MD business community rails against proposed 2.5% services tax
ANNAPOLIS — As Maryland’s business community rails against a proposed tax on business-to-business services, top Democrats in the legislature have framed the proposal as just one of several options for raising the revenue needed to avoid drastic cuts to vital government services.
Company executives, business owners, advocacy organizations and industry groups on Monday descended on Annapolis in an attempt to beat back the proposal, which would levy a 2.5% tax on services between businesses.
State analysts have projected that the tax would raise more than $940 million next fiscal year and nearly $1.3 billion in the following fiscal year at a time when the state is staring down a more than $3 billion deficit that is projected to double in the coming years.
But opponents, including Republican legislators, have claimed the tax would jack up prices paid by consumers, chase businesses from the state, prompt large companies to reconsider having assets in Maryland, force small businesses to lay off staff or shutter altogether, and generally hinder the state’s already stagnant economic growth.
“We have heard over and over and over again, especially this legislative session, that Maryland needs to grow its economy,” Cailey Locklair, president of the Maryland Retailers Alliance, said during a news conference Wednesday.
“This tax, on top of tax proposal after tax proposal and years and years of costly mandate after costly mandate aimed directly at the business community, that sends the exact opposite message,” she said.
At a time of rising concern about a potential state-based recession, Democrats have said that revenue raised from this tax could preclude cuts to Medicaid and government programs and services for people with disabilities, foster care, and veterans, among others.
During a hearing Wednesday, House Majority Leader David Moon said he chose to introduce the tax on services between businesses as an option for balancing the budget along with what is likely to be at least $2.5 billion in cuts.
Gov. Wes Moore has introduced an expansive tax reform package, but several parts of his plan haven’t received the support they need in the legislature.
Lawmakers have also considered legalizing online casino gaming, which could eventually raise hundreds of millions of dollars in revenue, but top state senators and the governor have been weary about how such a measure would exacerbate problem gambling, among other concerns.
Since introducing the business-to-business tax, Democrats have appeared open to including carve outs for some types of businesses, including sole proprietors, and it remains to be seen whether they’d be open to lowering the proposed tax rate.
Legislators have laid out more than a dozen categories of business-to-business services to which the tax would apply, though it remains to be seen exactly which business types will be subject to paying the tax.
The proposal has also garnered some powerful opposition, including from companies like Under Armour, Northrop Grumman and McCormick & Company.
Paul Nolan, McCormick’s vice president of tax, government affairs and strategic real estate, said during Wednesday’s hearing that the proposed tax would “encourage those of us here to consider other locations to receive any of the services that are taxed here.”
