Don’t Be Fooled: With Smart Reforms, Maryland Can Afford to Invest in Children

September 20, 2019 by Christopher Meyer in Blog, Education

For the third year in a row, major reforms to Maryland’s education system will be on the agenda when the General Assembly convenes for its 2020 session less than four months from now. Lawmakers will have to choose whether to commit to the investments necessary to create a world-class education system in Maryland, or to instead continue to prioritize tax breaks that benefit powerful special interests but do nothing to help our economy. Despite over-the-top rhetoric from Governor Hogan and others, strengthening our investments in public schools is the right choice to build broadly shared prosperity in Maryland for decades to come.

Maryland’s history of school funding choices since the turn of the century tells a story of progress and retreat. After lawmakers passed the Bridge to Excellence in Public Schools Act of 2002, the state and counties ramped up their investments in education for six years straight. These investments increased from four to 23 the number of local school systems at or near the funding level required to meet state academic standards—and students’ test scores increased during the same years. But policymakers chipped away at those investments in response to revenue shortfalls caused by the Great Recession and did little to reverse these cuts once revenues began growing again. Only six of the state’s 24 school districts were close to the 2002 funding standard as of 2017, and more than half of Black students attended a school district that was underfunded by 15 percent or more.

We now have a chance to change that. The Commission on Innovation and Excellence in Education (the Kirwan Commission) has developed a set of comprehensive reforms to make Maryland schools among the best in the world. These evidence-backed reforms include expanded prekindergarten, bringing teacher salaries up to the level of comparable professions, increasing opportunities for planning and collaboration during the school day, and strengthening our investments in high-quality career and technical education. The commission’s proposals are ambitious and can succeed only if policymakers back them with sufficient resources. With a wide range of state services stretched thin, the best way to strengthen our investments in education is to reform Maryland’s tax code to make it more effective and more equitable.

We can raise the needed revenue by taking three steps:

  1. Clean up our tax code. We should clean up Maryland’s revenue system by closing corporate tax loopholes, eliminating ineffective economic development subsidies, and reversing a recent cut to our millionaire estate tax. These special tax breaks benefit the powerful few but do nothing to help our economy.
  2. Modernize our sales tax. Maryland’s economy has changed a lot over the past several decades, but our tax code hasn’t kept up. We should modernize Maryland’s sales tax to reflect the increasing importance of services and online commerce to our economy. We can offset the impact on struggling Marylanders by expanding working family tax credits.
  3. Strengthen our income tax. Restructuring Maryland’s income tax will enable us to raise significant revenue, lower income taxes on most low- and middle-income Marylanders, and improve our upside-down tax code.

Too often, catastrophic predictions from the governor and other commentators skew the public’s understanding of how revenue reform would impact our state. Here’s what the three reforms described here would really mean for Maryland:

  • The reforms would together raise $1.9 billion by 2030 (adjusted for inflation), enough to fully fund the likely state share of the Kirwan Commission recommendations.
  • The reforms would improve Maryland’s upside-down tax code, which currently asks the least of the wealthiest households. The wealthiest 5 percent—those with annual incomes over $283,000—are responsible for 59 percent of new revenues under the reform plan, while working families would pay an average of $5 per month.
  • The reforms would improve racial and ethnic equity by offsetting special treatment of income households get from built-up wealth instead of from work. Ten percent of white families control nearly two-thirds of all accumulated wealth nationwide.
  • High-quality research and other states’ experiences both make clear that raising revenue to invest in education is consistent with a thriving economy. For example, after California increased the income tax rates paid by wealthy families in 2012, the state’s unemployment rate fell more quickly than nationwide unemployment and more quickly than in two of California’s three neighbors. When the revenue reform was set to expire in 2016, more than 60 percent of California voters chose to extend it.

Maryland has invested in education before and seen the benefits in student achievement and in our economy. If policymakers make the right choice, we can do it again.