State House Update: Computer tax defies realities of ‘business physics’

In this week’s State House Update, Greater Baltimore Committee president and CEO Donald C. Fry disputes the notion of lawmakers who say they supported the passage of the new 6 percent computer services tax because it is “vendor neutral.”

A piece of legislation “cannot suspend the laws of fiscal reality and business physics,” Fry says. “By definition, a ‘vendor neutral’ tax is ‘customer negative.’ In a free-market system, when you add 6 percent to a business cost, whether to the vendor or the customer, there will almost always be some form of reaction — often unintended.”

An unintended consequence of the tax surfaced when Maryland IT firms recently reported receiving letters from economic development agencies in Pennsylvania and Delaware inviting the firms to consider “expanding” to one of the neighbor states, Fry writes.

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