Contrary to what you may expect, the COVID-19 pandemic has not slowed down entrepreneurial activity in America. This is good news, because states heavily affected by the pandemic need more entrepreneurs to boost economic recovery.

According to the D.C.-based Economic Innovation Group’s analysis of U.S. Census Bureau data, the number of high-propensity business applications filed in the U.S. between the start of the shutdown and the week ending Aug. 15 was 11% greater than the number filed over the same period in 2019. Instead of discouraging entrepreneurs, the pandemic may have fueled the next wave of innovation by bringing exciting new business opportunities.

Possible reasons for the surge include unemployed individuals opting to start their own business, or entrepreneurs identifying new business opportunities amid the crisis. As the world continues to rapidly change under lockdown, fueling digitization of our economy, new business ideas are needed to meet the demands of the “new norms” of our society.

Let’s look at Maryland. As an increasing number of Maryland businesses fail to survive the pandemic—more than 7,200 have filed for bankruptcy this year — the state needs more entrepreneurs now than ever to build a strong economy. After all, new startups can rehire unemployed workers and eventually grow, thereby fueling Maryland’s immediate recovery and long-term growth.

Fortunately, Maryland is blessed with one of the most diverse pools of highly educated talent in the nation, only after Massachusetts. That pool holds potential entrepreneurs and executives for new startups, providing fertile ground for business development.

Yet a 50-state study by Seek Capital that considers the best states for entrepreneurs somehow ranks Maryland as the 5th-worst state to start a business.

One may find this surprising, but not if they understand Maryland’s policy environment. The state is one of the least tax-friendly states in the U.S. and home to countless onerous business regulations that can stifle innovation. Especially during the current pandemic and resulting recession, these taxes and regulations have done more harm than ever by slowing down the state’s economic recovery.

How state can help

Given this, how can Maryland officials empower entrepreneurs?

First and foremost, Maryland should review its tax policies that could be particularly harmful for entrepreneurs in today’s environment. High corporate income, personal income, property, and sales taxes all hurt or discourage entrepreneurs one way or the other. In fact, at least 65% of Maryland businesses report being negatively affected by taxes.

And in today’s digital working environment, entrepreneurs can easily choose to start their companies in more tax-competitive states and still hire Maryland’s top talent to work for them remotely. A competitive tax structure is necessary to prevent such brain drain and economic loss.

Just as importantly, Maryland regulators should look to relax or at least temporarily lift restrictions that can make it more complicated and expensive for businesses to form in the state.

Whether they are environmental regulations, labor regulations, occupational licensing regulations, or simply protectionist moves designed to benefit traditional players, excessive government interventions almost always do more harm than good. Burdensome business regulations also end up hurting Marylanders by limiting consumer choice.

Optimistically speaking, if we look back at history, economic crises have provided fertile ground for entrepreneurship in America. Disney was founded during the height of the Great Depression, Microsoft during the oil crisis of the 1970’s, and Venmo during the Great Recession.

Therefore, it is up to Maryland’s leaders to decide whether the COVID-19 pandemic turns into a once-in-a-lifetime opportunity or a devastating memory for the state’s would-be entrepreneurs.

Carol Park is a senior policy analyst at the Maryland Public Policy Institute.