Small-Business Owners Speak Out Against Proposed Business Tax

When lawmakers propose changes to state taxes, small business owners often find themselves bracing for impact. This is especially true in Maryland, where a proposed 2.5% tax on professional business services has sparked heated debate. While the state seeks to address a $3 billion budget shortfall, small-business owners argue that this new tax puts an unfair burden on their shoulders.

The proposed “business tax” would apply to common professional services like accounting, marketing, and social media management. For many small businesses, this change would significantly increase operating costs and disrupt the fragile balance of their profit margins.

This blog explores why Maryland’s small-business community is rallying against this legislation, how such taxes could impact entrepreneurs more broadly, and how tools like revolving credit lines may provide some relief for those navigating financial uncertainty.

What is the Proposed Business Tax?

The Maryland state legislature is considering a 2.5% tax on professional services exchanged between businesses. The goal is to help reduce the nearly $3 billion budget shortfall the state faces.

While the tax’s intent is to help close this gap, small business owners see it as a double penalty. These are not just costs companies pass along to their clients. Many small businesses also outsource services such as accounting, HR, and marketing, meaning they would have to bear the tax on both ends of their transactions.

Kimberly Prescott, owner of an HR consulting firm in Columbia, underscores this dilemma. “I will have to pay the 2.5% tax for any services that I deliver to my clients,” she said. “But also, I outsource a lot of my services… I’ll have to pay that tax as well on any services that I receive.”

The ripple effect could put serious pressure on small businesses already grappling with the challenges of inflation, rising wages, and post-pandemic recovery efforts.

Why Small Businesses Are Fighting Back

Small businesses play a pivotal role in Maryland’s economy and many other states. They not only generate significant local jobs but also fuel innovation and community engagement. However, they tend to have limited margins, meaning unexpected costs can deal a significant blow.

The 2.5% tax could trigger several negative consequences for small-business owners, such as:

• Decreased profitability. With businesses having to absorb higher costs, profitability shrinks, making growth and expansion more difficult.
• Higher fees for clients. To offset the tax, many businesses may raise rates, which could result in losing price-sensitive clients.
• Reduced cash flow. Lower cash flow impedes the ability to make timely investments, whether for hiring, scaling, or new technology.

Critics of the tax, including over 400 individuals who registered their opposition to the bill recently, argue that Maryland lawmakers are unfairly targeting small businesses to solve the state’s debt problem.

Avoiding Financial Strain During Uncertainty

While small-business owners are uniting to lobby against this proposed tax, it’s equally important to have financial tools in place to weather the storm. One such solution is the Bankroll Revolving Line of Credit from ARF Financial.

What is Bankroll?

The Bankroll Revolving Line of Credit offers small businesses an accessible and flexible way to maintain cash flow during uncertain times. Unlike standard loans, this line of credit allows businesses to draw funds as needed, pay them down, and borrow again without penalties.

Here are some key benefits of Bankroll that small-business owners should consider when preparing for financial challenges like new taxes or other unexpected costs:

• Flexible borrowing. Approvals go up to $1,500,000, allowing businesses of varying sizes to access an appropriate amount of credit.
• Manageable terms. Loans can extend up to 36 months, with fixed weekly payments for predictable budgeting.
• Unlimited draws and paydowns. Businesses can make unlimited draws or paydowns within the revolving period, ensuring they always have access to funds whenever they need them.
• No prepayment penalties. You’re in control of your loan. Paying off your balance early will not incur any fees.

Learn More About Bankroll’s Revolving Line of Credit

Relieve Financial Pressure with the Principal Pause Button

ARF Financial’s Bankroll also comes with the Principal Pause Button, an innovative feature that allows businesses to suspend principal payments for four weeks and only pay interest.

This is an ideal option for seasonal businesses or companies facing temporary hurdles, such as the potential financial hit from new taxes. Pausing principal payments can free up cash flow, providing immediate relief during a crunch. This feature is designed to give small businesses the flexibility they need to thrive even during tough times.

Pause Your Principal Payments and Learn More

How You Can Take Action

Maryland’s proposed business tax is a microcosm of broader challenges faced by small-business owners across the U.S. Taxation policies targeting professional services can have unintended ripple effects that hurt not just businesses but the local economies they support.

If you’re a small-business owner in Maryland or any other state, here are actionable steps you can take to prepare and make your voice heard:

1. Advocate against unfair taxation. Reach out to your state legislators and emphasize how the tax will negatively impact your business and the local economy.
2. Build community support. Connect with fellow small-business owners to rally opposition. Some of the most effective lobbying efforts are achieved through collective action.
3. Explore financial tools and resources. If you anticipate any financial strain, establish a revolving line of credit or other funding solutions to maintain your cash flow.

A Lifeline for Small Businesses

The proposed business tax may feel like another hurdle, but small-business owners have proven time and time again that they are tenacious, resilient, and resourceful. By staying informed, leveraging supportive financial tools like the Bankroll Revolving Line of Credit, and advocating for fair policies, you can help your business thrive in the face of adversity.

If you’re looking for flexible financial solutions that adapt to your business’s unique needs, apply for the Bankroll Revolving Line of Credit today and keep your operations running smoothly no matter what challenges arise.

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