IssuesCitizens for Henry KahwatyCfHK_08c64492-9534-11df-a3fa-be1c7a64ea2aHenry KahwatyCandidate for Maryland's House of Delegates representing District 14_08c64794-9534-11df-a3fa-be1c7a64ea2a_08c648b6-9534-11df-a3fa-be1c7a64ea2aEconomic Recovery and GrowthImprove the business climate in Maryland._08c6497e-9534-11df-a3fa-be1c7a64ea2a1Maryland 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 Fairfax, 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. _08c64a1e-9534-11df-a3fa-be1c7a64ea2aMaryland's BudgetMake tough choices on spending and tax policy to be sure that our budget is truly balanced._08c64ac8-9534-11df-a3fa-be1c7a64ea2a2State budgets are tight in most states, and the federal budget deficit was about $1.6 trillion during 2009. It is hard to imagine a trillion dollars, isn't it? In 2009, federal tax revenues (excluding Social Security and Medicare taxes) were just under $1 trillion according to the Congressional Budget Office, and federal government borrowings were over $1.6 trillion. Federal borrowing in 2009 was over 60% greater than federal tax revenues! We can all take comfort that Maryland's Constitution requires a balanced budget (Article III, Section 52), so that our great state cannot find itself in poor financial shape like our national government. Total revenues for the state were $12.9 billion in fiscal year 2009, which was about 4.5% below 2008 revenues. Revenues for 2010 were running 5.5% below 2009 revenues as of April of this year (the last month for which data are available). How has the state managed to balance its budget, as required by our Constitution, in this environment of diminished resources? Answer: it has used hidden borrowing and other gimmicks. Unfortunately, Maryland's fiscal picture is not that rosy, even though we have a balanced budget requirement in our state's Constitution and huge tax increases were passed in recent years. Sadly, our state's budget is not balanced. The federal government borrows enormous amounts of money to cover its day-to-day operations. This borrowing is highly visible. Maryland has taken a different path; its borrowing is hidden. The state should have contributed $2.2 billion to its pension fund during 2009, but only contributed $1.3 billion. The $900 million shortfall is a burden our children will have to bear when pension payments become due. Underfunded pension contributions force future generations to pay our current expenses. As a result, a pension shortfall is no different than making full payments to a pension fund but borrowing the money needed to make these payments. In essence, we are forcing future generations to make loans to us now. This $900 million shortfall represents 7% of Maryland's 2009 revenues. The state's pension fund is now underfunded by a total of $33 billion, which is almost three times Maryland's annual revenue. (See The Frederick News-Post, May 26, 2010.) We should not, as a state, be burdening future generations to cover our current expenses. This is fiscally irresponsible, and the next General Assembly needs to make tough choices on spending and tax policy to be sure that our budget is truly balanced. I welcome your ideas on how Maryland can save money by using its resources more wisely. _08c64b7c-9534-11df-a3fa-be1c7a64ea2aThe Federal Budget DeficitAmend the U.S. Constitution [to address the budget deficit]._08c64c4e-9534-11df-a3fa-be1c7a64ea2a3I have already outlined the facts regarding recent federal budget deficits. We all know that current deficits are not sustainable long-term. President Obama has named a panel to recommend solutions. Unfortunately, these recommendations are not due until December - after this fall's general election. As a democracy, shouldn't our nation debate these recommendations as part of the national election process? Do we want to pay a national sales tax? A value added tax? Increased income taxes? Do we want any additional taxes on top of the new taxes imposed by the healthcare law? The same is also true for our state. We need to decide in this election what we want Maryland's tax policies to be. For example, do we want to impose a new sales tax on services? Do we want to roll back income tax increases? How do we want Maryland to respond to changes in the availability of federal stimulus or other funds? Neither our Congressional leaders nor our President have the will seriously to tackle the problem of the federal deficit. Deficit spending has grown over time, and both Democrats and Republicans are responsible for this growth. We should expect politicians to support deficit spending. People do not like taxes, but do like spending. The huge federal deficit we face now is a sign that politicians will spend enormous amounts of other people's money, if they are allowed to do so. We cannot allow this. Our nation's leaders may reduce their excess spending a bit, but there is no evidence that they have the will to solve the problem. Any reductions will make the General Assembly's job more difficult. Nevertheless, we all must be involved in solving the problem. Our nation's system is one of checks and balances. Congress passes laws, but the President can veto them. Congress can override a Presidential veto. Courts can review our laws for their constitutionality. Congress can change laws in response to court rulings. Congress can propose amendments to the most fundamental law of the land, the U.S. Constitution. The Founding Fathers were careful to balance the power in our system of government by using these checks and balances. Maryland's Legislature is part of the system of checks and balances. Article 5 of the U.S. Constitution spells out the procedures for amending the Constitution. Amendments can be proposed by Congress, and these amendments come into force when ratified by three fourths of the states. If Congress won't act, however, the states may do so. If two thirds of state Legislatures request an amendment to the Constitution, Congress must call a convention to propose such an amendment. Any proposed amendment must then be ratified by three fourths of the states, which is the usual requirement, before it becomes part of the Constitution. The Maryland Legislature is part of our government's scheme of both proposing and ratifying Constitutional Amendments. The federal budget situation is so far out of control that it is time for state Legislatures to play the role assigned to them by the U.S. Constitution. If our national political leaders will not solve the deficit problem, the states must act. This includes Maryland. The U.S. Constitution should be amended as follows: Article 1No act of Congress providing authority to increase borrowing on the credit of the United States shall provide this authority for a period longer than six months._08c64d2a-9534-11df-a3fa-be1c7a64ea2a3.1What is the logic of this amendment? Each Congress has a two-year term, and the first article requires each Congress to vote on raising the federal debt limit at least four times during its term. This will force all members of the House of Representatives, all U.S. Senators, and the President to face repeated decisions on the total U.S. debt and the deficit. At least one vote must be held within six months of a national election.Article 2Congress may not authorize the net borrowings on the credit of the United States to increase by more than four percent of gross domestic product in any calendar year_08c64e2e-9534-11df-a3fa-be1c7a64ea2a3.2The second article does not require a balanced budget, but does place a limit on the extent to which the government can run a deficit. Most economists believe that the federal government should run a surplus during periods when the economy is strong and run deficits during times of recession. Article two allows this but also restricts the size of any deficit. Our current deficit of approximately 12 percent of gross domestic products (which is the annual value of U.S. domestic economic production) would need to be cut sharply by Article 2.Article 3Congress may waive the restriction in Article 2 of this Amendment during times of war or other national emergency by a Declaration of National Emergency approved by two-thirds of all members of the House of Representatives and two-thirds of all members of the Senate._08c64f46-9534-11df-a3fa-be1c7a64ea2a3.3Finally, Article 3 allows Congress to waive the requirements of Article 2 in times of national emergency, such as during a war. The federal government ran a deficit during World War II, and this amendment would not stand in the way of such a war fighting effort. During times of war, Congress must have the flexibility it needs to support our national defense. I believe that this amendment will force a change of behavior in Washington. Every member of the House and Senate, and the President's staff, will scour the federal budget for savings line-by-line because they will be required to do so to maintain favored programs. Our system does not provide sufficient incentives to spend public money wisely, and the Maryland Legislature needs to be part of the solution, both for our state and our country.2010-07-21http://www.henryformaryland.com/issues/OwenAmburOwen.Ambur@verizon.net