Maryland business leaders packed state legislative hearings Wednesday to voice their opposition to a proposed 2.5% tax on business-to-business services.
In its current form, the tax would apply to a wide range of services, including accounting, tax preparation, consulting, public relations, information technology, photography, landscaping, valet parking, and truck repair. If passed, it would take effect July 1.
Legislative analysts estimate the proposal would bring in $833.6 million next fiscal year and over $1.2 billion by fiscal 2030. The bill directs those funds to support the Blueprint, the state’s 10-year education reform plan.
House Majority Leader David Moon described the proposal as just one option for lawmakers to consider as they look to fill a $3 billion budget deficit and grapple with the impact of federal government layoffs and cutbacks on the state’s bottom line.
The Democratic leader said he did not plan to introduce a new tax this year. He blamed recent actions by the Trump Administration for his change in plans.
“We've seen the unemployment insurance rolls doubling, basically on a weekly basis here, and the hits, not just to our public sector employees but the private sector, keep coming,” Moon told members of the House Ways and Means Committee Wednesday.
He pointed to a report from the state Bureau of Revenue Estimates last week that roughly 28,000 federal employees in Maryland could lose their jobs, if not more. That equates to less tax revenue for the state, plus more residents potentially relying on government services.
“Nobody likes taxes. Nobody likes doing this,” he said. “But we are left with the reality that people like their services when suddenly they are the ones in need.”
However, business leaders told the committee that the tax would be counterproductive.
“This is the wrong tax at the wrong time,” said Paul Nolan, vice president of tax, government affairs & strategic real estate at McCormick & Company, Inc. “It is guaranteed to stifle economic growth in the state. It will discourage new companies from coming here, whether forming or moving, and will encourage those of us here to consider other locations to receive any of the services that are taxed here.”
The measure would disproportionately hurt smaller businesses that are more likely to rely on other firms for services such as accounting, said Rebekah Olson, CEO of the Maryland Association of CPAs.
To run her Millersville-based cybersecurity firm, Atruent, Aida Keehner needs accountants, lawyers, marketing, and other services.
“It’s like charging me extra just for following the rules,” she said.
Republican leaders also offered dire predictions of the tax’s potential impact, should it pass.
If lawmakers pass all of the proposed taxes under consideration this legislative session, “I think we’d be devastated,” House Minority Leader Jason Buckel told Moon during the hearing. “I think the state would absolutely collapse, from a population and an economic-output standpoint, if we did these things.”
