Maryland Shouldn’t Gamble With Corporate Welfare

Over the past several months, Maryland officials have discussed expanding gambling throughout the state.  Like many other areas throughout the country, Maryland sees existing video lottery terminal (VLTs) and table games at gaming facilities as a partial solution to budget woes that were often caused by runaway spending.   However, Maryland’s proposed solutions will only create greater inefficiencies in the economy and taxpayers will continue to bear the brunt of the state’s misguided fiscal policy. 

In May, the state legislature passed a massive income tax increase that will hit many families that are far from “rich.”  The new, top state-local income rate will rise to 8.95 percent — the fourth-highest rate in the nation.  This hike will not just affect individuals and couples; small business owners’ profits are taxed as personal income.   Additionally, the state increased the marriage penalty for working couples, which will significantly hit families with children, and also shifted pension obligations from the state to localities.  Governor Martin O’Malley may now call a second special session of the legislature in July to possibly give tax breaks to casino interests.   Earlier this year, members of the legislature proposed a 10.4 percent decrease in the rate for casino/“racino”/slot machine operators.  This is being done to presumably entice a vendor to build a new casino in Prince George’s County, and also to cut taxes on (VLT) operators in the state.  While this is being advertised as economic development, it is in fact corporate welfare.

While an appetite for gaming exists in Maryland – as in all states – at some point, the returns diminish as the industry reaches market saturation.  The gaming facilities compete for the same amount of customer money, especially when these establishments are located near one another.   It is no “sure bet” that cutting taxes on gaming interests will grow the economy; it is more likely a larger number of casinos will share close to the same number of patrons.   Giving casinos tax breaks that do not grow the overall economy – while trying to balance the budget on the back of working families – shows a misplaced set of priorities.

In a tough economy, policymakers must assert a sound policy that is business-friendly and does not punish workers and families.  Higher income taxes reduce savings and the purchasing power of taxpayers.  Localities that bear the pension cost-shifts may resort to increasing property taxes, a frightening prospect as many residents in Maryland already face foreclosures.   According to the Tax Foundation, the contrast in the tax burden of Maryland and neighboring Virginia continues to grow; as family can save $6,000 a year by moving to Virginia.

Maryland’s tax increases are, as Comptroller Peter Franchot put it, “simply the wrong approach at the wrong time.”  The state will not be able to close its half-a-billion dollar shortfall by treating taxpayers as its ATM.  They will neither be able to do so by promising the moon from casino revenues.   Maryland residents would be smart to let their legislators know that catering to gaming interests is not the answer to the problems they face.