Friday Five
Jan. 24, 2025 | This week's latest on Maryland business and government
1 — Maryland taxes, regulation put brakes on economic growth
In 2021, Maryland lost 27,000 residents who had filed 16,000 tax returns with an average income of $170,000. This was not just an aberration. Data shows the outflow of higher-income taxpayers from Maryland has been going on for years. So when Governor Moore announced that he was backing an increase in the state income tax for people making over $500,000 and an extra 1 percent on capital gains from the sale of stocks and property like real estate, that move ran counter to his stated goal of boosting Maryland’s lagging economic growth.
Fair Opportunity Maryland: A recently launched campaign by the Maryland Chamber of Commerce, Fair Opportunity Maryland advocates for smart tax policies that empower Maryland families and small businesses. We are committed to creating an environment where businesses can grow and families can thrive — free from unnecessary financial burdens.
2 — Governor Moore borrowed pieces of $1.6 billion Fair Share plan for his budget; Its architects want him to go further
For the second year in a row, legislation is being introduced that offers a hostile approach to solving the state's budget woes — expanding corporate taxes in multiple ways, while hiking the highest income tax brackets even further. Moore’s budget plan, introduced last week and now under review for the rest of the annual legislative session, borrowed from the Fair Share bill in 2024 and, before that, years of similar proposals from more progressive lawmakers. It aims to raise nearly $1 billion annually mostly from changes affecting individuals making at least $700,000. It would double the standard deduction and eliminate the ability for itemized deductions while consolidating lower personal income tax brackets and adding new higher levels.
Session 2025: The Maryland Chamber is advocating on behalf of Maryland's business community for fair economic opportunity, and we are working with Governor Moore and the General Assembly to ensure a final proposal balances fiscal responsibility with sustainable economic growth.
3 — Navigating challenges, creating opportunities
As the 2025 legislative session begins, Maryland faces significant challenges. A growing budget deficit, a fiercely competitive economic landscape, and evolving regulatory demands put our state at a crossroads. These hurdles demand action. For too long, our economy has struggled to keep pace with neighboring states. Maryland’s economic growth has stagnated at a rate of just 3 percent, while other states around us are surging ahead. Our state faces concerning trends, including outmigration of residents, slow population growth, sluggish job creation, and high taxes. These factors contribute to a diminished sense of business friendliness, which affects our competitiveness in the national and global marketplaces.
Eye on competitiveness: The path forward requires a commitment to pro-growth policies that prioritize business success. This means lowering tax burdens, reducing unnecessary regulations, investing in workforce development and creating a welcoming environment for business expansion.
4 — Moore’s budget plan raises taxes on wealthiest Marylanders, could it push them out?
As Maryland wrestles with a $3 billion budget deficit, Governor Moore is asking “Marylanders who have done exceptionally well financially” to contribute “a little bit more” so the state can invest more in economic growth, public safety and education. But previous reports showed an exodus of thousands of wealthy Maryland residents when taxes were raised, as they were under Governor O’Malley. For single taxpayers, Moore’s budget would tax all income beyond $500,000 annually at a rate of 6.25 percent and all income beyond $1 million annually at a rate of 6.5 percent. The previous highest bracket, a 5.75 percent rate for income beyond $250,000, remains intact, while the state tax rate would simplify to a flat 4.7 percent for all Maryland singles earning less than $100,000 a year. There are different figures for married couples filing jointly.
Pass-through peril: Senate Minority Leader Stephen Hershey argues that, “The increase in the personal income tax will be a direct hit to Maryland’s small business community that file as pass-through entities on personal returns.” Most U.S. businesses are taxed as pass-through entities that, unlike C-corporations, are not subject to the corporate income tax. Instead, their owners include their allocated shares of profits in taxable income under the individual income tax. Pass-through businesses include sole proprietorships, LLCs and S-corporations.
5 — Maryland is 2025’s fifth worst state to start a business
WalletHub on Monday released its report on the Best & Worst States to Start a Business in 2025 to help people maximize their chances of success by starting in the right location. Comparing the 50 U.S. states across 25 key indicators of startup success, the data ranked Maryland 46th for starting a business, 50th for labor costs, 45th for cost of living and 49th for industry variety; among others.
Economic development: One of the most sound approaches to driving economic development is the establishment of home-grown businesses, with owners who take pride in their communities and state. With these rankings, Maryland is far from being open for business, threatening our regional economic competitiveness and the wellbeing of our Main Streets.
Advancing inclusive partnerships for a Maryland where all businesses and their communities thrive
The Maryland Chamber of Commerce is the state’s leading business advocacy organization — committed to working with our alliance of partners on critical public policy issues. With a focus on economic development and grassroots advocacy, we impact policies that directly affect Maryland business.
