While the mainstream media titillates itself with the University of Maryland porn scandal, here’s what we have our eyes on in the rest of the General Assembly session.
Misclassification Bill
Despite heavy lobbying by anti-union hired guns Lisa Harris Jones and Sean Malone, the O’Malley administration introduced a bill to crack down on tax cheating by employers who misclassify workers as independent contractors. Other states have found that they are losing tens and sometimes hundreds of millions of dollars in income taxes and unemployment revenues every year due to such scams. The bill was nearly crippled by two poison pill amendments adopted by the Senate. The bill is now in conference and if the Senate’s amendments survive, the odds of any actual crackdown on tax cheats will be very low.
Prince George’s Stadium
Marc Korman says the stadium is a bad deal for Maryland and he’s right. But it could be a good deal for Prince George’s County if only they could get the rest of the state to pay for it. After all, with Senator Ulysses Currie (D-25) chairing the Senate Budget and Taxation Committee, you might figure the county could grab a bit of cash for it. Instead, the Prince George’s County Council voted against the stadium, pulling out the rug from delegation supporters and throwing the whole plan into limbo. It seems that the Prince George’s politicians can’t work together even to implement bad ideas, which may actually be a good thing.
Expungement Bill
Delegate Lou Simmons’ (D-17) odious abuser expungement bill is technically still alive in the House Judiciary Committee but we have not heard about it in awhile. We hope that it will not re-emerge from its lair.
Bill Frick’s Credit Card Bill
Delegate Bill Frick’s (D-16) bill to crack down on credit card abuse has passed the House 136-1 and is now before the Senate. We ask the Senators to read Marc Korman’s excellent post praising the bill.
WSSC
Several months after the disastrous pipe break on River Road, the momentum for structural reform at WSSC has petered out. If nothing emerges from the General Assembly, the Montgomery and Prince George’s delegations will have to flee to Antarctica when the next pipe inevitably explodes.
Reregulation Bill
The bill to reregulate new power plants is the ultimate “do-little-but-hype-a-lot” bill. It will have virtually no impact on electric bills and distracts attention from real measures that could make a difference. The Senate passed it but some members of the House Economic Matters Committee dislike it. The General Assembly would do well to return to the issue with different legislation next year.
MCPS Disclosure
Delegate Al Carr’s (D-18) local bill requiring online vendor disclosure by the Montgomery County Public Schools passed the House on a 139-0 vote. This bill is badly needed and we hope the Senate supports it.
Will Anything Positive Happen on Transportation?
The Governor and the General Assembly are doing nothing to raise revenue for transportation even though the Transportation Trust Fund (TTF) even though its money is disappearing before our eyes. A bill by Delegates Susan Krebs (R-9B) and Brian Feldman (D-15) limiting raids on the TTF was killed by the House Appropriations Committee. Senator Rob Garagiola’s (D-15) task force bill may or may not get a vote from the Senate Budget and Taxation Committee. Even if it does, time is running out on a House vote.
We’ll report back on how all of this turns out. In the meantime, don’t forget to check out Senator Andy Harris’s (R-7) latest anti-porn coverage.
Tuesday, April 07, 2009
What We Are Watching in Annapolis
Monday, October 27, 2008
District 18 Town Hall Meeting, Part One
On a chilly Thursday night, the District 18 Delegation of Senator Rich Madaleno and Delegates Ana Sol Gutierrez, Jeff Waldstreicher and Al Carr converged on Holy Cross Hospital to field questions from 70 of their constituents. As your blogger lives just a couple blocks north of the meeting site and our civic association organized the meeting, I would be derelict in my duty to our readers if I did not cover the event. But this was no ordinary meeting. In answers that were at times brutally honest, the delegation made some news.
Charles Duffy, moderator of the meeting, is a genial enough fellow. But as the long-time host of Political Pulse, a resident of Chevy Chase and the moderator of the District 18 appointment forum last December, he has a knowledge of the district’s issues that is too deep for any politician to escape. Mr. Duffy relied on index cards submitted by the audience to determine most of his questions, but he occasionally subjected the legislators to merciless follow-ups. Luckily for them, all emerged with their seats intact.
As I describe the major questions asked by Mr. Duffy and the answers given by the delegation, bear in mind that I am the Treasurer of the District 18 slate campaign fund. If that causes me to be too lenient (or too critical) in my account of the meeting, I invite our many readers who attended to correct me in the comments section. Let’s start with the most contentious state issue in the current cycle.
What is your position on slots?
Delegates Waldstreicher and Carr are both opposed to slots. Waldstreicher described them as “a tax on the most vulnerable” and Carr said they would have a “corrupting impact” on state politics. Waldstreicher voted against the referendum and Carr was not in office during the special session.
Delegate Gutierrez also opposes slots and said, “There are better ways to grow the economy and to grow jobs.” She also stated that slots have “an incredibly negative impact on our society.” Despite her views, she voted in favor of the referendum. Describing intense lobbying by both Governor O’Malley and County Executive Leggett prior to the referendum vote, she admitted, “After all of the pressure, I caved.” Shaking her head, she told the crowd, “It was one of the hardest votes I ever cast. I am sorry I did cast that vote... I am working as hard as I can to get people to vote against the referendum.”
Senator Madaleno started by mentioning his votes against prior free-standing slots bills when he was in the House of Delegates. But he said the referendum was different because it was part of a “comprehensive plan to close the structural budget deficit… The only way we could cobble together enough votes to pass the entire package was to pass the referendum.” Madaleno voted for the referendum and said he continued to support it because of long-run budget problems. “It’s hard to imagine where we will go forward after 2011 without the slots revenues.”
Mr. Duffy questioned Waldstreicher about his comment in the Sentinel that “We should not be making a decision on the issue based on political agenda.” Waldstreicher clarified that the issue had “become a bit of a personality contest between the Governor and the Comptroller” and should be evaluated on its merits.
District 18 is, at the level of local Democratic Party activists, extremely hostile territory to slots. Some may not have been pleased with the answers given by Madaleno and Gutierrez. But they deserve credit for their honesty.
Would you favor additional progressivity in the income tax to finance education?
The delegation turned this question into a general discussion of budget options. Delegate Waldstreicher said he would consider higher taxes on alcohol to help deal with the upcoming billion-dollar-plus state deficit, which he estimated would bring in $25-40 million per year. He also favored combined reporting, which would prevent large companies from hiding their earnings from Maryland’s income tax in other states. Delegate Gutierrez suggested making the beneficiaries of dredging in Baltimore’s harbor pay fees for that service. Senator Madaleno noted that the vast majority of the state’s budget is spent on education and health care and is therefore very challenging to cut. He noted the hope of many in Annapolis that an Obama administration might increase state aid.
But in the eyes of your blogger, Delegate Carr stole this question by condemning tax cheating by employers who intentionally misclassify their workers as independent contractors, a practice that costs the state untold millions. We appreciate politicians who pick up good ideas and run with them.
In Part Two, we will explore the delegation’s opinions on the ICC, the Purple Line and their “greatest achievements” in Annapolis.
Friday, September 05, 2008
A Reply to Brian Griffiths on the State Budget
Brian Griffiths, leader of Red Maryland, believes that the tax package passed during last year’s special session is causing Maryland’s budget problems. He accuses me of covering for Governor O’Malley and the General Assembly by not blaming them for their “irresponsible tax hikes.” But Griffiths did not bother to check the economic data or my prior work before expressing his opinion. Nor does he understand the relationship between fiscal policy and economic growth.
Even casual readers of the news know that Maryland’s economy has suffered along with the rest of the nation. The causes of American economic stagnation are well known: a bursting real estate price bubble, resulting problems in financial markets and rising fuel prices exacerbated by a weak dollar. (The weak dollar is caused in part by immense federal budget deficits driven by the war in Iraq.) Those national problems affected Maryland. According to the Bureau of Labor Statistics’ Current Employment Survey, job growth in Maryland slowed from 36,000 in 2005 to 28,500 in 2006 to 24,600 in 2007. That is not the fault of either Governor O’Malley or Governor Ehrlich – it is merely a reflection of national economic problems that impacted the state’s economy.
The slowing economy laid bare an underlying truth: the state had a structural deficit and was on track to spend $1.10 for every $1.00 it received in taxes. As I said nearly a year ago in a blog post ignored by Griffiths, the cause was two-fold: a 10% income tax cut in 1997 and billions of additional spending on education (commonly called the Thornton Plan) started in 2002. Both of these events occurred during the Glendening administration, but Governor Ehrlich did nothing to reverse them. It therefore fell to Governor O’Malley to devise a solution to the problem in the face of a bad economy. I was unenthusiastic about the ultimate outcome, but it was an honest attempt to right the state’s fiscal ship.
Griffiths said the following about my post yesterday on the budget: If Pagnucco was being an honest broker, he would note that the decrease in revenues is directly caused by the irresponsible tax hikes enacted by O'Malley and Annapolis Democrats last year, and that the current structural deficit has been caused by irresponsible discretionary spending increases. But, for reasons that shall remain obvious, he refuses to place any blame whatsoever on O'Malley and his band of merry tax hikers.
Griffiths’ assertion that the tax hikes caused a decrease in revenue is directly contradicted by state budget officials, as reported by the Examiner: David Roose, director of revenue estimates, said that the slowing economy had lowered receipts from the income and sales taxes. If the sales tax hadn’t risen from 5 percent to 6 percent, “receipts would have been essentially flat, the worst performance since 1991.”
There are of course limits to the usefulness of sales tax increases in a small state with lots of neighbors. The Sun’s Jay Hancock and a recent Post article speculate about whether cross-border shopping has cut into sales tax revenues. But Griffiths should do his homework: I criticized the special session sales tax hike from the very beginning and recommended a crackdown on tax-cheating employers instead.
Griffiths implicitly assumes that tax hikes hurt the economy while government spending cuts do not. Here he demonstrates a basic ignorance of every macroeconomics course taught to college freshmen. From the perspective of economic growth, it does not matter whether the government implements a tax hike or a spending cut as a deficit reduction measure. Both reduce aggregate demand in the economy, especially when taking into account a reverse multiplier effect. A big tax hike and a big spending cut are equally damaging to the state’s economy in the short term, but because the state cannot deficit spend (as the federal government does), policy makers must pick one, the other, or both. After next year’s round of spending cuts is added to last year's tax package, we will have both.
The best thing the state government could do to revitalize Maryland’s economy is to increase its investment in infrastructure, even if it means taking in additional revenues. The Montgomery County Chamber of Commerce recommended raising $600 million for the Transportation Trust Fund this year, a step that was unfortunately not taken by the General Assembly. The business community and building trades unions believe that infrastructure construction creates jobs, long-lasting physical assets and abundant opportunities for private sector growth. Those things in turn will stabilize the budget over the long term. If only conservatives like Brian Griffiths could agree.
Tuesday, July 15, 2008
Labor and the Governor
At first, I believed that Maryland’s labor movement would be annoyed at the anti-union propaganda on the state’s business development website but would ultimately see it as a blip in an otherwise positive relationship with Governor O’Malley. But after talking to many labor leaders around the state, I am not so sure about that.
MPW readers should know that our original post on this subject that followed Free State Politics’ breaking of the story received more visits than any individual post on our blog for many months. In fact, direct visits to this post alone without going through the site URL accounted for nearly one-quarter of all visits to MPW for two straight days. And yesterday we received more visits than on any other single day in two months. This is all extremely unusual considering that our first post on the issue appeared on a Saturday in July, hardly a prime viewing time for political blogs. We hear that our original post and a follow-up dating some of the rhetoric all the way back to the Glendening administration zoomed across the state’s labor movement and crystallized some of labor’s existing feelings about the current Governor. By Monday morning, the anti-union language on the state’s website had been taken down but the damage remains.
Martin O’Malley was elected with overwhelming support from Maryland’s labor movement. He got off to a good start on labor issues, helping pass a state living wage law in his first year and supporting a bill that allowed public employee unions to charge fees to non-members for representational services. His appointments of former Montgomery County Council Member Tom Perez as the Secretary of Labor, Licensing and Regulation and former Baltimore building trades leader Ron DeJulius as Commissioner of Labor and Industry were widely praised by labor. And the Governor announced that he was restoring and beefing up the labor inspections office after his predecessor virtually killed it.
But since then the relationship has cooled. During the special session, labor assisted the Governor in passing his tax package and the slots referendum even though many did not like its regressive elements. Despite its aid to the Governor in his time of need, labor did not achieve many of its priorities in the general session that followed. One angry labor leader told me, “Seven labor bills were introduced before the legislature last year and not one made it out of committee. The administration was essentially AWOL on all of them.” Another labor leader gave O’Malley a grade of “C,” saying, “I understand that politicians make lots of promises and then do a little less, but…” A third labor person described a state of “discontent” with the Governor. “He’s been good to blue-collar families in a general sense, but he hasn’t done a whole lot to help the labor movement grow.” Still another labor veteran challenged the perception that the Governor was responsible for the living wage law, claiming that since the legislature already passed it once but was stymied by former Governor Ehrlich’s veto, all that was necessary was to have a Governor who would not veto the bill again. “What can you point to with O’Malley? On living wage, when he was handed the football on the one-yard line, he got it in… He hasn’t picked up any labor bills as one of his top 3 or 4 priorities in any year. There’s been no initiative, and that’s the sad thing.” This leader also gave the Governor a grade of “C.”
The Governor does have his defenders. One longtime labor pro credited him for the living wage bill since “it would not have passed without him.” This leader also praised the Governor for advocating combined reporting (which would make it harder for corporations to hide their income in other states) and making the income tax system more progressive. “I have nothing but admiration for him for that.”
Among the bills that died in 2008 were ones requiring employers to provide shift breaks, requiring construction contractors on state jobs to participate in state-registered apprenticeship programs, requiring construction contractors on state jobs to provide health insurance, requiring construction projects over $500,000 to have lavatories, prohibiting state agencies from purchasing apparel from sweatshops, requiring any casinos permitted by the slots referendum to negotiate project labor agreements for their construction jobs, establishing a Public School Labor Relations Board, and increasing the maximum weekly unemployment insurance benefit.
Perhaps most troubling of all was the death of a bill designed to crack down on misclassification of workers as independent contractors. As I explained last November, employers in many industries, but especially construction, often illegally misclassify employees as contractors to escape responsibility for paying FICA taxes, unemployment insurance premiums, workers compensation premiums and income tax withholding. Several states have found revenue losses from these practices totaling in the hundreds of millions of dollars a year, though no one has studied the issue in Maryland. In a year that the administration supported cuts of $25 million to the newly-established Chesapeake Bay cleanup fund and $50 million to transportation to pay for repeal of the computer tax, the Governor might have been expected to embrace a labor-backed bill that would have raised millions of dollars more for the budget. But the bill died in a House committee and the Board of Public Works voted in favor of more spending cuts last month.
The Governor currently has troubled relationships with some in the immigrant community over the drivers license issue, many in the GLBT community over marriage equality and now some in labor. These are three very important parts of the state’s progressive base. At a time when the Governor’s approval ratings are still low, he needs these groups more than ever.
“What’s the alternative?” asked one labor leader, dismissing out-of-hand any consideration of the still-detested former Governor Robert Ehrlich. That may be a valid point, but here is the problem for Governor O’Malley: how many people in his base are now asking that question?
Update: Kathleen Miller of the Examiner picked up the story and obtained confirmation from the state that the anti-union site went back to the Glendening administration. Further, they admitted “staff researchers had occasionally updated data on the page during O’Malley’s tenure.” Ms. Miller recognized the role played by both Free State Politics and MPW in fixing the problem, a rare acknowledgement by the mainstream media of the blogging community. Thank you Ms. Miller!
Thursday, November 01, 2007
Adam Pagnucco on the Budget: Part III
Part Three: Are There Any Alternatives?
Some politicians would like to repeal the 1997 income tax cut. Others suggest higher taxes on alcohol or other “sin” products. The Republicans would like to avoid new taxes by dramatically cutting education spending. Senator Rich Madaleno reports that as many as 80 bills may be filed by legislators for the special session, many of them related to the budget problem. Here’s my idea.
Your correspondent is a researcher for the United Brotherhood of Carpenters. One of the issues we encounter on many construction job sites is worker misclassification as independent contractors. Under state and federal tax laws, workers are supposed to be classified as employees when they operate under an employer’s direction (such as under established hours of work), use tools and equipment owned by the employer and do not bear business risk. Employers are required to withhold income, Social Security and Medicare taxes and pay premiums for workers compensation and unemployment insurance for their employees. However, many employers misclassify workers as independent contractors and pay none of the above. Workers may (or may not) receive Form 1099 to report income as independent contractors, but these forms are often discarded. This problem is especially severe in construction but also afflicts trucking, janitorial services and other industries.
Employers have a huge incentive to misclassify. FICA payments (Social Security and Medicare) account for 7.65% of an employer’s payroll costs. In
State governments can lose massive amounts of unemployment insurance premiums and income taxes due to misclassification. A 2004 Harvard study found that
Some states are finally cracking down to recover these lost revenues.
How much money is
Even if
Adam Pagnucco is the Assistant to the General President of the United Brotherhood of Carpenters and has been employed in the labor movement since 1994. The views in this column are his alone and do not represent official statements from the union.
