As Maryland voters prepare to cast ballots in a hotly contested election, one critical issue weighs heavy for taxpayers: the faltering Maryland economy.
A revealing Goucher College and Baltimore Banner survey found that a whopping 76% of Marylanders rank economic development and jobs as their top concern. Given the state's economic stagnation since 2017, this should come as no surprise.
For business owners, the cause of stagnation is clear. Maryland's maze of complex taxes and regulations have stunted economic growth, driving businesses across state lines and scaring away fresh investment. To refuel Maryland's economic engine, lawmakers must take a hard look under the hood at the regulatory gears that are grinding down entrepreneurs.
Maryland ranks 45th out of 50 states in the Tax Foundation's business climate index, which measures tax and compliance complexity and burdens. Neighboring Virginia ranks 21st and Delaware is 25th.
Small and mid-sized businesses -- often the catalysts for local economies and job creation -- can bear the heaviest of those burdens. While large corporations find compliance costs challenging enough, small businesses face threats to their very existence when they struggle to navigate state regulations. Instead of pursuing bold innovations or creating jobs, they're forced to squander precious resources on administrative demands.
According to the National Association of Manufacturers, the per-worker cost of federal tax compliance alone is 90 percent higher for a firm with fewer than 50 employees, compared to a firm with 100 or more employees. Other federal regulations, plus state rules, only make the load harder to carry
Rather than trying to survive in such a hostile environment, many entrepreneurs flee to neighboring Virginia and Delaware, where streamlined regulations foster prosperity.
Another example of regulations inflicting economic damage is the Maryland Online Data Privacy Act. Though well-intentioned, this law may very well turn into a regulatory python, constricting small businesses in crushing compliance requirements.
MODPA's stringent rules can cripple the ability of small businesses to effectively leverage targeted advertising -- an essential tool in today's digital marketplace. While large businesses will muddle through compliance, raising prices and scaling back hiring plans, small businesses can completely drown in legal complexities.
It's no wonder Maryland-based taxpayers (both individuals and companies) have been abandoning ship for friendlier regulatory waters.
This exodus inflicts collateral damage beyond the business community. As firms flee, they take with them the jobs and opportunities that sustain our communities. Virginia's magnetic pull continues to attract both businesses and workers, creating a positive cycle of investment, opportunity, and growth. If Maryland continues its regulatory overreach, the risk involves not just businesses, but the workforce, too.
As the legislative session nears, Maryland's leaders face a clear choice: double down on policies that repel businesses, or embrace reforms that promote a balanced and welcoming business environment. Maryland's taxpayers should demand concrete plans to address these challenges and restore its competitive edge in the regional economy.
Maryland's proximity to Washington, D.C., and its location amid vibrant business hubs should make it an economic powerhouse. But the contrast is striking: While Virginia and Delaware streamline regulations to foster economic growth, Maryland's tax and regulatory policy remains mired in old thinking.
As the Tax Foundation index mentioned above indicates, compared to its neighbors, Maryland's individual income tax (which many solo and small businesses pay on their profits instead of the corporate tax) is particularly onerous. So is the unemployment tax system. State leaders also continue to pursue ill-advised taxes on digital services.
The National Taxpayers Union stands ready to work with lawmakers on proven-effective approaches to taxes, budgets, and regulations, including reforms that protect consumer privacy and support business growth. It can be done, and other states have shown how. Simplifying compliance requirements, reducing unnecessary red tape, and nurturing a more hospitable environment for businesses will help Maryland regain its competitive edge and secure a prosperous future for all our residents.