Howard County Maryland Blog

Local Politics and Current Events

Technology Tax

Posted by David Keelan on Tuesday, March 11, 2008

I don’t think I had to go to grad school to learn how regressive taxes can be to the economy.  One of the models we used last semester measured the effect of taxes on supply and demand.  Granted it was only a model (much more reliable than some of the climate change models – do you hear me Dr. Manns) but the point was that when misapplied taxes are growth killers.

That is why I think it is odd that while heading into recession (a growth killer of its own) Martin O’Malley needed to raise taxes.  Did the state of the current economy creep up on us?  No it didn’t.  We saw this coming – but instead of digging in and slashing spending it was decided that the best way to tackle an economic slow down was to take more money out of the economy.  If we are hurting now why not pile it on!

In economic terms Government spending is called an investment in the economy.  Many people will take that little piece of knowledge and try to beat fiscal conservatives over the head with it.  They want to twist that little piece of news into good news.  What they don’t want to hear is that private investment in the economy is much better and sustainable than Government spending.  In addition, there is less danger to freedom if Government is not permitted to grow.  That is what true conservatives really care about.

We are already seeing a decline in sales tax revenue because of the double whammy of higher taxes and the economy.  What kind of revenue increase do you think Annapolis is going to realize in new technology taxes?  They can only project that information.  They also projected that they will realize less jobs in this sector, which means smaller pay rolls, and lower income and sales taxes.  How do you think they balance those kinds of decisions?  These are smart people.  They know that the industry will suffer negative consequences and that this is a wealth redistribution scheme.  Do you think they cared about these technology workers and employees, and the companies (and those employees) who buy from them?  No, they felt it was an acceptable risk.

We are talking about the well being of real people.  Supporters of these taxes say it is for the greater good!  Sorry, I don’t buy it.  It is a money grab.  The business people have it and O’Malley wants to redistribute it among HIS priorities.

Today technology is not an option for a lot of companies, but there is a lot of discretionary spending in technology.  There are lots of substitute available in the market (just look on eBay).  Buyers can decide to postpone buying decisions – and according to game theory they likely will postpone buying decisions.  With the current economic environment and these taxes they are going to see a drastic slow down in technology spending.

Will the technology sector recover?  Eventually.  It usually does but it lags the rest of the economy.  The point is this.  Martin O’Malley just made the recession a lot worse for a lot of little guys in the technology business whether they work for Cisco, SAP, or are the owner of Tom’s LanWarehouse.

In the mean time he is doling out $600,000 pay raises.  Does anyone else find that to be ironic?  Do you really think Martin O’Malley cares?  He is a nice person, but he really is not thinking about these employees and small business people he is thinking about all the spending promises he made.

I voted for Ehrlich.

Maryland Computer Services Sales Tax hearings in Annapolis

Follow us on Twitter @TCMMdBio

When: March 12, 9:00 AM

Where: Lawyer’s Mall Annapolis, MD (directly in front of the State House and next to the Governor’s Mansion)

Why: This new tax, which takes effect July 2008, will put many Maryland businesses at a severe disadvantage. Small businesses — the least able to sidestep the tax — will be particularly affected.  This tax will hurt the welfare of industries beyond the Tech sector and will also drive some businesses out of state! Imposing a 6% sales tax on computer services like computer facilities management, network maintenance and custom programming is bad policy.

RSVP: Brian Levine, Facebook or Meetup.


Please mark your calendar to SPEND THE MORNING IN ANNAPOLIS Wednesday, March 12. The rally will crescendo just before 10 a.m. as legislators walk past the rally to their floor sessions in the State House.

Later that afternoon, Tech Council of Maryland staff and volunteer leaders will testify in hearings on the six percent Computer Services Sales Tax issue in both the House and the Senate. 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.

Fight Tech Tax Coalition members include Tech Council of Md, the Maryland Chamber of Commerce, the Greater Baltimore Tech Council, the Charles County Tech Council, Montgomery County Chamber and Howard County Chamber. Thank-you for your support!


One Response to “Technology Tax”

  1. Jim Walsh said

    I am half-amused to see that MOM has finally got religion and wants to repeal the tech tax. Congratulations to the IT industry for giving a much-needed economics lesson to the Democrats in Annapolis. I’m only half-amused, however, because MOM wants to find an alternative revenue source to make up the revenue “lost” because they can’t raise taxes as high as they originally wanted to.

    I was also amused by MOM on the radio yesterday (although I’m sure he hasn’t intended on being as funny as he is), defending his high-level pay raises by comparing the government of the State of Maryland to a large corporation that needs expertise in a diverse range of fields. Just more proof that the guy is clueless. If any large corporation were run like Maryland state government, its stock would long ago have been de-listed and trading on the pink sheets as the final chapter before filing for its inevitable bankruptcy.

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