Maryland Can Afford to Invest in the Pillars of our Economy
Marylanders are faced with important choices about what kind of state we will be. We have a growing backlog of unmet needs in education, health care, and other pillars of our economy. The choices embodied in our state budget determine how we will respond to these needs and ultimately reflect where our priorities lie. The surest path to long-term prosperity is to invest in the backbone of thriving communities, like great public schools and a healthy population. To do that we need an effective, equitable revenue system. This future is within our reach, if we have the will to build it.
Maryland’s prosperity today is built on the smart decisions we have made over time to invest in the basics. But we started cutting back in the years after the Great Recession, and the effects are showing more by the day. Here’s where Maryland stands now:
- Our public schools are underfunded by nearly $3 billion per year and our teachers are paid 14 percent less than other college-educated workers.
- The state agencies responsible for protecting our environment, keeping communities healthy, and delivering other essential services are stretched thin. State analysts last year found that the state is running a staff shortage of nearly 2,500 employees.
- Our population is aging, but because of low pay there aren’t enough home health workers to meet the increasing need for long-term care.
- When we underinvest in basic services, it creates barriers like health problems and long commutes that get in the way of Marylanders of color achieving their full potential.
We have the tools to address these challenges. The first step is to fix our state’s upside-down tax code and update our revenue policies so they reflect today’s economic realities. One of the biggest changes Maryland’s economy has experienced over the last half-century is the increasing concentration of wealth and power in a few hands. The wealthiest 1 percent of Maryland households, with annual incomes averaging $1.1 million as of 2015, have doubled their slice of the economic pie over the last 40 years. But because of our upside-down tax code, these wealthy few pay a smaller share of their income in state and local taxes than the rest of us do.
We should rebalance Maryland’s tax code to ensure that those who have benefited the most from economic growth over the last several decades contribute equitably to the services we all rely on. While the benefits of an effective revenue system are clear, there is also strong evidence that the opposite strategy—doubling down on the lopsided tax breaks Congress just handed to wealthy individuals and large corporations—would fail to deliver broad prosperity.
Maryland taxes are unexceptional, and the wealthiest pay less. State and local taxes together come to 10.4 percent of Marylanders’ income. That’s near the middle of the pack and close to the nationwide average of 10.1 percent. Because of our upside-down tax code, the top 1 percent in Maryland pay only 8.7 percent of their income in state and local taxes. That’s just below the average tax responsibility in Arizona, which has the 11th-lowest taxes in the nation.
Maryland has the nation’s highest share of millionaires. Maryland is home to more millionaires per capita than any other state, with 7.9 percent of households holding at least $1 million in investable assets. Among the top 10 states where millionaires are most likely to live, seven have tax levels above the national average.
Other factors matter more when families move. High-quality research shows that families consider jobs, housing costs, weather, and where their relatives live when they decide where to locate. Taxes generally don’t make the list or appear near the bottom. It should be unsurprising, then, that highly educated workers are more likely to move to Maryland than to most other states.
Other factors matter more for job growth. Most job creation comes from young, homegrown companies expanding—and most entrepreneurs launch a business in the state where they already live. Even when companies do move, other factors like skilled workers and reliable transportation matter more than taxes. That’s partly because state and local taxes aren’t a major cost for most companies. Finally, when businesses do consider taxes, they tend to get a good deal in Maryland
The verdict is in: Cleaning up and rebalancing Maryland’s tax code is the right choice for our economy. Smart reforms like closing corporate tax loopholes, bringing back the state’s millionaires’ tax, and restoring our full estate tax will allow us to strengthen the investments our state needs to build long-term, shared prosperity.
