House of Delegates Passes Tech Tax Repeal
The House of Delegates gave final approval to the tech tax repeal bill tonight by a vote of 93-44. The Daily Record has more here.
House Ways & Means Committee Approves Repeal
The House Ways & Means Committee approved SB 46 today by a vote of 13-8. It will be on the House floor this afternoon.
This bill, which the Senate passed Thursday, would repeal the sales tax on computer services, impose a 6.25 percent individual income tax bracket for three years, transfer sales tax revenues from the transportation trust fund to the state general fund for five years, and direct the governor to cut an additional $50 million from the budget before July 1, 2008.
Today's Headlines
Senate Committee Votes to Repeal the Tech Tax
The Senate Budget and Taxation Committee voted this afternoon to repeal the computer services sales tax. As an alternative, the committee:
- Increased the income tax rate for those earning more than $1 million a year to 6.25 percent for three years.
- Cut $50 million in transportation funding for five years.
- Directed the Governor to cut an additional $50 million before July 1, 2008.
The bill, SB 46, now moves to the Senate floor. The committee vote was 10-5.
Senators voting for the proposal included:
Ulysses Currie
James E. DeGrange, Sr.
Verna L. Jones
Edward J. Kasemeyer
Nancy J. King
Nathaniel J. McFadden
Donald F. Munson
Douglas J. J. Peters
James N. Robey
Robert A. (Bobby) Zirkin
Senators voting against the proposal included:
David R. Brinkley
George C. Edwards
Rona E. Kramer
Richard S. Madaleno, Jr.
J. Lowell Stoltzfus
The Latest From Sen. Mike Miller
Baltimore Sun reporter Gadi Dechter posted an item on the Sun's The Session Blog reporting that Senate President Mike Miller seems optimistic about the tech tax repeal.
"It's going to be one or two votes either way," Miller said. "But I think we're OK."
Senate to Hear Tech Tax Bills on March 12
The Senate Budget and Taxation Committee will hear the computer services sales tax bills on March 12 at 2 p.m. The House Ways & Means Committee will hear the House bills on the same day at 1 p.m. If you care about this issue, please mark March 12 on your calendars. We will need a huge business presence in Annapolis for the hearings.
Hundreds Rally for Tech Tax Repeal
Hundreds of business people gathered in Annapolis yesterday to advocate the repeal of the computer services sales tax, which will take effect July 1.
"I think this is wonderful," Senate Deputy Majority Leader Rob Garagiola (D-Dist. 15) said. "I'm shocked, actually, by how many people are here."
A capacity crowd filled the Maryland Inn for a media briefing, where a group of business people outlined how the tax will impact Maryland businesses and the state's economy.
"Martek Biosciences is a $300 million biotech company in the State of Maryland. When we invest in information technology, we do it to improve our efficiency, to improve our effectiveness, and we do it to improve our competitiveness on a global landscape," said David Ronis, Martek's Chief Information Officer. "We have operations in four states around the country. I don't think legislators realize just how easy it is to relocate outside of the state."
"We have about 200 employees in Maryland in our Montgomery County office. We also have offices in California, Washington State, and we're about to open an office in Northern Virginia," said Gail Bassin, Chair of the Board/Treasurer of JBS International. "This use tax on IT services will definitely harm our business in Maryland."
Larry Letow, President and COO of Convergence Technology Consulting voiced his concern over the impact the tech tax will have on emerging technology companies. "The tech community is largely based on companies that started small and grew. We need IT companies, especially small businesses, to focus on growth, not to focus on survival."
Business people in attendance were also joined by a bi-partisan group of legislators, who vowed to work together to repeal the computer services sales tax.
"Legislators are going to have to find the courage to do the right thing here and repeal this tax, which never should have been implemented to begin with," said Del. Jeannie Haddaway (R-Dist. 37B). "We realize how important it is to your businesses. We realize the affect it's going to have on small businesses."
Lawmakers also urged business people to keep the pressure on their lawmakers. "I'm convinced that this type of event is the only type of activity that will convince the legislature and the executive branch to repeal this tax, House Minority Leader Del. Tony O'Donnell said. "We need you to continue to pump up the volume and continue to put the pressure on. We need your letters, your emails and your calls."
"You all need to keep the pressure on. How is it impacting your businesses? Are you making alternative plans of moving if this goes into effect? That's the kind of message that needs to be told to our legislators," Sen. Garagiola said. "I think it will resonate. I am hopeful that we will get a bill to the governor's desk. I'm committed to working hard to make sure that happens. You can count on my support. We're going to make it happen, but it's going to take your help and your support."
Help us keep the pressure on. If you haven't already contacted your legislators, please contact them today. You can also help by spreading the word to your colleagues and employees.
Photo: Sen. Rob Garagiola addresses the crowd during Save Maryland IT Day on Feb. 27. He is surrounded by legislators who support the repeal of the tech tax, including (L to R) Del. Shane Pendergrass (D-Dist. 13), Del. Donna Stifler (R-Dist. 35A), Del. Jeannie Haddaway (R-Dist. 37B), Del. Tony O'Donnell (R-Dist. 29C), and Del. J.B. Jennings (R. Dist. 7)
House Hearing Set for March 12
It looks like the House Ways & Means Committee will hear the computer service sales tax bills on Wednesday, March 12 at 1 p.m.
Mark you calendars.
No word on a Senate hearing date yet.
Needless to say, we will need a huge business presence in Annapolis for the hearings. We'll keep you updated.
Jan. 31: Where Do We Stand?
Today's Daily Record provides a good status report on efforts to repeal the computer services sales tax. In a nutshell:
- Nearly a dozen bills have been introduced, including one co-sponsored by a majority of the House of Delegates.
- Success will likely hinge on whether or not lawmakers can agree on a measure to replace the $200 million that the new tax would reportedly generate.
- House Republicans unveiled a plan to offset the repeal with spending reductions. House Speaker Michael Busch (D-Dist. 30) said many of the proposed reductions are temporary and that an alternative to the computer services tax must provide a permanent solution to be acceptable.
- House Ways and Means Committee Chair, Del. Sheila Hixson (D-Dist. 20), said her committee would not hear any of the repeal proposals until after the Senate is finished with Gov. Martin O'Malley's budget bill.
- Sen. Robert J. Garagiola (D-Dist.15) will propose a plan to replace the computer services tax with two 3 to 4 cent increases in the gasoline tax. Legislative leaders have indicated a gas tax is not palatable to many lawmakers.
To read the full story, click here (pdf).
In the short term, we need to continue to work to ensure that lawmakers are hearing from impacted constituents. Help us spread the word.
Five Reasons to Repeal the Tech Tax
Our coalition is seeking to repeal the computer services sales tax because:
The Tax Stifles Economic Development and Job Creation: Maryland spends millions of dollars annually to attract and expand technology companies and jobs. Computer service companies employ 68,000 Marylanders, with an annual payroll of $5.2 billion, paying wages nearly twice the statewide average. Imposing a sales tax on these activities will jeopardize these jobs and harm Maryland's economic development goal of maintaining a high-tech knowledge economy and workforce. The tax has already caused companies to cancel planned expansions.
The Tax Damages Maryland's Competitiveness: Only a handful of states tax computer services. Enacting this tax would make Maryland's business climate and tax structure uncompetitive with other states. Maryland companies will source their computer services acquisitions to other states or relocate in order to stay competitive.
The Tax Hurts Small and Growing Companies: This new tax will especially harm small businesses that consume and provide computer services. While many large companies hire employees to perform the services taxed by the new law, most small businesses hire outside service providers. In addition, many of Maryland's computer services providers are themselves small businesses – often women and minority-owned – with relatively small profit margins.
The Tax Harms Important Growth Industries: Industry sectors important to Maryland's economy, like bioscience, financial services, health care, higher education, and government contracting, rely on technology services to drive innovation and stay competitive in a global marketplace. The tax will divert BRAC contractors to non-Maryland locations.
The Tax Will Be an Administrative Nightmare: Applying the sales tax to computer services will cause confusion for Maryland businesses and tax administrators. The tax has proven to be difficult to administer in states that have passed similar laws. That's why several states have repealed the tax.
Download our Five Reasons Flyer here (pdf)
11 Tech Tax Bills to Date
So far we've seen 11 bills introduced to repeal or alter the computer services sales tax. Here is a listing of the bills:
Here is a word document listing every Senator and Delegate who has sponsored or cosponsored one of these bills. So far the count is 25 Senators and 76 Delegates.
Help us ensure this costly tax is repealed. If you haven't already contacted your legislators, contact them today. Urge them to support legislation to repeal of the computer services sales tax.
