The Economic Engine of Maryland, Part Two

Montgomery County is often called the “economic engine” of Maryland. But how important is it to the state’s economy? Let’s find out.

The Bureau of Economic Analysis provides the following estimates of population and employment by Maryland county in 2006:


So Montgomery accounts for 16.5% of the state’s population and 19.3% of its employment. This is significant, although perhaps not dominant. But this is only one aspect of the county’s role. Consider personal income and total wages and salaries paid in 2006:


Montgomery accounts for 24.0% of the state’s personal income and 22.7% of its wages and salaries. This far outpaces second-ranked Baltimore County (with 14.6% of personal income) and Baltimore City (14.4% of wages and salaries). But that still understates the county’s impact. Consider dividends, interest, rent and proprietor income in 2006:


Montgomery accounts for one-third of all business income – dividends, interest, rent and proprietor income – in the state. That is roughly double the business income created in runner-up Baltimore County and more than Anne Arundel, Carroll, Frederick, Harford, Howard and Prince George’s Counties combined.

The state’s tax base benefits immensely by the inclusion of Montgomery County. Shown below are income and sales tax receipts by county for FY07, the most recent complete year available. These two sources constitute approximately 80% of the state’s general fund revenues.


Montgomery accounts for 25.8% of the state’s income tax receipts, 13.0% of its sales tax receipts and 21.2% of combined receipts in both categories. (Corporate income taxes are not included in this data.)

Tax receipts are important, but taxes do not appear out of thin air. They depend on employment, which in turn depends on business profits. The truly critical role Montgomery County plays in the state’s economy is to act as its principal base of profit and job creation. By generating one-fifth of the state’s employment, one-fourth of its personal income and one-third of its business profit, Montgomery’s economic health directly determines the state’s well-being.

But as big and robust as it is, Montgomery County is far from invulnerable. It has a direct competitor across the Potomac River. And its ability to go head-to-head with its powerful rival has a colossal impact on Maryland’s future. More on that in Part Three.