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isn't repealed before it takes effect in July, it would be one of the most 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relocate if the tax isn't repealed.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Pennsylvania, a 6% computer services tax was repealed after it handicapped the 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. 


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