Tax Foundation: Maryland Business Tax Climate Ranks Among Worst

By Tyler Waldman

Maryland may be the Free State—but it's not cheap.

Maryland came in 41st in the Tax Foundation's ranking of state business tax climates, ahead of states like Connecticut, New Jersey, New York and California. The rankings were based on tax rates and their complexity, according to the organization's website. The rankings took into account sales tax, income tax, corporate income tax, unemployment insurance tax and property tax rates.

Maryland, for example, has the fifth highest income tax and 10th highest property tax in the country, but the eighth lowest sales tax, according to the organization's website.

"The goal of the State Business Tax Climate Index is to start a conversation with policymakers about how their states fare against the rest of the country,” foundation economist Scott Drenkard said in a release. “With this report, we’re asking: ‘how well is your tax code structured? Are businesses in your state spending too much time complying with onerous tax provisions? Are you double taxing things you shouldn’t?’”

Anecdotally, the report cites Northrop Grumman's 2010 decision to move its headquarters to Virginia instead of Maryland. The Washington Post reported at the time that company officials cited facility opportunities and access to the Washington area, along with economic benefits, for contributing to the decision.

Virginia and other neighboring states West Virginia and Pennsylvania came in around the middle of the ranking in the Tax Foundation study.

The top business tax climates, according to the report? Wyoming, South Dakota, Nevada and Alaska.

In studies, officials at the Center on Budget and Policy Priorities have found no consensus on any correlation between state tax levels and economic growth.