The Reinvented Blog

It continues to be massively frustrating that Maryland has passed a new 6% tax on computer services without hearings or industry input or much thought. Two months after passing the bill, more than half the legislators have signed a bill to repeal it. One wonders what these same legislators were thinking when they voted for the tax, but at least they now have seen its folly. However, the Ways and Means Committee seems very likely to prevent a vote on the repeal. Wasn’t this one of the hardest ideas to understand when you were a young idealistic kid in high school government classes – that we have a representative democracy with elected representatives, but then they are subject to the control of a few powerful committee members?

If you want to help with the efforts to repeal this tax, go to www.fightthetechtax.com, organized by the Tech Council of Maryland and the Maryland Chamber of Commerce. And if you are a Maryland resident, you can use the site to send emails to your state legislators with just a few seconds of effort.

Maryland’s state legislators have made a very short-sighted decision in voting to impose a 6% sales tax on computer services. It creates a direct burden on computer service firms and the companies that need their services. Perhaps more importantly, it sends a strong message to the technological community that the state does not want to create a good climate for them. Don’t the legislators understand that it is in Maryland’s best interest to encourage technological businesses and development?

By any standards, the tax is unfair and arbitrary. Maryland does not tax other comparable services. The legislature also imposed the tax in a special session without an open hearing or chance for testimony. Maryland’s Comptroller calls the measure “disturbing,” “highly irregular,” and might “undermine our ability to compete effectively in the global technology marketplace.” The tax is also very difficult to administer and has been a failure in the few other states that have experimented with it.

What frustrates me even more is that I think it represents the great divide between the people who get the future of technology and those who don’t. The legislators originally had several service businesses under consideration for taxation, including landscaping, massage, and auto repair. But yet the final bill included just computer services. I think many of the legislators voted to tax computer services rather than landscaping or auto repair because at a gut level they understand the economics of lawn-care or auto repair businesses but are clueless about computer services. When you don’t understand something, it is much easier to make it a target without realizing the far-reaching consequences.