Maryland’s Northrop Grumman HQ loss opens old wounds

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Maryland’s government wants people to believe that the Washington region will somehow share the benefit from Northrop Grumman’s decision to move to Northern Virginia and to blame a lack of commercial office space in Montgomery County for the defense giant opting for the Commonwealth.

But if Maryland really lacked appropriate office space, then there was no reason to offer Northrop a $22.5 million incentive package. Virginia offered a smaller package of up to $14 million, yet Maryland’s package was rejected.

Northrop Grumman CEO Wes Bush said “overall economics” was a consideration in moving to Virginia, which is not a surprise since he runs a business. Business climate factors heavily into the overall economics the CEO mentioned. By any objective standard, Maryland compares poorly with Virginia.

Forbes magazine ranks Maryland 42nd in business costs while Virginia is ranked number one overall. And it’s easy to see why.

Maryland’s corporate income tax is 8.25 percent, compared to Virginia’s 6 percent. The maximum personal income tax is 9 percent in Maryland, compared to 5.75 percent in Virginia. Maryland’s sales tax is 6 percent and Virginia’s sales tax is 5 percent.

Such criteria, along with states’ unemployment insurance obligations, are used to determine the nonpartisan Tax Foundation’s business climate tax index, where Maryland ranks 45th and Virginia is 15th.

An anti-business reputation

Virginia Free is a nonpartisan business organization that tracks Commonwealth legislators’ business votes, similar to Maryland Business for Responsive Government’s Roll Call. Both organizations assign cumulative business rankings of up to 100 during the span of a legislator’s career.

Nearly every lawmaker in the Commonwealth — 99 percent — scored higher than 50. In Maryland the story is much different: only 40 percent of legislators have cumulative rankings greater than 50.

It’s hard to say exactly when Maryland developed an anti-business reputation, thanks to a long history of politicians’ disdain for the private sector. In 1984, Fairchild Industries, a major aircraft manufacturer, left Hagerstown as the then-attorney general launched a public crusade against the company over an obscure environmental regulation.

Nearly a decade later, a former Montgomery county executive publicly discouraged General Dynamics from locating in Maryland. The state legislature burnished this reputation in recent years with a string of blatant anti-business bills ranging from mandatory shift-breaks during this session to the so-called “Wal-Mart” bill and the “tech tax” in sessions past.

Time to get rational

In the Northrop decision, social and cultural matters were said to be “a critical issue” in whether the company located here or in Virginia.

The critical issue, according to a Maryland state senator, is that companies can take a stand for their gay and lesbian employees by locating in Maryland. The senator’s letter to Wes Bush resulted in the Washington Post headline: “Northrop Grumman pressured by Maryland legislator, gay rights groups over move.”

If Maryland’s business climate weren’t bad enough and social agendas defined as critical issues in corporate relocation decisions, consider that the Montgomery County Council is poised to pass a 100 percent energy tax increase that would cause power bills to go up by hundreds of thousands of dollars for large companies. That was likely among the “overall economics” the Northrop CEO had in mind.

Maryland officials need to get rational about economic development and the important role of business in government.

Ellen R. Sauerbrey, a former state delegate and gubernatorial candidate, and former governor Marvin Mandel are co-chairs of Maryland Business for Responsive Government.