Last week, the Maryland Public Policy Institute and the Jacob France Institute of University of Baltimore released findings from the 2018 Maryland Business Climate Survey.

While the survey showed some overall improvement in optimism among Maryland businesses since the last survey in 2011, 64 percent of the surveyed businesses reported being negatively impacted by Maryland’s taxes and 39 percent responded that taxes were the greatest disadvantage to doing business in Maryland.

Such findings help understand why businesses are considering moving out of Maryland. In January, Vision Technologies, an IT consulting firm with over 500 employees, announced that they are looking to move out of their Glen Burnie, Md., headquarters. John Rausch, the company’s vice president of corporate sales, said, “We see companies choosing to locate elsewhere due to constraints on taxes.”

Maryland has a long history of losing companies to neighboring states with a better tax climate. In 2010, Northrop Grumman chose to move its headquarters to Northern Virginia, citing a better business climate there.

In 2011, Maryland state government paid Bechtel, one of the largest engineering and construction companies in the world, nearly $10 million to convince it to keep 1,250 jobs in Frederick, Md. Despite this, Bechtel ultimately ended up relocating most of its workforce to Reston, Va. in 2015.

Most recently, Maryland lost the Amazon HQ2 race to Virginia in 2018 even though Maryland offered Amazon billions of dollars in tax incentives. This embarrassing story made national headlines and became a favorite example for economists who oppose corporate welfare.  

On the bright side, Maryland legislators are currently considering a few bills in the General Assembly that can help improve Maryland’s business tax climate. First, Senate Bill 458 would allow Maryland’s publicly traded corporations to subtract from their taxable income, which would help reduce some of their corporate income tax burden.

However, SB458 does not go far enough to improve Maryland’s overall business tax climate, as the bill would apply to less than five companies, all of them large companies with over 500 employees. Therefore, a more drastic measure is needed to accommodate the small- and medium-sized businesses that are in far more desperate need of a reduced tax burden.

Senate Bill 37, sponsored by Sen. Andrew A. Serafini, seeks such a measure. The bill would reduce Maryland’s corporate income tax rate for all businesses from 8.25 percent to 8.0 percent for fiscal 2019, 7.5 percent for fiscal 2020, and 7.0 percent for fiscal 2021 and beyond.

Maryland’s Economic Development and Business Climate Commission, also known as the Augustine Commission, published a report in 2016, recommending an across-the-board corporate tax rate reduction. Yet the reduction was never implemented, as it was opposed by most Maryland Democrats in the legislature.  

However, economic studies support corporate tax reduction in Maryland. For instance a Maryland Public Policy Institute study found that lowering Maryland’s corporate income tax rate to 6 percent may actually improve Maryland’s real per capita corporate tax revenue by about 7.4 percent. In other words, a corporate tax cut may allow Maryland to attract businesses to the state without compromising state revenue.

The key to growing the state’s tax revenue is to grow the tax base. As high taxes were considered the number-one impediment to businesses, according to the 2018 survey, removing such barriers would help to grow Maryland’s corporate income tax base.

When asked what steps can be taken to improve Maryland’s business climate, some 40 percent of firms surveyed cited reducing or reforming taxes as most important. It is time for Maryland legislators to pay more attention to Maryland’s business owners. While they may not be Amazon, every business helps to grow Maryland’s economy and deserves to have its voice heard.