Maryland businesses face enough challenges without Annapolis creating new ones. Yet that’s exactly what’s happening with the proposed 2.5% tax on essential business services (H.B. 1554/S.B. 1045) — a measure that would fundamentally change the economics of operating in our state.

This isn’t just another business expense — it’s a direct attack on Maryland’s business community and competitiveness when we can least afford it. And the financial impact is staggering. Some businesses estimate the tax will cost them millions, while many small businesses anticipate annual costs ranging from $50,000 to $150,000 — or even more. For some, the added burden could take a third or more of their annual profits, jeopardizing their ability to grow, invest and stay competitive.

For perspective, small businesses typically operate on 3-5% margins. This new tax would immediately reduce profitability in significant ways, as it targets critical services they can’t function without: accounting, IT support, marketing, payroll processing and more. When every neighboring state offers a more favorable environment, the math becomes painfully simple.

The consequences reach far beyond business owners. This is effectively a tax on Maryland families that would increase costs on virtually everything: health care, child care, home repairs, restaurant meals and retail goods. Why? Because these expenses inevitably flow to consumers as businesses struggle to remain viable.

And it’s not just small businesses at risk. Larger employers that Maryland depends on for thousands of jobs will face difficult decisions about future investments and expansions. Many business owners — both large and small — report they would be forced to cut jobs, raise prices or seriously consider relocating operations to more business-friendly states.

Maryland already ranks 45th in the Tax Foundation’s State Business Tax Climate Index and as the third most expensive state to do business in, while all our neighbors rank significantly better. Rather than addressing this competitive disadvantage, Maryland’s General Assembly is doubling down with a policy that would drive investment elsewhere.

The irony? This short-term budget fix would actually worsen Maryland’s long-term fiscal health by eroding the very economic base that generates sustainable tax revenue.

There are better approaches to balancing budgets. Economic growth — not new taxation — remains the most effective path to fiscal stability. Creating an environment where businesses flourish naturally increases revenue through job creation, investment and economic activity.

Business owners aren’t asking for special treatment — just a fair opportunity to compete, grow and contribute to Maryland’s prosperity. This tax would make that increasingly difficult, if not impossible, for many.

For the sake of Maryland’s economic future, our lawmakers must reject this proposal and focus instead on policies that strengthen our competitiveness rather than diminish it.

Mary D. Kane is president and CEO of the Maryland Chamber of Commerce.