Maryland’s economic outlook continues to slide, with the state falling to 42nd place in the 2025 edition of the Rich States, Poor States report released Tuesday by the American Legislative Exchange Council (ALEC). The annual ranking evaluates each state’s economic competitiveness using 15 forward-looking metrics that include tax policy, labor regulations, and fiscal management.
The drop marks a steady downward trend for Maryland, which reached its peak at 20th place in 2012. The report attributes the decline to high tax burdens, increasing debt service obligations, and a growing public-sector workforce. Maryland is one of only a handful of states that has consistently moved backward in the rankings over the last decade.
According to the report, Maryland’s top marginal personal income tax rate of 8.25% ranks as the ninth highest in the nation, placing the state 42nd for that category. The state also ranks 45th in income tax progressivity and 41st in remaining tax burden per $1,000 of income, reflecting the degree to which taxes continue to impact residents and businesses even after accounting for recent changes.
Debt service obligations are another significant factor dragging the state’s outlook. Maryland devotes 5.2% of its tax revenue to servicing debt, one of the highest shares in the country. The size of the state’s public workforce also plays a role. Maryland ranks 48th for the number of full-time public employees per 10,000 residents, a measure ALEC uses to highlight government growth relative to population size.
The state’s economic challenges extend beyond projections. Maryland also ranks 41st in ALEC’s economic performance ranking, which is based on backward-looking data including gross domestic product (GDP) growth, employment trends, and population shifts over the past decade. Between 2013 and 2023, Maryland’s GDP grew by 51.7%, but its non-farm employment increased by only 5.1%, placing it among the lowest states for job growth in that time frame.
In terms of domestic migration, Maryland ranks 45th, with a net loss of more than 266,000 residents from 2014 to 2023. ALEC identifies out-migration as a key indicator of economic strain, especially when high-income earners and job creators choose to relocate to states with more favorable tax climates.
One of the central policy areas flagged by ALEC is the increasing cost of doing business in Maryland. The report notes that rising minimum wage levels have contributed to higher expenses for employers, with possible downstream effects on consumer prices.
Several recent tax changes have also raised concerns. Maryland has introduced higher tax brackets for upper-income residents and enacted a digital advertising tax, both of which ALEC classifies as anti-growth measures. The policies were part of broader legislative efforts to close a projected $3.3 billion budget shortfall and to support long-term education investments, including funding for the Blueprint for Maryland’s Future initiative.
While ALEC’s rankings often align with its fiscally conservative viewpoint, the methodology is consistent year-over-year and widely cited in discussions about state-level economic competitiveness. The group uses data from nonpartisan sources such as the U.S. Census Bureau and the Bureau of Labor Statistics to compile its rankings.
Critics of the ALEC report argue that it prioritizes low taxes and small government over social and economic equity. Supporters view the rankings as a benchmark for pro-growth policy reforms.
The full 2025 report is available at: https://www.richstatespoorstates.org/states/MD/
