Make competitiveness a priority in 2014 session

With the 2014 General Assembly session set to convene on January 8, the Greater Baltimore Committee is sending printed copies of its recent report, “Compact for Competitiveness,” to state lawmakers to remind them of policy priorities for competitiveness recently compiled by Maryland business and civic leaders.

The report offers a policy “To Do” list for competitiveness developed during the GBC’s research and information-gathering process in 2013 that culminated in a day-long Chesapeake Conference of CEOs held in June in Baltimore.

It’s part of the GBC’s more than two-year initiative to develop a common agenda between business and government leaders for strengthening Maryland’s competitiveness for business growth and job creation.

The report amplifies eight core pillars – prerequisites for economic growth and job creation compiled by the GBC and business leaders in 2010 that was intended to begin the process of closing a “disconnect” between business and government in Maryland on the issue of business climate.

Briefly, the core pillars are: government that unites with business as a partner, an educated workforce that meets business needs; streamlined, stable and predictable regulatory policies; a competitive and fair tax structure, competitive costs of doing business, superior transportation with reliable funding, strategic and effective state investments in business growth, and a long-term, well-funded state marketing strategy.

The new GBC report builds on those core pillars by offering constructive, substantive and outcome-driven priorities — developed at the GBC’s June 2013 CEO conference – for strengthening Maryland’s competitiveness as a place to locate and to grow a business.

The CEO conference found that Maryland’s business and civic leaders strongly believe that the overarching strategic objective for making Maryland more competitive must be to develop a “Compact for Competitiveness,” a shared set of strategic priorities for economic growth and job creation embraced by leaders of both business and government in our state.

Why is this so important?  Because the degree to which government policy makers and business leaders are on the same page profoundly affects – either positively or negatively – the decision-making processes in Annapolis and the policy framework that defines the private-sector’s capacity for the economic growth, which ultimately funds the fiscal capacity of our government.

Participants in that conference assigned as the top priority to making Maryland more competitive the notion of restructuring state taxes in a strategic, but revenue-neutral way and examining the state’s spending processes.

In addition to tax and spending reform, the GBC’s priorities for competitiveness include crafting a 10-year plan for transportation infrastructure, investing in port and airport resources, implementing regulatory reform, and deploying a coordinated STEM strategy throughout the state’s K-12 and higher education systems.

Recommended priorities also include investing in resources to nurture innovation and entrepreneurship, strengthening the state’s economic development programs, implementing outcome-driven accountability in K-12 education, and leveraging business partnerships for infrastructure development.

The report and its recommendations, available online at www.gbc.org, are offered as a constructive plan to strengthen public-private teamwork on key issues that will frame our state’s future economic progress and quality of life.

Acting on the report’s top priority – tax and spending reform – the GBC has formed an independent tax and spending commission of knowledgeable private-sector experts who have already begun working on this issue that is fundamental to the state’s ability to compete.

The notion of restructuring Maryland’s taxes probably prompts nervousness among many who, no doubt, view such exercises as a ploy to raise taxes.

But the GBC’s proposal is intended to neither increase nor decrease overall tax revenue. The operative concept driving the work of the GBC’s tax study is “revenue-neutral.” In other words, match today’s tax system to today’s economy and today’s business growth trends.

The most beneficial outcome would be to achieve a state tax framework where economic growth translates more efficiently to state revenue growth without the need to continually increase tax rates in a manner that directly inhibits our economy.

Of course, that’s easier said than done, but it’s well worth trying. Tax structure is “the elephant in the room” in any discussion about Maryland’s business climate.

Published rankings consistently report that Maryland’s tax structure – particularly for personal income tax rates – serves to detract from positive rankings our state receives in many other business-climate categories, such as technology and innovation, education, and quality of workforce.  Most published rankings – even those favorable to Maryland – consistently report that Maryland’s tax structure ranks near the bottom.

Any study of tax structure must also be accompanied by a thorough evaluation of the state’s spending decisions, say business leaders.

The Maryland General Assembly has a Spending Affordability Committee charged with making an annual calculation to ensure that the state’s spending growth does not exceed its economic growth.

But our elected leaders should consider making Maryland’s budgeting process less of a mathematical exercise and more of an effort to better match spending with a strategic plan for our state.

The processes by which state government leaders raise revenue from Maryland’s citizens and allocate that revenue to strategic priorities is a fundamental element of any state’s ability to remain competitive for economic growth and job creation and to maintain a high quality of life.

Given the hyper-competitive nature of today’s global economy, it’s time for a fresh evaluation of our state’s tax structure and spending decisions. Working toward palatable alternatives is far preferable to Maryland’s status quo.

This commentary appeared in the January 3 edition of Center Maryland. Donald C. Fry is president and CEO of the Greater Baltimore Committee. He is a regular contributor to Center Maryland.

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