Friday, Feb. 15, 2008

Repeal computer tax

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Last November, meeting in special session, the General Assembly implemented several increases in taxes Marylanders pay. This was done to close the structural deficit of $1.5 billion.

Many of the revenue-raising measures were debated well in advance of the special session. The increase in the sales tax, the corporate income tax and additional income tax brackets were all widely discussed.

Additionally, the legislature searched for service sectors of the economy to which it could expand the sales tax. Unable to garner the votes to expand the sales tax to cover health clubs or landscaping services, (it pays to have a lobbyist watching out for you in Annapolis), the legislature settled on computer services.

Adding the 6 percent sales tax to computer services was estimated to bring in $200 million to the state. Comptroller Peter Franchot warned that the figure would be lower in a sluggish economy, but the legislators simply could not resist the tempting $200 million figure. The idea first arose during the special session, then was dropped and then, like an Edgar Allan Poe admirer stealthily placing fine cognac at graveside, was back at daybreak.

Counter-productive policy

While $200 million in revenue is enticing, the public policy aspect is counter-productive.

Computer services and its associated information technology aspects create thousands of high-paying environmentally clean jobs for working families in Maryland. According to the Maryland Chamber of Commerce, computer service companies employ 68,000 Marylanders with an annual payroll of $5.2 billion.

Deliberately setting a public policy that makes states competing with Maryland for those very jobs look more attractive is not in the best interest of any Marylander. Nor is this a welcome sign for the high-tech businesses that the Base Realignment and Closure Commission (BRAC) is bringing to Maryland. We do not need to supply any further evidence to those who believe that Maryland is unfriendly to business.

The General Assembly should follow the lead of Florida and neighboring Pennsylvania and repeal the computer tax before it becomes effective on July 1. Then it can look for ways to replace the revenue that would have resulted from the computer tax. These could include an additional $50 million reduction in planned spending increases.

Reduce local aid

Legislators could also reduce by $75 million the amount of new revenue that is planned to be transferred from the general fund to the transportation fund. Local governments would benefit from the jobs saved and created in the computer field, so a reduction of $75 million in local aid would be partially offset. A surcharge penalty scaled to the number of points an individual carries on his or her driver’s license could also be considered.

Certainly, there are other creative solutions that legislators will propose to reduce spending and⁄or produce offsetting revenues that do not inhibit Maryland’s economic vitality.

Computer services and information technology are an integral part of Maryland’s economy in the 21st century. We need to foster its growth, not place a stranglehold on it. This is neither a partisan nor an ideological issue. It’s about creating and encouraging good jobs and high-tech development in Maryland.

Repeal the computer tax.

Kevin Igoe is a Republican political consultant and former executive director of the Maryland Republican Party. Cheryl Kagan is a Democratic activist and commentator and a former member of the House of Delegates from Montgomery County.