The Tech Tax faces (bipartisan) opposition

In this opinion piece in the Gazette, a Maryland Republican Party operative and a Montgomery County Democrat in the House of Delegates advocate for a repeal of the new sales tax on computer services that was enacted literally in the "dead of night" during last Fall's tax hiking special session. While I support the content of the article, I do object to their use of the term "structural deficit" at the beginning of this article since that is a made up term politicians use when they want to raise taxes. We'll cover this in a future posting.

Indeed there is a bill in the House that would repeal the tax with a hearing scheduled for March 12th at 1pm (Feel free to show up and make your position known or attend this Maryland Chamber Event tomorrow). The bill is backed by House Republicans but will likely have trouble even getting to the floor for a vote. The Democratic leadership including Speaker Busch and Gov. O'Malley have said that the expected $200 million in annual revenue from the Tech tax would need to be replaced with cuts and/or a different tax increase.

The Governor claims the Tech tax wasn't his idea, he had proposed taxes on real estate management, tanning, massage therapy and health club memberships. (From this claim one can surmise that the Governor mindlessly signs legislation that lands on his desk without reviewing it.) However these groups had time to lobby the Legislature strongly enough to avoid the extension of the sales tax to their areas. Meanwhile the House Republicans took the Democrats at their word and identified $203 million in budget cuts. I have requested further details on the proposed cuts from Delegates Anthony J. O‘Donnell, the House Minority Leader and Christopher B. Shank, the House Minority Whip.

And it gets more complicated... other states are actively recruiting Maryland tech companies to relocate and the Comptroller Peter Franchot's office hasn't even determined how the tax will work including what companies and services the tax will apply to. (Franchot has already called for a repeal of the tax.) And that clarification isn't expected until after this year's General Assembly session ends. Which means we have a bad law on the books, can't get it repealed due to stubbornness and indifference of the Democratic leadership and companies will not know the impact of the tax law until it is ready to be collected.

This is an unbelievably complete and utter public policy nightmare and the Governor and the Democratic General Assembly leadership are completely and utterly at fault. We can only hope the public remembers when elections come around again.

Disclosure: The author owns a web design business, 311 Media Group, leads a technology user group and holds a position with Z, Inc. a Maryland based IT and professional services firm. Ironically the author has been contacted for web design services from State Senator Jennie Forehand, who cast the deciding vote for the computer tax and sales tax increase during the special session last Fall, after a phone call from Governor O'Malley.