Economic Recovery and Growth in Maryland Maryland has, along with the rest of the country, suffered through a deep recession. According to the Maryland Department of Labor, Licensing and Regulation, Maryland employment is down about 175,000 jobs since 2008. The Maryland unemployment rate has increased 4%, and our labor force has actually fallen by 60,000 people. Maryland's unemployment rate is lower than the national average due to the prevalence of federal jobs in our area. Federal employment can't continue to grow much in the future, however, due to the enormous federal budget deficit we now face as a country. Any future economic expansion in Maryland must be based on private sector job growth. Maryland competes with other states for private sector jobs. Unfortunately, however, Maryland has a very unfavorable climate for business, making it difficult for us to compete. One sign of this is Northrop Grumman's recent decision to locate its headquarters in Northern Virginia, instead of Montgomery County. CNBC recently released a report comparing the 50 states on numerous characteristics. It found that Maryland was ranked 42 out of 50 in terms of the cost of doing business, which is obviously a very poor ranking. Maryland ranked even worse at #45 in terms of the cost of living. Finally, Maryland was ranked 27th in the country in terms of the cost of doing business overall. Virginia, by comparison, was ranked #1 on the overall cost of doing business. It is obviously very difficult for us to compete with #1. Other studies have also found that Maryland ranks poorly in comparison to other states. The Tax Foundation's 2009 State Business Tax Climate Index ranked Maryland as #45 out of the 50 states in terms of its overall tax system. The Tax Foundation's description of the Maryland tax system is eye opening. It states: Maryland ranks 45th overall, a drastic drop from its 24th rank last year. Maryland lawmakers achieved this remarkable feat by raising most of the state's major taxes for FY 2009. They raised the corporate income tax rate to 8.25% from 7%, the sales tax rate to 6% from 5%, and the cigarette excise tax to $2.00 from $1.00 per pack. They also created four new income tax brackets, raising taxes on filers earning more than $150,000 per year. Maryland's top personal income tax rate is now 6.25% (up from 4.75%); that's on top of a weighted average local option rate of 2.98%. Maryland now has by far the worst personal income tax in the country, with a significantly lower score than second-place California. (2009 Study, page 5, available here). A marriage penalty was also added to the state's income tax system. Furthermore, Maryland's tax on estates drives business owners and retirees to other states. Maryland taxes estates valued at $1 million or more; Florida has no estate tax. Given this, it is no surprise that there are so many retirees in Florida! Maryland cannot expect to attract businesses and jobs in the future unless the overall business climate improves. This is a leading priority for the next General Assembly. If we are not competitive, jobs and residents can, and will, go elsewhere. Maryland's income tax rates and corporate tax rates are above Virginia's. Maryland taxes estates heavily; Virginia repealed its estate tax several years ago. Where would you locate or expand a business if you could choose among the two? Not surprisingly, Fairfax County has a lower unemployment rate than Montgomery County and a higher per capita income. As a starting point for improving Maryland's climate for business, we need to make our tax system competitive. We need to reduce Maryland's corporate and income tax rates and raise the threshold for estate taxes so that we can compete and capture a greater share of the Washington area's job growth. This is essential if we are to maintain and grow our tax base over time. If we are not competitive, our tax base will decline. I will introduce legislation to phase in tax reductions over several years until parity with nearby states is reached.