A recap of this week’s top-five news items and resources from the intersection of business and government.
1. Marylanders should get ready for tax hikes
The state Department of Legislative Services revealed in June that, thanks to spending hikes, Maryland will face a budget deficit starting next year that will grow to $1.8 billion in five years. A primary cause of the ballooning shortfall, and in turn looming tax increases, is the high cost of the Blueprint for Maryland’s Future. According to a Maryland Public Policy Institute poll, 63 percent of Maryland voters oppose tax hikes needed to pay for the increased education spending.
Business outlook: High taxes are driving business and labor away. According to a Tax Foundation analysis of Internal Revenue Service migration data, Maryland is ranked the 5th worst in tax return funding lost, with more than $1.8 billion in taxable personal income gone in 2019 alone.
2. Governor Moore calls for bold but restrained approach for state budget
Governor Moore called for a need to invest in Maryland’s strengths during a recent speech at the Salisbury Area Chamber of Commerce, underscoring the need to expand the state economy which he says has grown only 0.2 percent per year since 2018. “As our budgets have gotten bigger over time, the problem is our economy has not,” he said. The Governor aims to invest in programs for youth, education and workforce development that could drive growth in more stagnant areas of the state economy.
Why it matters: Budget negotiations are set to begin this fall, and with a mountainous budget deficit headed down the pike, state leaders should be thoughtful as to which spending priorities — and sacrifices — are to be made for Maryland’s economic future.
3. Maryland counties seek more control over cannabis
Maryland’s counties are calling for state lawmakers to grant them more control over the cannabis business. The state’s cannabis law prohibits dispensaries from being within 500 feet of a school, child care center, playground, park, recreation center or library, or within 1,000 feet of another dispensary. The law states that local governments can establish “reasonable zoning requirements,” but they cannot “unduly burden” a cannabis business. County officials are also looking for state lawmakers to change the cannabis market’s revenue sharing. Local governments receive 5 percent of the tax revenue from cannabis sales, which is reportedly the smallest local share of revenue of any state with legalized adult-use cannabis.
What’s next? According to Will Tilburg, acting director of the Maryland Cannabis Administration, it will be up to local governments and the legislature to interpret or amend the law. Still, county officials are hopeful that they receive increased control and another bite at the tax apple in due time.
4. As office returns ramp up, workers are commuting more, and paying more
As the debate over a return to office work continues, Chamber of Commerce calculated the cities with the costliest commutes by comparing average commute time in each city with the median income for full-time, year-round workers. Nationwide, commuters experience an annual wage loss, or commute cost in time, of roughly $5,748.05 a year, or about $22.11 per day. For Greater Washington commuters, that number is $11,067.07 annually ($42.57 daily) — ranking as the third costliest commute behind first San Francisco and second Fremont, Calif.
The bottom line: Greater Washington’s commute times cost Maryland businesses and workers. Investment must be made into improving infrastructure in not only this region but statewide so that the efficient movement of goods and people can fuel a more competitive Maryland economy.
5. U.S. economic growth in Q2 revised down to 2.1% rate
The U.S. economy expanded at a 2.1% annual pace from April through June, showing continued resilience in the face of higher borrowing costs for consumers and businesses. The government had previously estimated that the economy expanded at a 2.4% annual rate last quarter. Though the economy has been slowed by the Federal Reserve’s strenuous drive to tame inflation with interest rate hikes, it has managed to keep expanding, with employers hiring and consumers spending.
What is hoped: The combination of tumbling inflation, continued economic growth and slower but steady hiring has raised hopes for a rare “soft landing” — a scenario in which the Fed manages to conquer high inflation without causing a painful recession. Only time will tell.