Maryland Governor Wes Moore recently made it official: he’s running for reelection. By passing on presidential buzz, he now has a chance to prove himself where it matters most — at home. If Moore wants Maryland to be a place where small businesses and emerging technologies can thrive and to set himself up for higher aspirations later, he must confront the state’s struggling business climate. Right now, Maryland is falling behind and policies like the nation’s only digital ad tax are a big reason why.
Maryland just slipped to 32nd in CNBC’s “Top States for Business” rankings, down ten spots in two years. The state ranks near the bottom in cost of doing business, weighed down by high taxes and rising utility costs. For Maryland’s small businesses, which employ 1.2 million people, those pressures aren’t abstract — they show up in every payroll, every monthly bill, and every decision to delay growth.
Nothing illustrates the problem more clearly than Maryland’s Digital Advertising Gross Revenues Tax. It was pitched as a way to make “Big Tech” pay, but the costs are passed down to advertisers — and digital ads are often the only way small businesses can compete with larger companies. A Baltimore coffee shop spending $2,000 a month on ads could lose $2,400 a year, money that could have gone toward hiring staff, upgrading equipment, or keeping the lights on.
Nine in ten small businesses now rely on digital advertising to reach customers and grow. When Maryland makes those ads more expensive, it’s not Silicon Valley that pays the price — it’s Main Street. And the tax hasn’t delivered what was promised. Lawmakers expected $250 million a year; actual collections have been barely a third. If courts strike it down as unconstitutional, Maryland could be forced to refund tens of millions of dollars — but to the large platforms that remitted the tax, not the small businesses that bore the higher costs.
It’s no wonder at least 13 other states considered similar taxes and walked away. Rhode Island legislators cited Maryland’s legal headaches and budget woes. Meanwhile, Pennsylvania and West Virginia are welcoming AI and data-center investments with friendlier policies. Maryland doesn’t share their natural resource advantages, but it can compete — if it embraces pro-growth policies instead of punishing ones.
These budget challenges also expose Maryland’s heavy reliance on federal spending. Growth has long clustered in the D.C. suburbs, leaving too many regions behind. As federal dollars become less certain, Maryland must broaden its base and give entrepreneurs in Frederick, Hagerstown, and Cumberland the same chance to thrive.
Unfortunately, the hits keep coming. On top of the digital ad tax, Maryland recently imposed a 3% levy on a wide range of digital services — from cloud storage and web hosting to IT support, software publishing, and data processing. The measure has drawn bipartisan criticism for creating steep compliance costs that discourage growth, with the heaviest burden falling on startups already struggling to compete. Meanwhile, just across the Potomac, Virginia has built a reputation as a tech hub.
Governor Moore wisely chose to stay home and run for reelection. That decision gives him a chance to fix Maryland’s reputation as a tough place to do business. But unless the state scraps policies like the digital ad and tech taxes, it will keep bleeding investment to Virginia and beyond — and small businesses will keep paying the price.
Brendan Thomas, Executive Director of Internet for Growth