Different Approaches Emerging To Improve State’s Business Climate

Maryland’s business tax and incentive structure is being closely examined this interim to improve the state’s competitiveness. However, different approaches seem to be emerging to accomplish this task.

As reported by The Daily Record (subscription required), Commerce Secretary Mike Gill, speaking at a breakfast meeting, predicted that the corporate income tax would be reduced by the General Assembly during the upcoming session.

“For those of you that have businesses, if we can get that 8.25 down to something less, and it puts a little bit more money in the business, you’ll re-invest it,” Gill said last week. “Government kind of looks at this stuff like, ‘hey, we can’t trust them, they’re probably going to go buy a new boat if we let ‘em keep that extra half a point.’ So I really do believe that there’ll be legislation put forward looking at the taxes and where we can make improvements.”

Analysts, who have examined Maryland’s tax structure, suggest changes to the personal income tax to make the state more friendly to small business.

Dan White, an economist for Moody’s Analytics, said that Maryland’s corporate tax rate may not be the problem at all.

“Corporate income taxes, especially when you combine the lowest level, are very low,” White said. “Especially when you compare them with the peer group and the USA (average).”

“Where Maryland really does stand out is that large reliance on other taxes,” White said. “Total personal income taxes — it’s the third highest burden in the U.S.”

White said that is likely to have a bigger effect on small businesses in Maryland.

“Those who are sole proprietors, people who have very small businesses, they’re not paying the corporate income tax,” White said. “They’re paying the personal income tax. So for smaller businesses and startups, sometimes that personal income tax can be just as important if not more important.”

Dan White presented these findings to the Maryland Economic Development and Business Climate Commission, otherwise known as the Augustine Commission, during a day long meeting held on October 2. The peer states identified in the report for comparison purposes included Georgia, Massachusetts, New Jersey, North Carolina, Pennsylvania and Virginia.

The report, titled “How Maryland Measures Up” indicates that Maryland has become increasingly dependent on federal jobs and has had difficulty growing its private sector employment. But, the analysis also found that Maryland’s business taxes were not excessively high when compared to a group of peer states.

The Commission is scheduled to meet again on November 30 and a final report with recommendations is expected in December.

Prior coverage of the Maryland Economic Development and Business Climate Commission can be found on Conduit Street.