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Welcome to Economics 101

Say what you will about the Maryland GOP, whoever does their press releases has had flying fingers lately. Of course, being in session the General Assembly is full of material for those on our side to object to. Here are today’s examples, which go hand in hand and begin below the fold:

As Taxpayers Leave Maryland, Tax Revenue Drops

Following last year’s Special “Tax Hike” Session, Martin O’Malley and Democrats in the General Assembly forced through a nearly $7 billion tax hike on Maryland families over the course of the next four years. They operated in the shadows and out of the light of day, and taxpayers were shut out of the process and without an opportunity to be heard.

Earlier today, the state Board of Revenue Estimates estimated that tax revenue will decrease by $333 million for fiscal years 2008 and 2009. According to WBAL Radio, David Roose, the Executive Secretary of the Board, indicated that the revenue shortfall reflects a slowdown in consumer spending, high energy prices, and falling home prices.

The Maryland Republican Party warned Democrats that raising taxes on Maryland’s working families and small businesses, especially computer services, would cause people to change shopping habits and in some cases, to move out of state. Not surprisingly, tax revenue is now expected to decline as Marylanders respond to these new tax burdens.

Dr. Jim Pelura, Chairman of the Maryland Republican Party, released the following statement:

“Martin O’Malley and the Democrats passed the largest tax increase in the history of Maryland and now Marylanders are changing their shopping habits and moving out of state. It is no surprise that we learn today that a slowdown in consumer spending, high energy prices, and falling home prices have caused tax revenue to drop. Democrats cannot keep raising taxes and expect Marylanders to keep taking it.”

“Most Marylanders live within 45 miles of the state line and can shop elsewhere, including some who enjoy tax-free shopping in Delaware. Other Marylanders have been forced to move their families out of state so they can better make ends meet. O’Malley and the Democrats need to realize that you cannot tax your way into prosperity.”

“The solution to the economic slowdown in Maryland is to provide tax relief now. Maryland’s working families can better spend their money than the government can. Instead of constantly increasing government spending and taxes, it is high time that working families get tax relief. Now is the time to cut taxes and give Marylanders a reason to shop and live in Maryland again.”

And then you have this:

Democrats Push For $130.7 Million In New Property Taxes

At a time when Marylanders are feeling the pinch of higher gas prices, soaring utility rates, and hikes in the cost of household goods, Democrats in the General Assembly are pushing for over $130 million in new property taxes.

Democrat leaders recently held hearings on Senate Bill 302 and House Bill 512, which would impose a new tax on Maryland families that would total $130.7 million in 2010 and increase each year thereafter. This would amount to an additional state property tax rate of $0.05 per $100 of assessed value for operating real property of a public utility and $0.02 for all other real property.

The new taxes would be used to start a new government program, the Maryland Affordable Housing Investment Fund. SB 302 and HB 512 would grow state government, creating a new board to administer the Fund with 14 new bureaucrat positions that would receive 4.4% annual pay raises without regard to budget shortfalls, inflation, or the job performance of the employee.

Dr. Jim Pelura, Chairman of the Maryland Republican Party, released the following statement:

“Martin O’Malley and the Democrats have not learned their lesson. They cannot tax the state into prosperity. In a volatile housing market, the last thing anyone should do is raise the property tax. What they should do is lower the property tax rate to provide Maryland families with the relief that they need right now. Marylanders are overtaxed and cannot afford more government programs. Martin O’Malley and the Democrats need to realize that they have a spending problem, not a revenue problem.”

You may ask why I placed both of these in one post, making it quite long. This is an example of why I call my website the “Memory Division”, because you’ll notice I refer backwards a lot. I think of it as groundwork for the 2010 campaign.

I’ll begin with my take on the first release, which talks about sagging revenues. Once again, Democrats have forgotten a cardinal rule that has been proven on the federal level by Presidents Bush 43, Reagan, and yes, even the Democrat John F. Kennedy – lowering tax rates increases revenue. On the other hand, both President Bush 41 and Clinton increased tax rates and led us into a recession. (President Reagan also made some minor increases in 1986 but on the whole was a tax cutter.) Unfortunately, Governor O’Malley thought he was smarter than everyone else and that revenues could increase with higher rates, but once again people voted with their feet and/or snapped their pocketbooks shut. It also aggravated the higher energy prices and rapidly eroding home equity which I believe can be traced to other misguided leftist policies. That’s a post for another day, though.

I do find fault with Chairman Pelura, however, in two areas. It’s not only working families that should get tax relief, all of us should get tax relief including those nasty rich people. They’re the ones who pay the taxes! He also should have brought up the point that consumers are paying the increased sales tax twice: once at the cash register and again as an increased cost to businesses that is passed on to the consumer. Remember, businesses never pay taxes – their customers do.

And while this has nothing to do with the Maryland GOP, it is unfortunate that their representatives in the House of Delegates could not present an alternative to the FY2009 budget without using the tax increases that Jim decries. This weakens the argument he makes precipitously.

Now I’ll turn my attention to HB512/SB302, which is one bill I brought up in my Legislative Checkup a few weeks back because it’s a bill co-sponsored by local Delegate Rudy Cane.

Last year people screamed about a 14% property tax hike in the City of Salisbury, enough so that a petition drive was attempted to put the issue to a referendum. Here we have the state of Maryland making an attempt to raise the property tax rates by 17.9% but it’s gotten little play in most areas. Even the Maryland GOP didn’t bring this up until days after the hearings. (Guess they need to read monoblogue more often.) While many scoff at the bill’s chances of passage with only a handful of sponsors, the seed has been planted. Look how many times they’ve made the attempt at in-state tuition for illegals, or as an example that did pass in recent years, the Fair Share Health Care Act (a.k.a. the Wal-Mart bill.)

And once again this bill would not just impact the tax bills we receive, but add hidden costs to our utility bills because they are hammered at 2.5 times the rate you and I would pay. It makes me wonder if the majority in the General Assembly really thinks these things through?

There’s a reason I titled this post as I did. Somehow the Democrats in our General Assembly cannot figure out basic economics. Even if I put it on the level of, “if all of us have less wealth, there is less wealth for you to redistribute and buy votes with,” I’m not too sure they’d understand what I’m trying to explain here. Then again, if it’s simply about using their power to intrude on the lives of average Free Staters as much as they can, I think they’ve learned that lesson quite well. That class is in session through April 7.

Crossposted on monoblogue.

Oh, by the way, before you accuse me of being against affordable housing, perhaps if we lightened the burden on average taxpayers an overspending state and federal government exacts, could it be the additional money in their pockets would allow them to save up enough for a good down payment? Being an architect, I like people enlisting the company I work for to design townhouses, condos, and single-family residences but that hasn’t happened a lot lately around here.






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