If you’d like to know what the first months of a Hillary Clinton administration would be like, just recall the first days of the Bill Clinton administration — or observe the antics of one of Hillary’s most slavish political supporters, Maryland Governor Martin O’Malley (dubbed "The Teflon Leprechan" by WBAL Radio talk show host Ron Smith).
In the first several months of the Bill Clinton regime barely a day went by when the newspapers were not filled with proposals for new taxes of all kinds. Former Labor Secretary Robert Reich was in such a frenzy to raise taxes on everyone and everything that columnist George Will felt compelled to treat him like an out-of-control, hyperactive child in one of his Washington Post columns, advising him to "Calm down, Mr. Secretary, calm down."
At the time I began clipping all the "let’s raise taxes" headlines and taping them to my office door. Within a couple of weeks my entire door was completely covered with "Clinton calls for higher gas taxes." "Clinton Calls for New Payroll Taxes." "Clinton Calls for Higher Income Taxes." "Social Security Tax Will Have to be Raised." "Clinton Apologizes for No Middle Class Tax Cut, as Promised." And on and on.
Which brings us to the Teflon Leprechan, Maryland Governor Martin O’Malley. He was one of the first — possibly the very first — governor to endorse Hillary for president, and has been making speeches around the country on her behalf for months. He is clearly a Bill (and/or Hillary) Clinton wannabe. He is sometimes slick like Bill — staging photo ops on a daily basis, always talking out of both sides of his mouth, constantly "flip-flopping." He even plays in a band. And he is sometimes the Leftist ideologue like Hillary, preaching class warfare with the best of them. He’s the worst of both Clintons, in other words. As a politician he is apparently so obnoxious that after just one meeting with him the Washington Post endorsed his Republican opponent, the incumbent Governor Robert Ehrlich, in the 2006 election. I have been reading the Post for twenty-six years and I cannot recall the paper ever before endorsing a Maryland or Virginia Republican for any of the top state offices.
The first several months of the O’Malley administration have been déjà vu all over again, as Yogi Berra would say, with regard to the Clintonesque tax-raising frenzy that has come out of the governor’s office. Not that O’Malley’s predecessor, Robert Ehrlich, was a tax cutter. One of the first things he did upon assuming office was to raise the state’s real estate tax rate in 2003. The real estate boom, and the strong Maryland economy fueled by the enormous growth of the federal government during the Bush regime, allowed the first Maryland Republican administration in some thirty-five years to increase spending as much as any Democratic administration in memory had done.
According to a 2006 National Taxpayers’ Union study, state spending in Maryland grew by 8.2% per year, on average, from 1993 to 2003, easily twice the rate of personal income growth in the state. In his last year in office (2006), Governor Ehrlich submitted a $30 billion budget that was a 12% increase over the previous year, the biggest one-year increase in a quarter of a century. Marylanders are so overtaxed that Ehrlich left office with a budget surplus in excess of $1 billion.
But that was not nearly enough for the Teflon Leprechan, whose inaugural address was filled with 1930s-era class warfare talk about the undeserving rich in the state, the haves and have-nots, the evils of corporations, bla, bla, bla. And all of a sudden, out of the blue, the state bureaucracy announced that, lo and behold, they are "projecting" a $1.7 billion budget deficit. "Huh? Where did that come from?", was the initial response of almost everyone.
It came from "projected" massive spending increases on the black hole of government-run school monopolies, which is essentially a giant payoff to the teachers’ unions that were instrumental in getting O’Malley elected and has nothing to do with "education" per se. Like all other states, the more Maryland spends on its rotten government schools, the worse they get in terms of student performance.
So in order to pay off his campaign debts with taxpayers’ money, O’Malley has proposed a surge of tax increases. His major objective, besides raising money, seems to be to incite envy and class warfare. With stern talk about the "unfairness" of "the rich" residing in the state, he has proposed increasing the state income tax rate from a flat 4.75% to 6% for families with incomes over around $200,000 per year and 6.5% for those with incomes above $500,000. In Maryland there is a state income tax and a local "piggyback" tax (isn’t that a cute and cuddly name for a tax?). The latter averages about 2.5%, which means that, for the families or small business owners with $200,000 in income, their tax rate will be 8.5%, much higher than in any of the surrounding states.
The people who drive Maryland’s private economy will be able to give themselves an immediate 8.5% annual pay raise by simply moving to one of the zero income tax states like Florida or Tennessee. Maryland employers will also be put at more of a competitive disadvantage in hiring if they recruit nationwide for their top employees and are forced to pay higher wages to compensate for the state’s already uncompetitive income tax rates. O’Malley doesn’t care at all about this, for he obviously views this job as a mere stepping-stone to national politics.
Like Bill Clinton, O’Malley has promised a "middle class tax cut" as well, in the form of a miniscule $90 per year cut in state income taxes for those making around $75,000 a year. It’s a good bet that he will also follow Clinton’s example in announcing, several months from now, that he has "worked as hard as I have ever worked in my life" and has been unable to find a way to come through with this miniscule tax cut. So far, he has not yet mastered the Clintonian art of lower-lip biting, but rumor has it that he’s working on it.
The Teflon Leprechan has also proposed cutting the state-administered property tax by a few pennies per thousand dollars of assessed valuation, but this too is a mirage. He will either renege on his promise, or the state tax assessors will see to it that property reassessments guarantee that there will never be any actual reduction in the amount of property taxes that are paid. Promising property tax rate cuts while increasing property assessments is the oldest trick in the state and local politicians’ book.
The Leprechan also wants to raise the state sales tax by 20%, to 6%, while "broadening the base," which is political lingo for taxing lawyers, doctors, dentists, and other service providers who are not now subject to sales taxation. There is no state sales tax in neighboring Delaware, so this will be great for all the outlet malls that dot that state. The state gasoline tax will be raised, along with the automobile titling tax (which is another 6% or so on car sales); O’Malley wants to expand excise taxation and fees in as many industries as he can get away with; and, of course, the "closing of tax loopholes" is also a top priority.
With regard to the latter topic, O’Malley staged a photo op recently on the roof of a downtown Baltimore restaurant, where he could point to a corporate headquarters building that was recently sold and was exempted from the state’s "transfer tax," a special tax of 2% on all real estate transfers. It’s "unfair," the governor whined, that the people living in a $200,000 home in the city (a slum apartment by Baltimore’s standards) will pay a $4000 transfer tax on the sale of their home, but the corporation will pay nothing on the sale of its building.
Of course, the easy way to "increase fairness" would be to eliminate the "transfer tax" for the homeowners, not to extend it to others. It is nothing but a Mafia-style shakedown "tax" anyway. As the "don" said to a young Vito Corleone in Godfather II as he tried to extort a weekly "tribute" from Vito in return for allowing him to "do business" in "his" neighborhood: "I only want a taste." The Maryland "transfer tax" is a means by which the governor of Maryland tells buyers and sellers of real estate, "If you wanna do business in my state, you gotta give me a taste."
Several years ago Maryland raised the tax on cigarettes by $1 per pack and created a smuggling epidemic, since Virginia’s cigarette tax at the time was about 3 cents per pack. There was so much smuggling of cigarettes, driven by the arbitrage opportunity created by Maryland’s tax increase, that the state employed literally thousands of "cigarette tax police" to try to stop it. Former state comptroller Donald Schaeffer even claimed that terrorists were in on it and sending their ill-gotten gains back to their terrorist brethren in the Middle East. O’Malley has proposed another $1 per pack tax increase on cigarettes, a tax that would be borne mostly by lower-income Marylanders.
The latest O’Malley tax-increasing proposal as of this writing (there is bound to be another one tomorrow) is to establish a state government slot machine monopoly. When Governor Ehrlich advocated legalizing slot machines at Pimlico Racetrack and elsewhere, then Baltimore Mayor O’Malley denounced the idea as an "immoral" way of raising revenue. Now that he’s safely ensconced in the governor’s mansion it’s all perfectly kosher. If he is successful, slot machine revenue will fuel the creation of even more government bureaucracies, which will become deficit-ridden like all the rest when the next economic slowdown occurs, which will lead to calls for even further tax increases, and the cycle will start all over.
There has been no talk at all from O’Malley about allowing spending to merely continue growing at 8% or so (double the personal income growth rate), based on the existing tax system and a growing state economy. Such a proposal — of allowing 8% spending growth, as opposed to "projected" growth of say, 15%, would constitute a 7% "budget cut" and that would be "unfair" to the teachers unions, state bureaucrats, and corporate and individual welfare bums that constitute the backbone of the Democratic Party in Maryland and in every other state.
Thomas J. DiLorenzo [send him mail] professor of economics at Loyola College in Maryland and the author of The Real Lincoln: A New Look at Abraham Lincoln, His Agenda, and an Unnecessary War, (Three Rivers Press/Random House). His latest book is Lincoln Unmasked: What You’re Not Supposed To Know about Dishonest Abe (Crown Forum/Random House).