The Second Gubernatorial Debate
Republican Gubernatorial Candidate Larry Hogan has an opening with genuine discontent about taxes. He has certainly pressed it home virtually to the exclusion of all other issues.
Tax Cuts for You, Tax Cuts for Me
Hogan has put out the idea of a panoply of tax cuts. At a forum in a Baltimore populated by retirees, his idea of eliminating all taxes on retirement income was unsurprisingly popular among this demographic that votes at very high rates.
He also wants to lower taxes on corporations as part of an effort to improve the State’s business climate along with cutting back income taxes more broadly. Since he repeatedly talks about repealing all tax increases that occurred over the past eight years, that means that the gas tax and the Chesapeake Bay Restoration Fee (a.k.a. the “flush” tax) should also go.
But Before We Even Get to Tax Cuts
However, before engaging in any new tax cuts or spending, the next governor will have to deal with a major revenue shortfall. Tax revenues are often hard to predict. While the federal deficit has declined rapidly, Maryland will need to close a gap of $405 million in order to balance its budget.
Illusory Plan to Pay for Them
Hogan promises we can have it all by cutting “$1.75 billion in waste and abuse that we have identified.” Cutting waste, fraud, and abuse has a long history as the savior of politicians who want to cut taxes or increase spending without making tough choices. Just recall the Grace Commission report 30 years ago.
Hogan has now dusted off this strategy. Except that his figure is woefully inaccurate–inflated by a minimum of $843 million— as a review of just a portion of Hogan’s claims by the Baltimore Sun revealed. Sloppy math, such as a misplaced decimal point, undermines the Hogan meme that as “just a small businessman” who will watch our pennies carefully.
Even more embarrassing is that another error to the tune of $285 million relied on collecting more in property taxes–not exactly the theme of his campaign–but also on the assumption of tax rates of 100%. My guess is that not what they were going for when they unveiled their plan.
Hogan’s campaign concedes that the Sun‘s report is correct, as Campaign Spokesman Adam Dubitsky creditably acknowledged. (Smart: admit the mistake, move on, and pivot back to the campaign’s core message.)
And the Costs are Unknown
Hogan doesn’t know the cost of all of the various tax cuts that he has proposed. However, the Washington Post reported that a nonpartisan analysis revealed that the cut in retirement taxes alone would cost the State over $1 billion in revenue.
Incredibly, despite the welter of promises, Hogan simply hasn’t looked into it. As Dubitsky explained to the Post, “It’s not going to be until we dive into the budget after we win the election.” An amazing admission about the leader of Change Maryland who just said in a debate “I don’t want to over promise and under deliver.”
Since Hogan promises so much but there is little on the table in the way of real cuts, I worry that they may fall on the state’s universities–not just in terms of tuition but also in other funding that has been vital to its steady positive trajectory. And my view is that any pro-business economic strategy has to rely both on continuing that movement and taking better advantage of it.
Speaking with Dubitsky and listening to Hogan in the debate, one also perceives a more reasonable version of Hogan. Dubitsky told me that Hogan is committed to maintaining the State’s AAA bond rating and getting the fiscal house in order before moving forward with tax cuts. Makes sense to me.
Certainly, working to make Maryland more attractive to business is a perfectly reasonable goal, as is the idea of restructuring state government to improve efficiency and focus it on future challenges. But so far, all Marylanders have received is theme and message without an iota of content.
Avoiding specifics may well be the way to go in a campaign–too many Democrats get bogged down in the specifics of plans. Anyone remember the endless and pointless 2008 debates between Obama and Clinton about who had the better health care plan?
Even just the outlines of an approach and concrete examples backed up by facts would put meat on the bones and provide badly needed credibility. Even more welcome would be if Hogan would stick to not over promising by ceasing to hand out impossible tax cuts like lollipops on the campaign trail.