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Prepare for the State’s Changing Relationship With the Federal Government

The potential for major federal policy changes to harm Maryland families and our economy continues to loom large. Whether it’s shifting billions of dollars in expenses for federal anti-poverty programs to Maryland’s budget or shrinking the federal workforce, the state must be prepared to respond.

Programs like Medicaid, food assistance, and housing assistance provide them the stability they need to climb the economic ladder. All of these vital services are cut severely under budget visions put forward by the Trump administration and the House of Representatives budget committee.

While it would be very difficult for the state to make up for the billions in potential cuts, our state has a strong history of going beyond the minimum federal requirements, helping more Marylanders keep a roof over their heads, food on the table, and access to health care. Policymakers must continue this tradition – raising revenue needed to lessen the harm of potential federal cuts and looking for creative solutions that allow as many people as possible to get the assistance they need.

Maryland must:

  • Increase access to health coverage. While most pieces of the Affordable Care Act remain intact, the current leadership in Washington has made it clear that they intend to continue to undermine the law. Removing the federal requirement for people to carry health insurance alone is expected to cause 226,000 Marylanders to lose coverage in the coming years, significantly adding to the approximately 390,000 Marylanders who are already uninsured. There are a range of possible solutions, from expanding Medicaid access to people with moderate incomes to adopting a form of universal health care. Regardless of the specific approach, Maryland must continue to take proactive steps expand health coverage to those left out of the current system and ensure coverage remains affordable to the individuals that have it now.
  • Protect effective anti-poverty programs. Some leaders in Congress, as well as the President, have called for harmful cuts to proven, effective anti-poverty programs like food assistance, Medicaid, Medicare, housing assistance, and more. One of the ways they have proposed doing so is getting states to enact harsh time limits or work requirements for these essential programs. Evidence shows these approaches don’t lead to more people working. Rather, they leave people hungry, or homeless, or without the health care they need to maintain stability and find work. Maryland should resist calls to enact time limits and work requirements.

Regardless of any new actions at the federal level, economic experts have long agreed that Maryland would be wise to diversify its economy to be less reliant on the federal government. About 19 percent of Marylanders work for the federal, state, or local governments, and many more work at private businesses that rely on government contracts.

Just over half of Maryland workers are employed at a small business (defined by the Small Business Administration as having fewer than 500 employees), and these businesses create thousands of new jobs each year[i]. While Maryland is already a great place to do business, boasting a highly educated workforce, leading academic and medical institutions, a large number of affluent customers and easy transportation connections to other markets, doing more to support small businesses and entrepreneurs would strengthen our economy.

Policy Tools

  • Level the playing field. One barrier to small business expansion is the difficulty in competing with large corporations. Lawmakers should close the tax loophole that allows large, multi-state enterprises to use accounting tricks to avoid paying taxes on all their Maryland profits. Each year Maryland’s small businesses pay their fair share and meet their tax responsibilities while large, multi-state companies are able to artificially shift their earnings to other states to avoid paying taxes in the state. Closing this loophole by implementing “combined reporting” would create a fairer, more effective corporate tax system.
  • Spend a larger share of public dollars in Maryland. Maryland issues billions of dollars in state contracts each year, money that doesn’t always wind up supporting local firms. Instituting a “buy Maryland, buy small” contracting policy that favors local businesses could ensure that more state tax dollars go to support Maryland businesses.
  • Increase access to capital. Access to capital remains one of the biggest challenges facing the small business community. State support for small businesses shouldn’t solely focus on the startup period. Stable businesses that are ready to expand also can have a hard time getting the capital they need. There are a variety of mechanisms Maryland can use to help support home-grown businesses, including allowing them to defer taxes in order to expand or guaranteeing loans.

< Making Investments That Support a Strong, Resilient, and Inclusive Economy

 

[i] https://www.sba.gov/sites/default/files/advocacy/Maryland.pdf