Second-Worst in America: Why Maryland Keeps Losing New Businesses

By MDBayNews Staff

Maryland has ranked 49th out of 50 states for starting a business in WalletHub’s latest national analysis — meaning only one state in the country performs worse. The near-bottom ranking underscores growing concerns among entrepreneurs and business groups that Maryland’s high taxes, rising costs, and complex regulatory environment are driving new businesses to more competitive states.

Maryland is once again facing uncomfortable scrutiny over its business climate. According to WalletHub’s 2025–2026 ranking of the best and worst states to start a business, the Old Line State placed 49th out of 50, ahead of only Rhode Island.

The findings reinforce a growing concern among business owners, chambers of commerce, and economic analysts: while Maryland boasts an educated workforce and proximity to federal agencies, high taxes and a heavy regulatory environment continue to push entrepreneurs elsewhere.

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How WalletHub Ranked the States

WalletHub evaluated all 50 states using 25 metrics across three broad categories:

• Business Environment – startup activity, entrepreneurship rates, and employer climate
• Access to Resources – workforce quality, financing, and office affordability
• Business Costs – taxes, labor, energy, and real estate expenses

Maryland scored 34.58 out of 100, ranking:

• 44th in business environment
• 18th in access to resources
• 47th in business costs

That last category proved decisive.

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The Top vs. the Bottom

States that ranked highest shared familiar traits: low or no income taxes, lighter regulation, population growth, and predictable costs.

Best States to Start a Business (2025–26)

1. Florida – No income tax, strong startup activity, robust lending
2. Utah – Workforce quality and fast-growing tech sector
3. Texas – No income tax, massive economy, business relocations
4. Oklahoma
5. Idaho

Worst States to Start a Business

46. New Jersey
47. Connecticut
48. Hawaii
49. Maryland
50. Rhode Island

Maryland now finds itself grouped with states known for high costs and complex tax structures, rather than with fast-growth competitors in the South and Mountain West.

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Taxes: Maryland’s Biggest Obstacle

From a center-right economic perspective, Maryland’s tax structure is a primary drag on entrepreneurship:

• Corporate income tax: 8.25% (among the highest nationally)
• Personal income tax: Progressive, with new top brackets reaching 6.5%, plus local add-ons pushing combined rates near 10% in some jurisdictions
• Capital gains surcharge: 2% on higher earners
• Sales tax expansion: A new 3% tax on digital and IT services, hitting many small and mid-sized firms
• Estate and inheritance taxes: One of the few states to impose both

The Tax Foundation’s 2026 State Business Tax Climate Index ranks Maryland near the bottom nationally, well behind neighbors like Virginia and Delaware.

Business groups argue that these layered taxes reduce margins, discourage investment, and make Maryland less competitive when entrepreneurs can easily cross state lines.

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Regulation and Cost Pressures

Taxes are only part of the equation. Maryland also ranks poorly for:

• Permitting and compliance delays
• Zoning and environmental rules that exceed federal standards
• Rising labor mandates, including higher minimum wages and paid leave requirements
• High commercial property and energy costs, driven by the state’s elevated cost of living

While recent legislation has targeted incentives toward biotech, cybersecurity, and government-adjacent industries, critics say general startups are left navigating red tape with little relief.

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Strengths That Aren’t Enough

To be sure, Maryland is not without advantages:

• Highly educated workforce
• World-class universities and research institutions
• Proximity to federal contracts and agencies

But WalletHub’s analysis suggests those strengths are outweighed by cost and complexity, especially for small businesses without government ties or venture capital backing.

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The Bigger Picture

Maryland’s poor showing mirrors broader trends:

• Population and business out-migration
• Growing budget pressures leading to tax increases rather than structural reform
• Rising competition from states actively courting entrepreneurs

For policymakers, the takeaway is clear: talent alone cannot overcome an unfriendly cost structure. Without meaningful tax relief and regulatory simplification, Maryland risks continuing to fall behind faster-growing states.

For would-be entrepreneurs, the message is more pragmatic: Maryland may still work for certain industries—but starting a business here comes with higher stakes, thinner margins, and fewer second chances.

When a state ranks second-worst in America for starting a business, the problem isn’t a lack of talent — it’s a policy environment that keeps telling entrepreneurs to build their future somewhere else.