Archive for the ‘Budget and Taxes’ category

Does Burning Money Increase MoCo’s Carbon Footprint?

28 April 2014


Council member Roger Berliner sponsored a set of environmental bills that made it through the council last week.  The worst one — which was passed, of course — requires the county to purchase 100% of its electricity from “clean fuels”.  The current requirement is 30%.

This initiative is all cost, and no benefits.

Based on the county’s fiscal impact statement, the law will increase the county’s energy expenditures in the range of $279,000 – $545,000 per year.  That gets over a million easily, in less than four years.Plaudits to Nancy Floreen, who argued for looking at this from a budgetary standpoint.  None of the other council members thought that was worthwhile.

And what do we get for those millions of dollars? Nothing.   The incremental change from this bill is so infinitesimally tiny that it adds up to nothing. No change in greenhouse gas emissions, no impact on climate change. Zero. Just a meaningless statement and bit of bluster.

So if the environment is not improved, who does benefit from those millions of taxpayer dollars? Well, council members like Berliner and George Leventhal get to crow about their wondrous accomplishment. (Leventhal excelled at playing the pompous windbag on this one.  He called it “the most urgent public policy challenge that we face.”   Really, George? More urgent than homelessness? Crime? Poverty? Educational failures for low-income neighborhoods?)

And certain energy producers, politically favored, get a more than tripling of the subsidy they currently receive. These producers are too expensive to compete, so they work through the political process to extract funds from MoCo taxpayers.

I can understand wanting to reduce emissions from fossil fuels.  I can understand reasonable policy proposals to do that.  But anyone with a lick of sense can also see what is purely symbolic, useless, and wasteful.This is a useless and expensive heap of corporate welfare, that allows the politicians to beat their chests, but accomplishes nothing. Nothing, that is, except take away funds from needs that really are urgent.



Maryland Business Climate: Close to the Worst

20 February 2014

Politicians usually realize the importance of attracting business to an area, and keeping existing businesses from moving.  There are two ways in which they can develop policy towards those ends.

One way is through targeted subsidies and other bribes to firms.  An example would be the tax incentives offered by Montgomery County to Westfield, to subsidize Costco’s arrival in Wheaton Plaza.  Another (on a grander scale, though no different) is the $200 million that Maryland gave to Art Modell to bring the Browns from Cleveland to Baltimore (on top of building the stadium for Modell).

Another way is to develop a set of policies that make an area a friendly place to do business.   Good, well-designed and fair tax systems are simple, transparent, don’t require large resources to comply, don’t skew towards particularly favored enterprises, and minimize the impediments to growth and prosperity.

What’s the difference between the two strategies?  And why do both the State of Maryland and Montgomery County prefer the first strategy?

The first strategy is general, and aims to provide a good climate for all business.  But that doesn’t gain very many brownie points, or rack up debts and favors that politicians can draw on later.  When something benefits the population in general, no one business gains enough that a politician can show up at the door with hat in hand.  However, the first strategy gains the politician just that.  By helping out Westfield,  MoCo councilmembers can count on campaign donations and other favors from the corporation.  For the most part, politicians don’t gain from advancing the general public good (as much as I hate using that nebulous and overused term).  They do gain from granting favors to individual actors, who then enter into a mutually advantageous backscratching relationship with the pols.

Maryland devotes a nice chunk of the budget to the Department of Business and Economic Development,  devoted to handing out this kind of corporate welfare to favored businesses.  When it comes to creating a favorable business climate (syn) however, the state government doesn’t do so well (for the reasons outlined above).  In fact, it does pretty lousy.

A report issued by economist Kail Padgitt at the Tax Foundation concluded that the Maryland fits in the ten worst business tax climates in the nation.  (Sixth from the bottom, actually).  The  report doesn’t look at an overall business climate (a pretty complicated assessment, one would think, covering transportation and other infrastructure, real estate costs, education, etc.), but rather just the tax aspect of the business climate.

The ranking is hardly incontrovertible, but is methodical and fairly applied across the 50 states.  It evaluates the business climate tax index by a weighted ranking of five tax factors.  Here’s how Maryland is ranked in comparison with Virginia (since those states competes for businesses):

MD            VA        PA

Corporate Tax                          14            4         38

Individual Income Tax            49            17        14

Sales Tax                                       11            8        28

Unemployment Insur Tax        47            29        42

Property Tax                                 40            25        44

Overall Ranking                      44            12        26

To his credit, Padgitt cites critiques of the annual Business Tax Climate Index report, but also notes several academic studies that demonstrate that the index tends to correlate well with economic growth in the state.

It is likely that tax policy is helping to steer some businesses (and jobs) away from Maryland into border states.  Without discounting other factors that are part of business location decisions, we have seen several cases in the past few years where businesses considered – and rejected – Montgomery County as a location for operations.  It would seem that if we want to improve the employment situation in Maryland, the General Assembly is going to have to take a hard look at the the areas where we do most poorly in comparison to other states – the individual income tax, the unemployment insurance tax, and the state property tax.

Voluntary? I Don’t Think So

9 February 2014


More than half the County Council is sponsoring a bill to create public financing for political campaigns in Montgomery.  The bill would mandate that tax funds go into a new pot of money for candidates to draw from.  Echoing the PR of Councilman Phil Andrews, who is introducing the bill, the Post gushes “Andrews plan is completely voluntary.”   By this, they mean that the pols don’t have to take money from it.  But it’s not voluntary for county taxpayers, who would be forced to pay more money — purely for the benefit of the candidates.

Andrews and the sponsors call it “campaign finance reform.”

I call it “Welfare for Politicians.”


Council and Executive Lay Higher Burdens on Montgomery Residents, Drag Down the Economy

4 June 2013

The County Council (last week) approved the budget for the upcoming fiscal year.  In a time of austerity, this budget represents a turn back to bigger government.  While the citizens are tightening their belts, this budget increases spending by 4.1% over last year.  The budget recommended by the county executive and now approved by the county council increases property taxes and increases energy taxes.  Combined with the increase in state taxes (including the jacked-up gasoline tax), this will be a draw down on the county’s economy.

There is a popular opinion that Montgomery County has not been affected by the recession, and therefore the government can increases taxes and spending willy-nilly.  But unemployment in the county is 56% higher than it was in 2008.  A report from the Sage Policy Group concludes that the 80% increase in the state’s regressive gasoline tax is likely to cause the loss of  959 jobs, and a loss of $124M to the economy.   The county budget is only likely to drag down employment and the economy even further.

Can’t Stop Spending that Cash of Yours

18 April 2013

Okay, I don’t really feel all that much sympathy for the county executive.  But watching Ike Leggett maneuver is a little like watching a Buster Keaton movie;  “Oh, no, he’s about to walk under that falling piano!”

Just a couple of weeks ago, Leggett put out his proposed budget for the upcoming fiscal year (2014), detailing plans to (what else?) increase spending and (what else?) increase taxes.  He proposes to increase property taxes by 2.2%.  As the average tax bill in the county is about $4500, that is roughly an additional $100 per household annually.  (You’ve got that just lying around, don’t you?)

Furthermore, he’s is proposing to extend the “temporary” energy tax once again. According to legislation passed two years ago, residential energy taxes are scheduled to go back to 0.5 cents per KWH; instead, they’ll more than double.  Business rates are scheduled at 1.3 cents per KWH; instead, they’ll almost double.  Again, we’re talking hundreds of additional tax dollars to the county, which every home and business has to spare right now because we’re in such flush economic times.

Leggett also proposes to increase spending by $190 million (4.1%) this year, after an increase of $199 million the previous year.
Now comes the County Council budget analysts, who tells us that after increasing spending by $390 million over these two years, the county budget will have a $300 million deficit the following year.

Kate Jacobson, what will I do without you?

County Taxpayers to Bankroll Risky Businesses

12 March 2013

The Planning, Housing, and Economic Development committee of the County Council approved Bill 3-13 on Monday, allowing the county to funnel taxpayer dollars into private companies.  The bill would allow the county to own as much as 25% of selected businesses.

Private firms can get money from banks or venture capital sources.  Why would they choose taxpayer dollars instead? Either they have been unable to raise money from those private sources, or it’s a cheaper source of capital.

Taxpayers would be dragooned into providing a capital subsidy to private enterprises.  The possible outcomes are limited. Either the public subsidy helps the company succeed over its less politically favored competitors, or the judgment of the banks and venture capital firms is vindicated, and the company fails (taking the taxpayers’ money with it).

Neither one is fair, just, or sustainable.

Windpower Boondoggle

3 March 2013

The fate of Governor O’Malley’s windpower boondoggle is  now in the hands of the Senate, as the House has passed the Maryland Offshore Wind Energy Act.  Although the envisioned project is relatively small, the corporate welfare effects are among the largest that the General Assembly has considered.   [Let’s define corporate welfare effects as the net loss to residents:  Amount of public money that will be fed to the well-connected corporation + other losses to residents.]

The bill creates an “Offshore Wind Business Development Fund”, funneling $17.7 million into the pockets of the project developers over five years.  Furthermore, according to the analysis of the State’s Department of Legislative Services,  both state and local expenditures  are expected to increase “significantly beginning in FY 2017 due to higher electricity prices.”

Sounds like a real win-win proposition, doesn’t it?  Only if you are one of the lucky developers poised to rake in both state subsidies and higher rates from the ratepayers, and then get further subsidies from taxpayers to cover the overruns.  For those corporations, it’s a guaranteed gain. For the ratepayers and taxpayers of Maryland, it’s a guaranteed loss.