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The Tentacle


February 6, 2008

The SB2 Virus

Kevin E. Dayhoff

Last November the Maryland General Assembly inadvertently installed a “Trojan Virus,” now named “SB2,” on the critically important Maryland technology industry.

The “SB2” virus was hidden in a program called “The Tax Reform Act of 2007.” It was downloaded on the backs of hard-working Marylanders by legislators as they put the finishing touches on the special taxing session, in an attempt to ameliorate a perceived budget deficit based on fuzzy numbers and voodoo math.

Who knew?

With no meaningful input from the public, Senate Bill 2 passed the Senate on November 9 by a vote of 24 to 20. The House passed an equivalent measure on November 13, by a vote of 74 to 36. (Take note of these numbers…)

It passed in spite of the heroic last-ditch efforts of Eastern Shore Republican Delegate Jeannie Haddaway, an accomplished techie – a graphic artist and web designer. She offered an amendment on the floor to remove the computer tax component from the bill just before the final vote.

Unbeknownst to Marylander until after the vote, the SB2 virus extended the (increased) sales tax to computer services. According to a Department of Legislative Services’ “malicious software alert” – “The Legislative Wrap-Up,” – the software code of the legislation, promptly executed and installed into law later on November 19, includes taxes on “computer facilities management and operation, custom computer programming, computer system planning and design that integrate computer hardware, software, and communication technologies, computer disaster recovery and data processing, storage, and recovery, as well as hardware or software installation, or maintenance and repair.…”

In spite of the fact that Democrat Baltimore City State Senator – and Senate majority whip – Lisa Gladden has determined that any criticism of the tax increases is “undemocratic,” indulge me, please.

Yes, dear reader, at the Greater Baltimore Committee’s 2008 Legislative Forum on January 28, Senator Gladden said (please stand while your read this next part,) that “we have a responsibility, if not to ourselves, then to the larger community. We have to pay taxes.”

Yeah, right.

You may resume sitting now, continuing to hum “America the Beautiful.”

For those following along on their computers at home, the final version of “Senate Bill 2” came about as the result of a Google search by the governor and General Assembly for anything that breathes or moves and was therefore available to be taxed.

With “safe search” off, and armed with plenty of Twinkies and coffee, the quest resulted in 94 bills being introduced, 34 in the Senate and 60 in the House.

SB2 provided some delightful operatic moments such as the hearing on November 3rd. It was there, according to the Capital News Service, that an “unlikely alliance of tattoo artists and interior designers testified …against a proposal to extend the sales tax to their services, one of dozens of revenue-generating bills heard by a House committee.”

“The bill, co-sponsored by Delegates Justin Ross (D., Prince George's), and Anne Kaiser (D., Montgomery) would also declare body piercing, tanning salons, home-moving services, and swimming pool and hot tub cleaning as ‘taxable services’ subject to the sales tax.”

A tax on “hot tub cleaning” services? Ay, caramba. I’m not making this up.

Like kids in a candy store, the Maryland General Assembly – motto: “No person or their property is safe during our legislative session,” – choose to eschew putting a curb on the state’s out of control spending.

However, a funny thing happened when many of the legislators got home: a people’s revolt quickly sprouted from the ill-advised fruits of their labors.

Fast forward to this year’s legislative session and, according to a coalition of the Maryland Chamber of Commerce and the Tech Council of Maryland (www.fightthetechtax.com) as of January 31, nearly a dozen [malicious software removal] bills have been introduced.

HB196, in particular, is co-sponsored by a majority of the House of Delegates – 72 of the 141 members of its members.

However, it seems that the success of the legislation “hinge(s) on whether or not lawmakers can agree on a measure to replace the $200 million that the new tax would reportedly generate.”

The “Fight the Tech Tax” web site is very informative – and provides an excellent synopsis of the (obvious) “Five Reasons to Repeal the Tech Tax:” the tax stifles economic development and job creation; damages Maryland’s competitiveness; hurts small and growing companies; harms important growth industries; and last, but not least, it will be an administrative nightmare.

In spite of Senator Gladden’s admonition, among all the unpleasant – and many will argue, unnecessary tax increases enacted last November – perhaps the “Tech Tax” is the most egregious as it strikes at the one economic engine and jobs creation bright spot in Maryland – the technology industry. This is true especially for the Central Maryland region of the state.

However, powerful foes have rallied aggressively against repealing the tax.

According to the “Fight the Tech Tax” web site, “House Ways and Means Committee Chairman, Del. Sheila Hixson (D., Montgomery), said her committee would not hear any of the repeal proposals until after the Senate is finished with Gov. Martin O'Malley's budget bill.”

That’s coded language for one of the oldest tricks in Annapolis: stall it in hopes of running out the clock.

Andrew Green wrote in the Baltimore Sun: “‘I think we'd be willing to look, but without overwhelming new data or evidence, I doubt we'd be willing to change,’ said Sen. Ulysses Currie, the Prince George's County Democrat who chairs the Budget and Taxation Committee.”

Senate President Thomas V. “Mike” Miller Jr. (D., Calvert) has been quoted in numerous accounts as saying: “I'm not of a mood to repeal the computer tax.”

If you are in a mood to see that the “Tech Tax” is repealed, consider contacting your Maryland legislator today. Consider calling to their attention your support of House Bill 196 and politely remind them of the “Five Reasons to Repeal the Tech Tax.”

Kevin Dayhoff writes from Westminster: E-mail him at: kdayhoff@carr.org



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