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Cato gives O’Malley a ‘D’ for growth

A report released Tuesday by the Cato Institute names the best and worst governors for economic growth.

And while Maryland Gov. Martin O’Malley avoided a failing grade — five governors received an “F” — the second-term head of state is only barely passing, by Cato’s standards.

O’Malley, by presiding over a bevy of tax increases since taking office, received a “D” in the institute’s report, eight points worse than his frequent sparring mate, Virginia Gov. Bob McDonnell, a Republican whose policies earned him a “C.”

Of the 16 governors to earn a “D” or worse, 12 were Democrats. All five who received failing grades were also Democrats, while the four governors who earned an “A” grade, including Pennsylvania Gov. Tom Corbett, were Republicans.

In commentary published by The Wall Street Journal on Tuesday, Cato tax policies Director Chris Edwards singles out business taxes as a much-needed area for reform in federal and state government.

“The Council on State Taxation found that state and local levies on businesses totaled $644 billion in 2011, or more than double the annual cost of the federal corporate income tax,” Edwards wrote. “True, the federal corporate tax rate is too high relative to other countries’ and is hurting American competitiveness. But business property taxes, sales taxes imposed on business purchases, and myriad other anti-investment levies imposed by state and local governments also impede economic growth.”

In Maryland, a recent report by the Tax Foundation found that the state had the 41st-best business tax climate.

O’Malley has defended his record by citing the state’s investment in the “New Economy” of biotechnology, innovation and entrepreneurship. The U.S. Chamber of Commerce recently ranked Maryland No. 1 for entrepreneurship and innovation.

That hasn’t been good enough, according to Cato. Here’s the institute’s review of O’Malley’s record:

Martin O’Malley has been in politics his entire career, and he has long supported an expansionary approach to government. In his first year as governor, O’Malley signed a $1.4 billion package of tax increases. It included increases in corporate taxes, personal income taxes,sales taxes, and cigarette taxes. O’Malley has been at it again recently, approving increases in income taxes, alcohol taxes, hospital taxes, and tobacco taxes during 2011 and 2012. For singles earning more than $100,000 and couples earning more than $150,000, the top in-come tax rate was raised to 5.75 percent. Local taxes in Maryland bring the total top income tax rate to 8.95 percent. O’Malley’s legislation also reduced personal exemptions under the income tax. Higher taxes are fueling higher spending in Maryland. The general fund budget jumped more than 13 percent in fiscal 2012.