop was the largest of any state in the country. By comparison, the other two states that changed their rankings the most, Michigan and Utah, improved by five places.

Stoltzfus told EDC members the dramatic fall in the rankings for Maryland is a reflection of both increased taxes and new stringent regulations for private businesses. He warned government intervention in private enterprise in Maryland has gotten to the point it is having an adverse effect on the state’s ability to attract new businesses, which is contributing to the state’s fiscal crisis in many ways.

“My concern is with the regulatory side of things,” he said. “We have to be careful. How did we get here? How did we get to the point government is so large and so intrusive that it controls everything.”

Delegate Norman Conway (D-38B) agreed over-regulation in Maryland is having a detrimental impact on the business climate in the state. He said the laws that are passed by the legislatures often come out the other end with different practical applications after they are passed through to the various state departments.

“My concern is regulation is very, very bothersome,” he said. “Laws get written, passed, signed into legislation and passed along to the departments who write the regulations. Sometimes, what comes out looks very different than the law that passed.”

Conway said intent of the laws are often admirable, but end up hurting, more than helping, the state’s business climate.

“We have conscientious, well meaning legislators that are just trying to do their jobs, but the economy needs to be allowed to function on its own somewhat,” he said.

Delegate Page Elmore (R-38A) said government intrusion on private business, large and small, is a flawed philosophy.

“We have to get away from the philosophy that government is going to stimulate the economy and solve all of our problems,” he said. “When you take money from an entrepreneur and give it to the government, who is going to grow that money faster? The government or the entrepreneur.”

Elmore encouraged less taxes and a less hands-on approach on business in Maryland. He said given the opportunity, the private sector would thrive if left to its own druthers.

“Don’t raise taxes, lower taxes,” he said. “Don’t regulate them out of business, let them do their thing in a responsible way with oversight and this economy will grow.”

Elmore said Maryland must look at how to overhaul its corporate tax structure. He said the House Ways and Means Committee on which he serves was successful in addressing the problem of the Delaware holding companies doing business in Maryland, but many have now set their sights on the other tax breaks for businesses with addresses in Maryland.

“Some of them want to tax, tax and tax some more,” he said. “We corrected the problem with the Delaware holding companies, but they weren’t satisfied. Now they want to look at the offshore companies, but most of them need those tax breaks to compete in a global economy. We have to become more tax-friendly to business, not only the big corporations, but the small businesses as well. We have to have a friendly atmosphere for business to survive.”

The “less is more” approach extolled by local lawmakers was music to the ears of the assembled Ocean City business owners, many of whom struggle everyday with meeting their state and federal tax burdens.

“Overtaxing business reduces revenues for small business,” said EDC President Michael James. “Business is not the enemy. That’s the message we have to keep hammering home.”

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