Governor Moore Should Emulate Virginia's Regulatory Reform Efforts

 Maryland Governor Wes Moore talks a good game (well, sometimes!) about making Maryland's government more efficient, effective, and accountable. But talking and doing are two different things. 

During the last decade, my Free State Foundation colleagues have often offered ideas, across Democrat and Republican administrations, for implementing meaningful regulatory reform measures in Maryland. While reducing wasteful spending in Maryland's budget is important, of course, cutting red tape and eliminating unnecessary regulations also serves leads to cost savings that enhances consumer welfare.

 

At an event yesterday, Virginia Governor Glenn Youngkin announced that the state had surpassed his target of cutting regulatory requirements by 25%. To lead his regulatory reform efforts, Governor Youngkin quickly established a new Office of Regulatory Management (ORM), initially led by Andrew Wheeler and for the last couple of years directed by Reeve Bull, a well-known expert regarding regulation and administrative law.

 

In this piece, "Regulatory Reform in the Old Dominion," Susan Dudley, herself one of the nation's foremost scholars on regulation, chronicles what was achieved in Virginia by Governor Youngkin, Reeve Bull, and the regulatory reform team – and how they did it.

 

If you are interested in improving Maryland's economic climate and benefitting consumer welfare by eliminating red tape, it's worth reading Susan Dudley's piece and getting inspired by Governor Youngkin's effort. More to the point, I commend it to Governor Moore – hoping it might not be too late for him to gaze across the Potomac and get inspired too.

Governor Moore Fails to Improve Maryland’s Tax Competitiveness

On October 31st, the Tax Foundation released the 2025 State Tax Competitiveness Index, which ranked states’ overall tax systems and certain individual taxation categories. The index considered several criteria for ranking states, including tax system complexity, aggressiveness, and structure. Additionally, the index considers corporate income, individual income, sales, property, and unemployment insurance taxes in the overall rankings.

In August 2023, Governor Wes Moore said, “Maryland has some of the best talent and assets in the world. But our economy is not reaching its full potential [...] The time for discipline is now.” Throughout his tenure as governor, Moore has continued claiming the state needs to make “difficult fiscal decisions.” Still, while he has continued to tout the need for budgetary discipline, Maryland’s government continues to fail to have enough discipline to create a competitive tax environment. This is why it is the fifth worst state in the nation in terms of “tax competitiveness.”

Maryland’s poor ranking is not entirely new, as it has been considered one of the ten least competitive state tax environments since 2020. However, according to the Tax Foundation's new analysis, Maryland’s score has worsened since then, so that it is now ranked 46th in the nation. For some states, being uncompetitive on taxation may be acceptable. For example, Hawaii is also poorly ranked, but few states compete for people and businesses with Hawaii. Maryland, however, has four states bordering it, as well as the capital. Except for DC, every state bordering Maryland is ranked at least 12 spots higher for tax competitiveness.

Virginia, in particular, is a competitor for businesses and people looking to live in the extended DC area. Its overall state taxation competitiveness ranking is 28th, 18 places better than Maryland's. Unlike some states with few or no bordering states to compete with, Maryland’s competitiveness with other states will heavily impact how many people and businesses vote with their feet.

Examining the index, it is clear that Governor Moore must do more than he has thus far if he wants to improve Maryland’s very poor tax competitiveness ranking.

Because the index considers so many taxes, Maryland’s overall scoring is poor for a multitude of reasons. Firstly, Maryland’s income tax is very progressive, with a high maximum tax rate of 5.75%, meaning higher income earners will want to live elsewhere. Additionally, standard deductions and personal exemptions are relatively small in Maryland, and there are no tax adjustments for inflation. Thus, as the U.S. dollar’s value declines due to inflation and wages are adjusted to match that, even working-class Marylanders will slowly move into higher tax brackets.

Maryland’s corporate tax rate is 8.25 percent, significantly higher than Virginia, West Virginia, or North Carolina’s. Maryland’s inclusion of a global intangible low-taxed income in its corporate tax base makes it rare among the states. This means that even profits from non-U.S. companies owned by Marylanders are taxed at the state corporate tax rate, which many other states do not require, including Virginia and Pennsylvania.

Lastly, Maryland’s tax complexity is much higher than other states. It is the only state in the country to impose digital advertising taxes, which are difficult to navigate and comply with. Although this tax only went into effect in 2022, multiple lawsuits have already been filed contesting the law behind it. Maryland is also the only state in the country with both estate and inheritance taxes, with high maximums, further incentivizing wealthy taxpayers to leave the state.

While many of these tax policies existed before Gov. Moore entered office, a governor showing proper fiscal “discipline” should fight to reduce these taxes. Moore should pursue the fiscal discipline he advocated for at the start of his administration and increase Maryland’s tax competitiveness. Otherwise, the state will continue to lag behind its neighbors economically.

On Regulatory Reform, Maryland Should Follow Virginia's Example

 In an op-ed published in January of this year, "Wes Moore Should Follow Glenn Youngkin's Regulatory Reform Model," I called attention to the important regulatory reform program initiated by Virginia Governor Glenn Youngkin. Here is part of what I wrote then:

"In June 2022, Virginia Governor Glenn Youngkin issued an Executive Order establishing a new Office of Regulatory Management – similar to the federal Office of Information and Regulatory Analysis (OIRA) that's part of the Office of Management and Budget. The executive order requires the new office, in coordination with the various state executive agencies, to "streamline the regulatory process and provide important institutional controls." And it establishes a concrete objective for the office: oversee a 25% reduction in regulatory requirements across state executive branch agencies."

As I explained, in December 2022, Virginia's Office of Regulatory Management released a Regulatory Economic Analysis Manual which I summarized this way:

"Written in clear, concise language free from economic jargon, the manual is a step-by-step guide for implementing an effective and efficient process for reviewing proposed and existing regulations. It explains how to perform the analyses required to ensure that the costs of new regulations, or ones already on the books, don't exceed their benefits. To achieve this, the manual describes the process for properly identifying the problem a regulation is intended to address and for identifying alternative approaches to addressing the problem that are the least intrusive and least costly, while still accomplishing their intended objective."

In my January 2023 op-ed, I urged newly inaugurated Governor Moore to look across the Potomac for good ideas regarding implementation of a regulatory reform program of his own.

Now, Reeve Bull, the Deputy Director of the Virginia Office of Regulatory Management, and an acknowledged expert on regulatory matters, has provided a useful update on the Virginia experience in an essay published in Penn Law's The Regulatory Review. In his piece, "A New Approach to Regulatory Budgeting in Virginia," Mr. Bull provides helpful information regarding the establishment of a "regulatory budget," one of the foremost regulatory reform tools. As he explains: "The idea is similar to a budget on government spending: agencies can regulate up to a certain amount, but, beyond that level, they need to get rid of old regulations in order to adopt new ones."

Easy to say, but the devil is in the implementation details, of course. So, Mr. Bull usefully discusses the nitty-gritty of several different regulatory budgeting approaches, including the one on which Virginia has chosen to focus: seeking to reduce the total number of regulatory restrictions by 25 percent by the end of the Youngkin Administration."

To be clear, we're not talking about willy-nilly deregulation for deregulation's sake. Mr. Bull emphasizes, and I agree, that the overriding goal is "to roll back regulatory burdens while still preserving necessary public protections." A proper balance can be achieved if the right reform tools are put in place.

In his inauguration remarks last January, Governor Moore acknowledged that, among the states, Maryland is "44^th in the nation in the cost of doing business." The existence of excessive regulatory burdens – regulations that are no longer needed because of changed conditions or in which the costs exceed the benefits – are a significant contributor to Maryland's poor "cost of doing business" ranking.

Improving Maryland's business climate, including by reducing unnecessary regulatory burdens, shouldn't be a partisan issue.

Thus far, Governor Moore has not devoted much attention to implementing a meaningful regulatory reform program in Maryland. For the sake of the state's economic health, he should. And, by way of example, he would be wise to look to Governor Youngkin's regulatory budgeting model and the other reform work undertaken by Virginia's Office of Regulatory Management.