GBC’s Fry: The computer tax’s unintended consequences

Don Fry Commentary on WYPR

A significant unintended consequence of Maryland’s new 6 percent computer services tax, which takes effect July 1, surfaced recently when information technology firms in our state reported receiving recruiting letters from economic development agencies in Pennsylvania and Delaware.

The letters, from top development officials in each state, don’t specifically refer to the computer tax, but they invite Maryland IT companies to consider, quote-unquote, “expanding” to their states. They tout business friendly, low-tax policies, and governments that are “predictable and responsive” to business.

The computer tax issue is on the minds of most business executives I talk to these days. Several CEOs of large companies have told me they’re investigating the tax’s business implications and would seriously consider relocating their IT divisions outside of Maryland. Some of these divisions employ hundreds.

The Greater Baltimore Committee and other business advocates strongly support the repeal of the computer services tax before it can do serious damage to Maryland’s business growth.

More than a dozen bills are before the General Assembly that would either repeal or alter the tax. While there is significant support among rank-and-file lawmakers for repealing the computer tax, a general reluctance to support the tax’s repeal persists among the governor and legislative leaders.

But strong evidence is emerging that this hastily-enacted tax, intended to fill a government revenue gap, will inflict harm upon Maryland’s business climate that will greatly outweigh the benefit. It taxes a key technology business sector and a core element of our economy that Maryland is working hard to attract. We need to nurture investment in this industry, not discourage its development.

It’s becoming clear that the computer services tax is not smart policy. It’s not sound public policy for lawmakers to continue to support its enactment. The tax is not even in effect yet and it’s already harming our business climate and creating opportunity for our competitors.

That’s the bad news. The good news for Maryland lawmakers is that it’s not too late to correct this misstep by repealing it.

For the Regional Business Report, this is Don Fry, President and CEO of the Greater Baltimore Committee, for 88.1 WYPR, your NPR news station.

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