the wall street journal weighs in: High Tech Tax March 15, 2008; Page A10
In the cinematic classic, "Revenge of the Nerds," a group of college outcasts fights back against the local campus bigshots to regain their place in the world. A real-life sequel is playing out in Maryland, where a new tax on computer services has business groups, techies and legislators rallying around the pocket-protector set. [Martin O'Malley] Under a bill passed in November, such tech services as Web design, computer repair and programming would all get hit with a 6% tax statewide. If the tax isn't repealed before it takes effect in July, it would be one of the most burdensome regimes in the nation on the growing industry. On Thursday, Governor Martin O'Malley, a Democrat who originally balked at repealing the tax, joined the chorus against it. The state's technology sector is critical, he said, and "not an advantage we want to weigh down." Proponents say the $200 million in revenue the tax is projected to garner is indispensable when Maryland is already facing a budget shortfall. Senate President Mike Miller insists that "We can't afford to cede to businesses $200 million in revenue without an alternative." Wait until they see what happens to revenue when business begins to leave the state. Many Maryland companies and small businesses say they could be forced to relocate if the tax isn't repealed. And nearby states are courting potential departees: 70 Maryland computer services firms got a letter last month from Delaware economic director Judy McKinney-Cherry to encourage companies to "include Delaware when you are contemplating an expansion." Other states have tried similar tax experiments -- with dismal results. In Pennsylvania, a 6% computer services tax was repealed after it handicapped the state's ability to compete with other states for business. Ditto Connecticut, which enacted a 6% computer consulting tax in the late 1980s, only to walk it back in 1997 as the importance of the computer industry became apparent, and business associations revolted. The Tax Foundation ranks Maryland 24th among the 50 states in overall tax burden after a big individual income tax hike last year, but it is still seventh best in corporate taxes. The new tech levy won't help that reputation and in particular will hit the small businesses that drive its economy. While larger companies may simply move their IT operations to other states, small businesses will lose money on tighter margins, or watch clients bring their IT services in-house. Maryland legislators won't control their spending habits, so they keep imposing tax increases that give more people an incentive to leave the state. That's the real revenge of the nerds. in case you are not famaliar with the journal, there has never been a tax that they do not hate. . this editorial is full of holes. taxes on md services to maryland entities would apply to in and out of state companies. there should be no tax on services performed in maryland for non maryland companies. ************************************************************************* ** List info, subscription management, list rules, archives, privacy ** ** policy, calmness, a member map, and more at http://www.cguys.org/ ** *************************************************************************
