This submission to the Baltimore Sun was intended as a possible multipart editorial commentary.
A Maryland Economic Competitiveness Snapshot
Introduction
There have been many who have recently and publicly addressed Maryland’s anemic economic performance. The public commentary has come primarily in soundbite form. Politicians and even pundits are more frequently resorting to short statements that support their positions; preferring to leave less flattering details to others. Soundbites work best for them because media outlets prefer them. The soundbites have a headline punchy impact. Those who attempt to dig deeper for the details are bombarded by ads and privacy decisions that deter the truth seekers. Yet some of these sources are credible economic activity watchers like the Chamber of Commerce, Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index and The Daily Record. All reporting Maryland’s economic competitiveness as weak.
Economic performance affects everything citizens care about including jobs, career opportunity, pay levels, and product pricing/inflation. Another meaningful part of their personal economic picture is taxation and the government’s ability to tax at a reasonable level while affording to fund desirable programs with fiscal discipline. Many of these programs, when adequately funded, directly affect the quality of life for its citizens. Public safety, infrastructure (roads, bridges, water, energy), education, and a hand up for those in need, are among the most important programs.
At a more macro level, economic strength attracts all of the desirable interested parties who wish to participate and who can contribute to further strengthening of economic performance. This is the critical success factor where some states excel while others suffer substandard performance. Once a state enters the negative cycle of spend too much, tax too much and subsequent weak economic performance, it takes extraordinary political courage to sustain the multi-year effort to achieve a turnaround. Some states, including all of Maryland’s regional competitors, are performing well. They have thriving economies that adequately fund desirable programs while maintaining sufficient incentives such as low taxes and adequate private investment incentives needed to sustain and even increase economic benefit for every citizen.
In this paper we will attempt to analyze at a high level the main factors at play in this scenario. Especially as it relates to the state of Maryland. Many politicians in the state speak eloquently about their talking points, their soundbites, about what is being done to grow the state economy thus expanding the tax base and achieving all the benefits mentioned in this report. You will read here that those sounds bites are not supported by the facts. That Maryland has much work to do to leave the negative spiral and enjoy the success of its regional competitors.
National Level Comparisons
Starting this conversation at a national level, among only the 14 states with county level income taxes, Maryland is the highest with an average county-level income tax rate of 2.83%. That rate is 27% higher than the next closest state of Ohio at 2.22%. This deserves restatement as a demonstration of intent. Of the 14 states that allow local income tax, Maryland rate is the highest by a considerable margin.
Among all states with a state level income tax, only California, Connecticut, Hawaii, Minnesota, New Jersey, New York and Vermont have a higher average individual income tax rate than Maryland at 3.1%. Yet, for all states with combined state income tax and county income tax, Maryland is the highest with a combined average individual tax rate of 5.93%. Remarkedly, it is higher than the average total individual income tax rate in California, Connecticut, Hawaii, New Jersey, New York, Ohio, Oregon and Pennsylvania. Each of these, minus Hawaii, with combined rate great than 4%.
All states with no state income tax, Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington and Wyoming, do not allow county/local income tax.
Maryland’s Regional Competitors
Maryland’s primary regional competitors, Pennsylvania, Virginia and North Carolina have combined substantially lower individual income tax rates than Maryland; with Virginia at 2.8%, North Carolina at 2.5% and Pennsylvania closest at 4.66% compared to Maryland’s much higher 5.93%. From a competitive positioning perspective, the tax rate difference is a massive disincentive to Maryland’s competitiveness as a desirable residential location, especially for high income earners who typically pay a much larger portion of total individual tax revenues. A number of these same high earners own businesses with employment opportunities and corporate tax revenues that will not follow them to Maryland.
Corporate tax rates among Maryland’s regional competitors tells a slightly different story. Maryland’s corporate tax rate is in the top ten in the country at 8.25%. Only Pennsylvania ranks slightly higher at 8.99%. Virginia and North Carolina’s competitive positions are much stronger at 6.0% and 2.5% respectively.
This combined tax picture (high citizen and corporate tax rates) represents a strong disincentive to investment in the state of Maryland.
Maryland’s economy is significantly smaller than its mid-Atlantic regional competitors, Virginia, North Carolina and Pennsylvania. Maryland’s economy relies much too heavily on its seat adjacent to the federal government. As federal spending is curtailed, Maryland’s economy suffers. Maryland must either expand the commercially driven portion of its economy or accept its fate and curtail its spending as its federal partner does the same.
Let’s take a look at Maryland’s economic performance as compared to its regional competitors.
| State | 2023 GDP | Rank (out of 50) |
| Virginia | $678B | 12th |
| Pennsylvania | $934B | 6th |
| North Carolina | $726B | 10th |
| Maryland | $518B | 15th |
Maryland, as all states, must compete for financial investment in order for its economy to grow at a useful rate. Maryland’s competitive position is weak as a comparative analysis shows it has under-performed in attracting private equity investment. As federal spending is curtailed, it is especially critical for Maryland to be highly competitive in attracting private investment to bolster private sector-driven economic growth. Recent data shows Maryland has performed poorly due to high tax rates and insufficient incentives to attract private investment funds to support wealth creation activity. Clearly, Maryland’s inability to attract private investment is driven in part by a lack of sufficient state funding for corporate incentives to achieve inertia. More importantly, high tax rates both for corporations and individuals act as further disincentives deflecting those precious investment dollars elsewhere.
In 2022, the year most current information is available according to sources, these are the levels of Private Equity Investments in Maryland and its neighbors. Maryland’s ability to attract private investment is woefully lower than its neighbors at 127% less than Pennsylvania, nearly 90% less than North Carolina and over 50% less than Virginia.
Pennsylvania $41.0B
N. Carolina $34.0B
Virginia $28.0B
Maryland $18.0B
So, how does Maryland’s economy grow fast enough to produce in-state tax revenue levels adequate to meet projected state spending levels? Given recent and projected state budget deficits, sustaining current spending levels (likely deemed inadequate by most progressive democrats), appears to be impossible without significant tax rate increases. Tax increases, actual spending cuts, or very likely both, appear to be required as the prospects for near term significant increases in taxable economic activity seem quite dim.
Maryland’s economy has fallen behind its competitors largely due its dependence on federal spending and employment. Being adjacent to Washington D.C. has made it overly easy to draw economic strength from federal government contractors and employees. Too much reliance on what is now declining federal spending, combined with strong disincentives (high tax rates and low government economic growth incentive spending), has led to an inability to outpace current enshrined levels of state government spending.
Data shows Maryland’s economy is weak compared to its regional competitors. This trend will not be positively impacted by recent (2025) tax and fee increases further negatively impacting the migration into the state by desirable high earning individuals, their businesses and tech industry entities. In fact, knowledgeable industry watchers believe these disincentives will cause negative migration into the state materially hurting economic expansion activity.
Another option for assessing a state, and its neighbors, preparation for economic expansion is Private Equity penetration. In other words, is there a positive inflow of private equity investment into the state that will support economic growth in desirable industries or sectors?
GDP growth affects PE penetration because a faster‑growing economy dilutes penetration unless PE inflows grow even faster. Looking at Maryland’s competitive position relative to GDP Growth and PE penetration.
| State | GDP Growth (2020→2023) | Trend Meaning |
| North Carolina | Strong | Expanding economy + rising PE intensity |
| Virginia | Moderate | Stable base + strong per‑capita PE |
| Pennsylvania | Moderate | Large economy + strong PE inflows |
| Maryland | Slower | Slower GDP growth reduces dilution but signals weaker economic dynamism |
Maryland takeaway: Maryland’s slower GDP growth means PE penetration is not diluted—but it also signals a less aggressive economic expansion compared to NC and VA.
Among the top 20 states in this 2022 (last year this data is available) Full State Ranking of Private Equity Investment below, Pennsylvania ranks 6th at $41B, North Carolina ranks 8th at $34B, Virginia ranks 12th at $28B and Maryland ranks 18th at $18B. California, with a combined state and local individual income tax rate substantially lower than Maryland, drew nearly ten times the Private Equity investment in 2022. Pennsylvania and North Carolina attracted more than 200% and Virginia attracted $10 billion dollars more in private Equity investment than Maryland. This speak volumes about the way wealthy investors, coincidently wealth and job creators, feel about the long term potential to earn desirable returns in Maryland versus it’s regional competitors.
2022 Private‑Equity Investment — Full State Rankings (1–50 only top 20 included)
(Amounts in billions of dollars)
| Rank | State | 2022 PE Investment |
| 1 | California | $172.0B |
| 2 | Texas | $82.0B |
| 3 | Florida | $74.4B |
| 4 | New York | $70.4B |
| 5 | Illinois | $66.4B |
| 6 | Pennsylvania | $41.0B |
| 7 | Massachusetts | $38.0B |
| 8 | North Carolina | $34.0B |
| 9 | New Jersey | $32.0B |
| 10 | Ohio | $29.0B |
| 11 | Georgia | $28.1B |
| 12 | Virginia | $28.0B |
| 13 | Colorado | $23.0B |
| 14 | Michigan | $22.0B |
| 15 | Tennessee | $22.0B |
| 16 | Washington | $20.0B |
| 17 | Arizona | $18.7B |
| 18 | Maryland | $18.0B |
| 19 | Minnesota | $17.0B |
| 20 | Missouri | $17.0B |
As each state’s economy grows, so do corporate revenues and jobs thus increasing state tax receipts without increasing tax rates that are clearly anti-growth. As tax receipts exceed reasonable spending levels, tax rates can be lowered to encourage organizations to invest more in the state and individual taxpayers will have more of their money to spend on personal needs, or investment, further increasing economic activity. Once this positive momentum is achieved, like it has in Virginia among other states, more private investment is attracted to the state enabling the continuation of this very positive cycle. Thus enabling state legislatures to have more funding available for programs that support those in need and those programs that attract future investment. Unmentioned to this point is how strong wealth creation in the state super-charges charitable giving.
So how strong is Maryland’s economy compared to its regional competitors? Below are a series of comparisons that empirically highlight the weaknesses Maryland must quickly address in order to stave off further stagnation. Stagnation highlighted by the double-barreled whammy of tepid economic growth and growing state government spending deficits.
As a reference point, here again is the 2023 state GDP comparison for Maryland and its closest competitors.
| State | 2023 GDP | Rank (out of 50) |
| Virginia | $678B | 12th |
| Pennsylvania | $934B | 6th |
| North Carolina | $726B | 10th |
| Maryland | $518B | 15th |
Takeaways are Maryland is a mid‑sized economy compared to its neighbors. Maryland’s smaller economy, than VA, PA, and NC, affects how PE penetration looks when normalized.
Private Investment Matters
This chart shows how large PE investment relates to the size of each state’s economy.
Private‑Equity Penetration as % of GDP (2022)
| State | PE as % of GDP |
| North Carolina | 4.9% |
| Pennsylvania | 4.0% |
| Virginia | 3.9% |
| Maryland | 3.5% |
Overall Comparison: How Maryland Stacks Up
Maryland is consistently “middle‑strength” in PE penetration
- Lower GDP than VA, PA, and NC
- Lower total PE investment than all three
- Middle‑tier per‑capita penetration
- Middle‑tier GDP‑based penetration
Who leads?
- Pennsylvania → strongest overall PE presence (big economy + high penetration)
- Virginia → highest per‑capita penetration
- North Carolina → highest PE penetration relative to GDP
- Maryland → solid but not leading in any category
PE penetration trends MD VA PA NC
Takeaway: Across the past three years of available data, Maryland’s private‑equity penetration has grown steadily, but Virginia, Pennsylvania, and North Carolina have all grown faster, widening the competitiveness gap. Below is a structured, trend‑based comparison using the only year with full state‑level PE data (2022) plus three‑year GDP and population trends to show how penetration is shifting over time.
GDP Growth Trend (2020–2023)
GDP growth affects PE penetration because a faster‑growing economy dilutes penetration unless PE inflows grow even faster.
| State | GDP Growth (2020→2023) | Trend Meaning |
| North Carolina | Strong | Expanding economy + rising PE intensity |
| Virginia | Moderate | Stable base + strong per‑capita PE |
| Pennsylvania | Moderate | Large economy + strong PE inflows |
| Maryland | Slower | Slower GDP growth reduces dilution but signals weaker economic dynamism |
Maryland takeaway: Maryland’s slower GDP growth means PE penetration is not diluted—but it also signals a less aggressive economic expansion compared to NC and VA.
Conclusions:
Maryland is clearly in an undesirable, downward cycle of slower private investment, increasing tax rates and state government enshrined spending to a level that exceeds tax receipts by more than a billion dollars each year for the predictable future.
It is difficult to say whether the political courage necessary to reverse this trend is present among all political candidates running for state level offices this year. The current governor of Maryland, for a time early in his administration, possessed the political capital necessary to stand up and reverse this trend. During his first administration he did not demonstrate the political courage to do so and showed everyone his primary motivation during his first term as governor focused on the national political stage. He chose to maintain the status quo assuming that, if the worst occurred, he would be out of the governor’s office and a national political figure potentially immune to the minor stories in his native Maryland.
Passed performance predicts Maryland will continue to suffer the consequences of an slow-growth, high spending, high taxes posture for the foreseeable future. All this while its regional competitors strengthen their competitiveness and enjoy the benefits of economic growth and government fiscal effectiveness.
Adding insult to injury, Maryland has a multi-year history of dramatic multi-billion dollar state government spending on so-called non-profits. Current non-profit spending levels are reportedly 20 billion dollars per year. This is a very large number by anyone’s standards and larger than the recent private equity investment in the state of $18 billion dollars. An unspoken truth is that a large portion of this spending goes to “non-profits” whose executive staff are largely populated by the current administration and general assembly member’s political cronies, friends, contributors and, unbelievably, sitting legislators themselves. As frequently stated, these “non-profit” executives are paid far in excess of what they would likely command in the private sector.
If, by some act of courage not imaginable in Maryland, 20% of this amount, just $4 billion dollars, could be redirected to programs designed to attract private investment while positively bend the state program spending curve and negating further tax increases, it could be a beginning of a reversal of this negative spiral.
Research assistance by Microsoft Copilot
- Tax Foundation, “Local Income Taxes in 2023,” February 2023.
- Tax Foundation, “State Individual Income Tax Rates and Brackets for 2023,” January 2023.
- Tax Foundation, “State and Local Tax Burdens, 2024,” April 2024.
- Tax Foundation, “State Corporate Income Tax Rates and Brackets for 2024,” March 2024.
- U.S. Bureau of Economic Analysis (BEA), “GDP by State, 2023,” November 2024.
- PitchBook Data, Inc., “2022 Annual Private Equity Breakdown,” 2023.
- American Investment Council, “2023 State Private Equity Rankings,” 2023.
- U.S. Bureau of Economic Analysis (BEA), “Real GDP by State, 2020–2023,” December 2024.
Curt Rasmussen
A retired I. T. industry executive and keen observer of Maryland’s political scene.
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