Tax Assault on Small Business in Maryland

When it comes to the public policy climate for small business and entrepreneurship, Maryland is a so-so state. With its ranking of 28th on the Small Business Survival Index 2007, which was released at the beginning of November, it’s not atrocious, but it’s far from great. It’s mediocre.

On the plus side, the Index data show that Maryland has no corporate alternative minimum tax (AMT), fairly low property and consumption-based taxes, and low workers’ compensation costs. Among the negatives are an individual AMT, a death tax, a large number of health insurance mandates, high electricity costs, a poor rating on eminent domain legislation, and poor ranking on highway cost effectiveness.

Apparently, Maryland policymakers were not content with being in the middle of the pack. They apparently wanted their state to measure up FAR WORSE when compared to the other states!

So, in case you missed it, a tax package passed late last month by state lawmakers and signed into law by Governor Martin O’Malley will make Maryland a far less friendly place to do live, work, invest and do business.

Consider the increases that were imposed as part of an annual tax increase estimated at $1.4 billion – the largest tax increase since the late 1960s:

• the state’s top personal income tax rate will rise from 4.75% to 5.5%;

• the corporate income tax rate will go from 7 percent to 8.25 percent;

• the sales tax rate increases from 5 percent to 6 percent, while also being extended to computer services;

• the cigarette tax goes from $1 per pack to $2;

• the state’s car-title tax will jump from 5 percent to 6 percent;

Indeed, these tax increases seem specifically designed to raise the costs of work, investment, entrepreneurship and job creation in Maryland. If that was not the intent, it will be the result.