Maryland businesses say high taxes curbing their growth

Originally published in the Baltimore Business Journal

MPPI in the News Joanna Sullivan | Editor-in-Chief, Baltimore Business Journal Mar 11, 2020

Maryland businesses upset with the state's taxes are making themselves known these days. They protested in droves in Annapolis last week, successfully killing one version of a bill that would expand the sales and use tax.

And now, a new survey shows just how worried businesses are about taxes affecting their bottom line. Nearly two-thirds of Maryland businesses report already being hurt by the existing tax climate in the state, according to the latest Maryland Business Climate Survey.

The survey, a joint project of the University of Baltimore's Jacob France Institute and the Maryland Public Policy Institute, a conservative think tank, asked 250 senior executives their feelings on a range of issues, including sales and hiring, state tax policy and workplace strength. The latest survey results, which cover all of 2019, include:

  • 65% of Maryland businesses reported being negatively impacted by Maryland taxes.
  • 24% reported being negatively impacted by state regulations.
  • 43% of executives reported taxes to be the greatest disadvantage to doing business in Maryland — up from 39% in 2018.
  • 48% of businesses reporting experiencing difficulties in obtaining workers with the skills necessary to fill specific job requirements.
  • 78% of businesses are experiencing either long-term worker shortages or both long- and short-term shortages.
  • Companies outside of the Interstate 95 corridor have the least positive view of Maryland’s business climate, with 39% rating it pro-business or business friendly and 32% unfriendly to business or anti-business.
  • Suburban Maryland companies, those in the Washington, D.C., suburbs, have the most positive view of Maryland's business climate, at 53% and 12%, respectively.

The survey comes at a time when businesses are facing an onslaught of taxes that would help pay for massive education reform in the state proposed by the Kirwan Commission.

The Maryland General Assembly last week rejected House Bill 1628, which would raise tax revenue an estimated $15 billion over five years by extending the sales tax to new services, including car repair, plumbing, haircuts, towing, veterinary care and babysitting.

However, HB 1354 remains alive. It would raise about $339 million over the next five years by taxing a slew of services aimed at affluent shoppers including fur cleaning and storage services, marina services, golf course or country club memberships, tanning, jewelry repair and interior decorating.

When asked what steps can be taken to improve Maryland’s business climate, 40% of firms surveyed cited reducing or reforming taxes as the single most important step, 13% of firms said improving or lessening regulations, and 13% suggested expanding economic development efforts.

Will those surveyed remain in the state despite what they feel is a tough tax environment?

About 97% said they would be very likely or just likely to stay, with only 3% saying they wouldn't. Of 26 firms that responded that they may be relocating, 21 firms identified the state they are considering moving to, with five considering moving to North Carolina, four to Virginia, three to Florida and two each to Delaware and Texas.

Seven of these firms cited business climate factors, including taxes, business conditions, and cost of living or business opportunities as the reason for the planned move.