I’ve been out of work for two months now, and it’s been a while since I whacked Governor Martin O’Malley for chasing jobs away from the state. When I heard Northrop Grumman, the humongous defense contractor, had decided to move its corporate headquarters from California to northern Virginia, I figured it was time for another O’Malley beatdown.
In all honesty, the impact of the Northrop Grumman relocation on the number of jobs in Maryland would have been practically nil. They’re bringing 300 people already on the payroll with them, rather than implementing a business unit that’s going to hire thousands of new workers. They would probably have hired local vendors for certain services, but that’s about the extent of their effect on jobs.
Still, the political impact of the decision is significant, especially in an election year, and particularly given the worst unemployment figures in the state in over two decades. GOP challenger and former Governor Bob Ehrlich wasted no time in lambasting Governor O’Malley for the anti-business climate in the state that he believes contributed to Northrop Grumman’s decision.
He ridiculed Governor O’Malley’s contention that Northrop Grumman’s decision was still a victory for Maryland because their presence would have a positive regional impact.”When the Yankees won the World Series, did The New York Times report it as a win for the American League?”, he said. Once a jock, always a jock, but point made nonetheless.
Some critics point to Maryland’s high corporate and individual tax rates, and its Byzantine regulatory framework, as the culprits that drove Northrop Grumman into the arms of our neighbor to the west. Both the state of Maryland and Northrop Grumman denied the claim, saying the final decision came down to available office space.
Color me skeptical on that excuse for a number of reasons.
Office space availability is something they could determine pretty early in the discovery process, and I think they’re smart enough to do that. If they knew early in the process that Maryland wouldn’t have the office space to meet their requirements, then they were playing us like a drum, perhaps using us to sweeten the deal with Virginia.
Also, a headquarters is the usual workplace for a companies’ highest paid executives. It’s not just the corporate costs that matter; the living costs for senior company executives matter as well. Maryland’s infamous millionaire’s tax has gotten a lot of ink over the past year because it’s been a spectacular failure. Rather than bringing in $106 million in additional income, it lost $257 million. This travesty contributed to the state’s $2 billion plus annual deficit, and Montgomery County, home to more Maryland millionaires than any other county, is facing a near $1 billion deficit.
There are many reasons for this, but analysis of federal tax return data says Maryland lost $1 billion from its tax base because of people leaving the state. One in eight millionaires who filed a state return in 2007 did not file in 2008. Some may have died, but many simply moved. Millionaires saved tens of thousands of dollars in personal taxes by leaving Maryland, and that is no small consideration in deciding where to move the headquarters of the 69th wealthiest company in the nation.
Companies usually consult with relocation specialists to help them make decisions on corporate moves. They don’t limit their consultation to one factor, so I’m sure office space, while it might have been high on the list, wasn’t the sole deciding factor.
Companies don’t make relocation decisions based strictly on immediate cost or benefit, like who offers the most in incentives. Maryland reportedly offered $22.5 million in incentives compared to Virginia’s $12-14 million. Long-term or recurring costs, however, like taxes, can add up over time. The regulatory environment and even the history of relations between corporations and state government are taken into account. If the cost of doing business with a state is too high, it doesn’t stand a chance of bringing in new business.
The apologists for Governor O’Malley’s knee-jerk hostility to businesses like to point out how our highly educated workforce, our status as a transportation hub, and our proximity to the nation’s capital make us attractive to the business community.
Attractive enough to overcome a governor who signs, then breaks legal agreements with companies to score political points? Attractive enough to overcome the highest corporate tax rates in the region, and the 4th highest individual income tax burden in the nation? Attractive enough to offset the state’s dismal rankings for business friendliness by several business publications and consulting firms?
If you want a true sense of how this governor and his legislature are perceived when it comes to business friendliness, talk to a small business owner here in Maryland. These people are the economic engine of our state, and our nation for that matter. They put more people to work than larger firms, export more goods to overseas markets, and put more back into the communities in which they work and live.
Consider the words of one Maryland small business owner, commenting in the Baltimore Sun on the Northrop Grumman news, as representative of the views of the small business community:
- “Taxes are too high for small businesses & that’s why hiring has dropped. Even the recent tax break to hire an unemployed worker is a ho-hum to a business owner. It will cost tens of thousands of dollars to keep someone & with all that is on the horizon (health care), it would be senseless to think I could keep them. Maryland doesn’t GIVE me anything in incentives, only takes, takes, takes.”
I began writing this article while sitting in the doctor’s office for my allergy shots and, quite coincidentally, a couple of small business owners were having an animated discussion about the economy and how government is saddling them with more and more costs, leaving them with the option of laying off, not hiring, or raising prices on their customers. Sometimes this stuff just writes itself!
Theirs isn’t an isolated opinion, either. I read it in the blogs, hear about it on the radio, and I get an earful from my online followers as well.
It’s no surprise Governor O’Malley is talking about “jobs, jobs, jobs.” He knows the small business owners are angry, and they’re ready to take out their frustrations on the current leadership. Where was his devotion to “jobs, jobs, jobs” when he raised everyone’s taxes, increasing small business costs and reducing consumer purchasing power so they buy less? Where was his passion for “jobs, jobs, jobs” when he nearly drove 4,000 construction jobs and 400 permanent positions out of the state in his vendetta against Constellation?
By the way, I want to commend Constellation CEO Mayo Shattuck who, after being called everything but a child of God by the governor and his cronies, agreed to help the state lure Northrop Grumman here. The governor could learn something from him.
The bottom line is that small business owners can see right through Governor O’Malley’s epiphany, and they know he’s just trying to save his own “job, job, job.”
So we congratulate Virginia once more as they successfully woo yet another business to the other side of the Potomac. You see, in Virginia, job creation is a permanent policy objective, supported by Republican and Democratic governors and legislatures alike. The pursuit of happiness, the right of free people to earn and keep the fruits of their labors, was first codified in the Virginia Declaration of Rights in 1776. Job creation is part of Virginia’s DNA.
In Maryland, job creation is a campaign slogan, dusted off every four years and immediately forgotten in the wake of the election returns.
Nothing stimulates the economy and boosts consumer confidence more than jobs and, as I personally know all too well, nothing stresses the family, hurts the finances, and burdens the spirit more than not having a job. Ask the 180 Northrop Grumman employees in Hagerstown who received layoff notices in March, even as the state was competing to be the home of their corporate headquarters. Ask the 228,800 unemployed Marylanders, or the thousands more who aren’t included in that number because they’ve given up on finding a job.
Ron Miller, of Huntingtown, is a military veteran, conservative writer and activist, communications director for the Calvert County Republican Party, and executive director of Regular Folks United, a 501(c)3 nonprofit organization. Ron is a regular contributor to RegularFolksUnited.com, American Thinker, and RedCounty.com. You can also follow Ron on his website TeamRonMiller.com, as well as Twitter and Facebook.