Maryland Case Study: Tax Increases Kill Revenue and Economic Growth

Liberals tell us that the government must raise taxes to increase tax revenue. However, this model can only work in the absence of competition. When Governor O’Malley of Maryland decided to raise taxes on the people of his state in 2007, he and his liberal state politicians were oblivious of the competition posed by tax-friendly states. O’Malley hiked sales taxes by 20% and vehicle titling fees on working families, raised taxes on high-income earners, and proposed massive government spending. As a result, Marylanders started shopping at neighboring states like Delaware, with zero sales tax. Also, those so-called “rich people” voted with their feet by relocating to other tax-friendly states. Ironically, there is panic in the state as income tax revenue is decreasing in Maryland with some localities now reporting up to a 65% reduction in revenue. This is a case study for the entire nation and a lesson for everyone that increasing taxes is inversely proportional to higher revenue and economic growth. If you want to stimulate the economy, cut taxes and watch economic activities take off.