Maryland, Kansas, or somewhere in-between?

Today, The New York Times featured an intriguing piece comparing Maryland’s approach to the economic downturn (and recovery) to Kansas’s approach.

Maryland, a state controlled by Democrats that has a pristine credit rating, raised income taxes on its top earners this year to preserve services and spending on its well-regarded schools — leading some business groups to warn that the state might become less competitive. Kansas, controlled by Republicans, decided to try to spur its economy with an income tax cut — which Moody’s Investors Service, the ratings agency, recently warned would lead to “dramatic revenue loss” and deficits that will probably require more spending cuts in the coming years.

Cooper, of The New York Times continues,

… revenue has been steadily climbing back for nine straight quarters, and a division between Republican-controlled and Democratic-controlled states is coming into sharp focus over whether to restore the lost services and jobs or to lower taxes, which in some states could effectively lock in some of the budget cuts made during the downturn.

. . .

Some Democratic-led states are increasing taxes, saying that it is more important to try to restore the services that were cut — and some of the 657,000 state and local government jobs lost — during the downturn.

The piece got me thinking, which way will Montana go?  Will we continue a balanced approach when addressing our budget or will we follow the failed policies of red states around the United States and simply cut spending, cut taxes, cut everything?

Note that Kansas is one of the 23 states that is not projecting a budget surplus this year.

Last month it was reported that Attorney General Bullock planned on pushing for a $400 tax rebate for homeowners in Montana.  Beneath the fold, Bullock was also asked about budget cuts.

Bullock was asked why he didn’t instead propose using the $100 million to make up for cuts in human services and other programs the past two legislative sessions.

“What we’re proposing is a balanced approach,” he said. “This won’t be the be-all and end-all.“

Bullock said he later will propose “additional investments in education, infrastructure and other things.“

It’s a good question to ask.  $400 means a lot to a middle class family, will probably be spent, and will probably help Montana’s economy.  However, the $400 tax rebate lacks a guaranteed return for the state.

To be honest, I think I’d rather see the money spent exclusively on restoring cuts.   That being said, at least Bullock is offering a balanced approach to spending and taxes.  The same can’t be said for Bullock’s opponent, Congressman Rick Hill.

Republican nominee Rick Hill criticized Bullock’s plan and called instead for permanent property tax relief for homeowners and small businesses. He estimated his plan would lower property taxes by $100 million annually on a permanent basis every year and not be a one-time $100 million rebate.

This is not the kind of planning that put Montana in the strong place it is in today.

Governor O’Malley of Maryland, put it this way,

“Without any anger, and without any meanness, and without any fear, let’s ask one another in these critical months ahead and years ahead: how much less do we think would be good for our state?” Mr. O’Malley asked. “How much less do we think would be good for our country? How much less education would be good for our children? How many fewer college degrees would make our state or our country more competitive? How much less research and development would be good for the innovation economy that we have an obligation and a responsibility, a duty and an imperative, to embrace? How many fewer hungry Maryland kids can we afford to feed? Progress is a choice: we can decide whether to make the tough choices necessary to invest in our shared future and move forward together. Or we can be the first generation of Marylanders to give our children a lesser quality of life with fewer opportunities.”

In 2013, will Montana walk the road of states like Maryland or states like Kansas?  Or will we be something in-between?

With Bullock, I think we get something in-between and continued budget strength in our state.  With Rick Hill, we go the way of Kansas (and 22 other states struggling to get to a budget surplus).

If you appreciate an independent voice holding Montana politicians accountable and informing voters, and you can throw a few dollars a month our way, we would certainly appreciate it.

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M. Storin


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    • What that really goes to show, Craig, is that all the promises Republicans make about cutting taxes to bring jobs are bull. Kansas as been chasing that wild goose, and it will never work out for them. Set taxes at a rate that will bring in the money the state needs. There is no evidence – none – that taxes play an important role in either spurring or stunting the economy. Investments by the state, on the other hand, make a huge difference. Therefore, its best to fund services and infrastructure at a competitive rate, and set your taxes accordingly.

      • PW, there are many bricks that make a business friendly structure. To argue that taxes aren’t important is ludicrous. Here’s a different take on Maryland:

        To miss that it is the cumulative straws that break the camels back (business) is to seriously avert one’s eyes to reality. It is never just taxes that cause business to leave or fail to come to a state. But they certainly do affect decisions.

        The fiscal problems in Kansas are not rationally related to just tax policy or which party is running the state house as Storin seems to hint. When the 800 pound gorilla leaves the state, it’s best to find out why and fix the problem.

        • Taxes may at any point be a factor in determining when a single company decides to move or decides where to set up. But I’ve yet to see any statistical evidence that tax level or tax structure has an effect on economic growth.

          • AS the CNBC study shows, it is the combination of the overall environment. Montana comes in at 24th while ND is 5, SD is 7, WY is 10, and ID is 13th. Everything else being equal, just where is economic growth likely to occur before considering MT?

            As to taxes and other Costs of Doing Business there is this from the study:

            Cost of Doing Business – 2012
            Cost is a major consideration when a company chooses a state. We looked at the tax burden, including individual income and property taxes, as well as business taxes, particularly as they apply to new investments. Utility costs can add up to a huge expense for business, and they vary widely by state. We also looked at the cost of wages, as well as rental costs for office and industrial space (rental cost information furnished by CoStar Group).

            As I said it is not just one straw but the cumulative effect.

      • Actually, PW, what I see when I read stories like that is that we – as a country – have become so beholden to the corporations that they feel they have the right to dictate to the public what will or will not be done in Government. Craig, in a previous argument pointed to the Catapilor company threatening to leave a state because of some government restriction they didn’t like. Cat is nowhere as big as Boeing (and certainly not as well connected in government as Boeing) and ended up not leaving.

        Craig is once again making a moving target to try to get you to argue the point he wants you argue rather than the point of the post. As you and others have pointed out, there is NO EVIDENCE that cutting taxes (or raising taxes) has a universally good or bad effect on business. It is sort of like the whole idea of “trickle down” economics. People like Craig are swift to point out anecdotal evidence that it works, even though all the evidence that exists today proves catagorically that is DOESN’T work. Arguing with Craig is a fools errand. He will fill your page with link after link that prove nothing one way or the other about the original point.

        • It’s happening in steps:

          exas has done it again.

          The Lone Star State makes a triumphant return as America’s Top State for Business—its third time at the top of our rankings.

          “Listen, there is a reason that Caterpillar [CAT 79.59 -0.68 (-0.85%) ] moved their hydraulics manufacturing and their engine manufacturing to the state of Texas,” said Gov. Rick Perry in November during the CNBC Republican presidential debate.

          We can attest to that.

          • And just how many jobs did they move away from the other state, Craig?

            The bottom line is that Cat still has it’s manufacturing infrastructure alive and active in it’s original place because it would cost the company too much money to move it.

            Moreover, you have once again proved two things – 1) you are a corporate slug and nothing you say can be trusted, and 2) that corporations are going to continue to use their financial muscle to make things better for them and worse for the middle class.

  • The propensity of Republican dominated places like Kansas to incessantly attempt to teach creationism and (un)intelligent design in their classrooms is reason enough for this father to never give Repubs too much sway over Montana and its kids. Not that one being a republican means necessarily that one will deny evolution, but as we’ve seen in the recent legislature, they tend to bring the crazy out in each other.

    Few things are more offensive than the the incorrect indoctrination of children. Or as Maclean said, “The chief privilege of man is to speak up for the universe.”

  • Maryland was a great example. They chased out most of the millionaires.

    QOTD:”A new report says wealthy Maryland residents may be moving out due to recent tax hikes – a finding that is sure to escalate the battle over taxing the American rich.

    The study, by the anti-tax group Change Maryland, says that a net 31,000 residents left the state between 2007 and 2010, the tenure of a “millionaire’s tax” pushed through by Gov. Martin O’Malley. The tax, which expired in 2010, in imposed a rate of 6.25 percent on incomes of more than $1 million a year.

    The Change Maryland study found that the tax cost Maryland $1.7 billion in lost tax revenues. A county-by-county analysis by Change Maryland also found that the state’s wealthiest counties also had some of the largest population outflows.

    In total, Maryland has added 24 new taxes or fees in recent years, Change Maryland says. Florida, which has no income-tax, has been a large recipient of Maryland’s exiled wealthy.

    “Maryland has reached the point of diminishing returns. We’re taxing people too much and people are voting with their feet,” said Change Maryland Chairman Larry Hogan. “Until we change our focus from tax increases to increasing the tax base, more people are simply going to leave, leading to a downward spiral of raising revenues on fewer citizens.””

    Too late now. Those wealthy business owners won’t be coming back, especially if they reside in income tax free Florida.

    • There is nothing in the links or in your quote that definitely indicates that these people left Maryland because of Taxes. The same argument could be made about all the Californians moving to Montana. You are assuming a causal link that simply hasn’t been established. It is a circular argument that goes nowhere.

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