Category Archives: Corporate Welfare

Hogan Takes $25 Million from Schools but Gives $20 Million to Northrup Grumman

Governor Larry Hogan has refused to spend $25.1 million that the General Assembly allocated toward education. Apparently, this is because he’s piqued that the legislature did not give the discretion on how to spend the money.

Among the $25.1 million is $6.1 million that would have gone to fixing aging schools. Governor Hypocrite has made a cause célèbre of bringing air conditioning more quickly to Baltimore schools but is uninterested in upgrades when he’s not at the center of headlines or they were the legislature’s idea.

An additional $19 million would have helped local school systems cover the cost of employee pensions, allowing them to free up the money to improve education. Hogan said no.

Instead, Hogan is giving $20 million to Northrup Grumman in a huge dollop of corporate welfare. Avowedly, this bribe to Northrup Grumman is to “retain” 10,000 new jobs in Maryland. Except that the fine print of the Department of Legislative Services (DLS) report reveals that NG is not required to create a single job to get the money.

Bad idea for so many reasons beyond the Trumpian “believe me” approach. First, Northrup Grumman won’t release the taxes it pays to the State, so we don’t even know the benefits. Does NG pay any taxes to the Maryland? Apparently, “don’t ask, don’t tell” has finally found a new home at NG.

Second, unlike some corporations, Northrup Grumman can’t easily move. It has a complex, heavy plant that would be very expensive to rebuild or relocate. The jobs require high skill workers who aren’t going to move or be replaced if NG up and moves to low tax Kansas or Louisiana. Most important, they do a lot of secret work for the federal government and it is very helpful to be near DC.

Third, and perhaps worst of all, the General Assembly already gave Northrup Grumman a $37.5 million tax credit in the past session with the Governor’s enthusiastic backing. So the total amount that NG is receiving at the trough in $62.5 $57.5 million. Yet Hogan won’t release $25 million more appropriated to the schools.

Finally, corporate welfare is a bad idea that both Democrats and Republicans should loathe. Democrats should dislike it because its a giveaway to the wealthy. Republicans should hate it even more, as another government expenditure and market-distorting industrial policy. Businesses should compete on a level playing field.

Maryland is never going to compete for business as the cheapest destination. Here’s a novel idea for Gov. Hogan’s consideration: let’s continue to invest in education so that our citizens remain the best prepared and most competitive in the nation, so we can attract good jobs on our merits rather than cash.

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Delegates for Corporate Welfare

The General Assembly managed to pass a tax subsidy worth $37.5 million for Northrup Grumman but not to enact the increase in the Earned Income Tax Credit (EIRC) that both houses favor. Laudably, the House  did not tie the EITC increase to a tax cut for the wealthy like the Senate but instead adopted a broad based tax cut.

Nonetheless, the corporate welfare for Northrup Grumman easily passed the House of Delegates 76-57. Twenty-eight House Democrats supported this giveaway, including several who identify themselves as progressive leaders in the House:

NG Dem DelEight Democrats didn’t vote on the issue, including a few members of the House leadership team:

NG Dem NV

Two Republicans stood for conservative principles and did not give away your tax dollars to a corporation that already does quite well at the federal trough.

NG GOP

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Senators for Corporate Welfare

The General Assembly couldn’t manage to pass an increase in the Earned Income Tax Credit (EITC) even though both houses supported it. In contrast, the bill giving Northrup Grumman a $37.5 million tax credit sailed to passage.

Who in the Maryland Senate supported this fine example of corporate welfare?

One Republican Against Corporate Welfare

Just about every Republican voted for the bill. Sen. Michael Hough (R-4) was the sole Republican who voted no, possibly because he is a conservative who (1) wants a simple tax code, (2) doesn’t think government should interfere in the free market by helping out only favored businesses, and (3) wonders why his tax paying constituents shouldn’t get the break instead of Northrup Grumman.

Democrats for Corporate Welfare

Nineteen Democrats joined the twelve Republicans who voted for the bill. The following chart lists them in decreasing order of support for Democrat Anthony Brown in the last election:

DforNGThough seven represent legislative districts that voted for Hogan, the rest hail from districts won by Brown. Nine of the 19 represent extremely safe Democratic districts. In these nine, Brown won by 59% or more, and all won election in 2014 by 62% or more.

Four more represent districts carried only narrowly by Brown (i.e. 50-52%). But even these senators do not face serious general election danger. Obama fared much better in the same territory, and Democrats won them by 57% or more in 2014 despite the terrible electoral fortunes faced by Democrats around the country.

Sen. Craig Zucker (D-14), recently appointed to replace retired Sen. Karen Montgomery, is tacking to the right of his predecessor. Besides voting in favor of giving money to Northrup Grumman, he also supported the tax cut for the wealthy. An interesting strategy as incumbent Sen. Rona Kramer lost to then-Del. Montgomery the primary after being attacked as too pro-business.

Dumb Politics

The politics of the legislation make little sense. It’s not even a question of alienating liberals. It’s hard to see how Democrats win more votes here from anyone. Are moderates, let alone liberals, really going to vote Democratic because Northrup Grumman received a tax giveaway?

The icing on the cake is that the Senate simultaneously killed off an increase in the EITC by standing firm in favor of a tax cut for the wealthy instead of for the middle class.

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