The Week Ahead: Back to School Edition.

Today is the first day of school for students in most of Maryland's public schools (17 of the 24 school systems). Prince George's, Frederick, Calvert, St. Mary's, Washington and Cecil counties started last week. Talbot begins Tuesday. (Some individual schools and grades have different start dates. Check with your local school system for more information.)

On the subject of schools, we blogged about the connection between educational attainment and economic growth. If you want a state economy with high-earning jobs, you should invest in good education.

We also blogged about the disappointing employment statistics for July.

Coming up for August 26 - 30:
August 27, 2013 

• The Community Services Reimbursement Rate Commission  meets in Catonsville.

August 28, 2013

• The US Bureau of Labor Statistics releases employment and unemployment data for metro areas.
• The Administrative, Executive, and Legislative Review (AELR) Committee meets in Annapolis to review nutrient management plan regulations from the Maryland Department of Agriculture.  

 August 29

•  The US Bureau of Economic Analysis releases data on GDP and corporate profits for the second quarter of 2013 (April-June)

August 30

• The US Bureau of Economic Analysis releases data on July personal income and consumer spending.
  

Investing in Education Will Build a Stronger Maryland Economy

It's back-to-school time again. It's a good time to think about how education contributes to our economy and our quality of life.

The best way for Maryland to grow its economy is by continuing to invest in a well-educated workforce, according to a new paper published by EPI for the Economic Analysis and Research Network (EARN—a network of state local and national economic think tanks, including MBTPI).

In A Well Educated Workforce is Key to State Prosperity, Noah Berger, president of the Massachusetts Budget and Policy Center, and Peter Fisher, research director at the Iowa Policy Project, find a strong link between the educational attainment of state workforces and both productivity and median wages. In Maryland, 41 percent of the workforce have college degrees; the US average is 33 percent. Maryland's average hourly earnings are $19.12, almost $3 above the national average.

Expanding access to high quality education will create more economic opportunity for Marylanders and do more to strengthen our overall economy than anything else state government could do.

 Some ways to increase the educational attainment of Maryland’s population include:

•  increasing funds for preschool programs and quality childcare,
•  restoring full inflation increases in the “Thornton” public school funding formula, an
•  keeping college affordable by holding down tuition growth, and increasing need-based financial aid.

Meanwhile, strategies such as cutting taxes to lure employers and capture private investments from other states are shortsighted, and promote a race to the bottom which undermines states’ ability to invest in and attract an educated workforce. The paper finds no clear relationship between a state’s tax rates and its wages.

Tax Free Week: Wasteful, Ineffective, and Expensive

Again this year, Maryland is promoting its annual back-to-school “sales tax holiday.” And again, we are obliged to point out that the sales tax holiday is a popular but expensive and ineffective program, as we did in 2012 and 2011.

From August 10 to 17, purchases of clothing under $100 in Maryland will be exempt from the regular six percent sales tax.

So, back-to-school shoppers get a “GIANT 6 PERCENT OFF" that week.

So what’s wrong with that?

First of all, shoppers get better discounts in the normal marketplace. This week, Kohl’s is advertising “15, 20 or 30 percent off.” Macy’s: “Back to School – save 25 to 50 percent.” Sears: “50 percent off back to school styles.” And so on.

A clothing store would be embarrassed to advertise “SIX PERCENT OFF.” But they will promote “NO SALES TAX” in large type.

A study in Florida shows that the stores provide smaller sales discounts when they can promote the tax holiday – so the savings to customers is even less.

And other studies show that most of the increased business is really just people buying during the tax-free-week what they would otherwise have bought during another week.

And it’s complicated. If you buy a set with a blouse and a scarf, you have to pay sales tax, because the scarf is an accessory and is not tax exempt. If you return your purchase later and exchange it for the same item in a different size, you don’t need to pay tax. If you exchange it for a different item, you owe tax at that time (even though the new item would have been tax exempt if purchased during the tax free week). Here’s all the restrictions, exclusions and other fine print.

 And, the state government loses over $5 million in revenue. If we wanted to help struggling families with children, we could use this money in much more efficient, effective, and well-targeted ways. We could reduce the waiting list for child care assistance or provide school breakfasts for some of the 200,000 students in schools that are eligible but where funding is not available.

That little six percent is part of our contribution to important services in our communities - education being one of the largest and most important. The Institute on Taxation and Economic Policy has a nice fact sheet on tax holidays here.

Here’s a government program that does not really help families, does not really help businesses and is very expensive. So, if we want to eliminate wasteful, ineffective and expensive government programs, maybe we ought to start with the tax free week.