Maryland had the eighth-lowest tax costs for established firms, but ranked No. 46 for new businesses, according to a report from the Tax Foundation, a conservative think tank in Washington, D.C.
The report, “Location Matters, a Comparative Analysis of State Tax Costs on Businesses,” also rated Maryland as 50th in “capital-intensive manufacturing” for new businesses.
The report said Maryland’s ranking of 46th for new businesses was attributed to the state’s property tax on manufacturing equipment. That tax was 30 percent higher than for the next highest state, Virginia, according to the report.
Maryland’s total effective tax rate of 13.3 percent for the largest category of mature firms was ranked 14th in the nation, according to the report. Virginia’s 12.3 percent total effective tax rate for mature firms was ranked No. 9.
The 198-page report, which was conducted in collaboration with audit firm KPMG, does not really show that a state’s business tax structure has an effect on the businesses in the state, said Matt Gardner, executive director of Citizens for Tax Justice, a nonpartisan think tank that also studies federal and state tax policies.
“The most interesting thing is, the title had nothing to do with contents,” Gardner said of the foundation’s report.
“The title implies businesses can do very well in the low tax states. But the report really is notable for what it is missing. Location means a lot of things, and taxes are just one of them. Location also means the quality of schools, the quality of life, and the quality of the infrastructure.
“There’s nothing in the report that actually claims taxes really do matter. All they do is giving a list of different tax features in different states.”
If the tax structure was so important to the location of businesses and their success, they would all be in states such as South Dakota, with among the lowest business taxes, he said.
“To their credit, they’re careful not to claim the level of taxes affect business location, other than the title of the report,” Gardner said.
A Tax Foundation spokesman referred questions regarding Gardner’s remarks to foundation president Scott A. Hodge, but he was not immediately available for comment.