Maryland’s proposed additional carried interest tax will hit small businesses the hardest, “by making investment in their success regionally and nationally incompatible.” That’s according to the Small Business Investor Alliance, which published an open letter to the chair of Maryland’s House Ways and Means Committee last week.
The SBIA played a significant part in bringing onside Democratic members of the US House Financial Services Committee hearing last November, “America for Sale? An Examination of the Practices of Private Funds”, and its president, Brett Palmer, says Maryland’s proposal to add a 17 percent surtax on carried interest and management fees would cause “small business activity to be taxed at a rate 400 percent higher than other income” in the state.
The move could drive small businesses out of Maryland and into neighboring states including Pennsylvania, where income from investments would be taxed at a rate seven times lower, Palmer writes. As we recently covered, it would also impose the surtax on out-of-state investment from private funds into Maryland business.
Maryland has a robust small business sector. Palmer notes a study showing that small business investment companies (SBICs) created three million jobs across the US between 1995-2004 and supported another 6.5 million jobs. Maryland is home to six SBIC funds.