Maryland’s Business Services Tax: A Price Hike for Consumers and Workers 

Already one of the highest-taxed states, Maryland lawmakers are now pushing to impose even more taxes. 

House Bill 1554, sponsored by Democrat Representative David Moon, would increase the tax burden on Maryland’s citizens by imposing a 2.5% tax on services that businesses provide to one another. This includes essential services such as accounting, marketing, lobbying, and equipment repair. If enacted, this proposal would impact more than 7,000 businesses across the state. 

This proposal isn’t just another tax, it’s a direct hit to Maryland’s small businesses and the state’s overall economic environment.  

Mary D. Kane, President & CEO of the Maryland Chamber explains how detrimental this bill would be stating, “This tax makes Maryland a more expensive place to do business, pushing companies to consider neighboring states like Virginia and Delaware, where they wouldn’t face these extra costs. We should be working to attract businesses, not driving them away.” 

At a time when Maryland is striving to strengthen its economic competitiveness, HB 1554 openly contradicts those goals. While this tax may provide a temporary revenue boost, its long-term consequences will outweigh any short-term gains. Higher costs for businesses mean reduced hiring, lower wages and a weaker overall economy, which ultimately leads to lower tax revenues in the future. 

In contrast, Maryland’s neighboring state, Virginia, is experiencing a budget surplus. Governor Glenn Youngkin recently announced that total general fund revenues have risen by 6.7% ($892.1 million) year-over-year through the first six months of Fiscal Year 2025. Meanwhile, Maryland faces a staggering $3 billion budget shortfall, driven by a combination of soaring state spending and sluggish economic growth. Despite already having some of the highest taxes in the country, Maryland continues to struggle with persistent budget woes, highlighting the state’s ongoing fiscal mismanagement. 

Maryland must take every possible step to avoid further weakening its economic environment, yet HB 1554 threatens to do just that. By imposing additional tax burdens, this bill would effectively trap Maryland in a deeper financial hole. It will directly raise costs for both consumers and workers, as businesses will inevitably pass on these additional tax costs in the form of higher prices for consumers and lower wages for workers. 

This bill is both unnecessary and detrimental to the great state of Maryland. Already burdened with high taxes, Maryland faces additional tax hikes, a more challenging economic environment, and reduced competitiveness compared to its neighboring states. Maryland legislators should be looking for ways to make the state more economically prosperous and competitive, rather than saddling Maryland residents with even greater tax burdens.