Daniel Bunn President and CEO at Tax Foundation | Twitter Website
Legislators in Maryland have introduced several proposals aimed at increasing taxes on businesses to address the state's budget deficit. These include a 2.5 percent business-to-business (B2B) services tax and a data broker gross income tax, alongside an attempt to implement worldwide combined reporting within the state's corporate income tax system.
The B2B services tax proposal, put forward by Senator Hettleman and Delegate Moon, would apply a 2.5 percent tax rate to various B2B services such as accounting, payroll, and asset management. The fiscal note suggests this could generate revenues from $944 million in FY 2026 to $1.4 billion in FY 2023 but may result in higher prices and effective sales tax rates.
A separate proposal aims to impose a 6 percent tax on data brokers' gross income, potentially increasing state revenues by $90 million-$100 million between FY 2027-2030. However, it would not contribute to the state's general fund and might increase costs for Maryland taxpayers who use digital services.
The Fair Share for Maryland Act of 2025 proposes mandatory worldwide combined reporting starting in 2029, making Maryland the first state with such requirements for all corporations forming unitary groups. This approach has been criticized for adding complexity and potential double taxation without clear economic justification.
Addressing the projected $3 billion budget deficit is crucial for Maryland's government. While Governor Moore suggests spending cuts as a solution, finding suitable revenue sources remains challenging. Increasing the sales tax rate or broadening its base could be alternatives that avoid targeting business inputs and complicating corporate taxes.