MARYLAND BUDGET & TAX POLICY INSTITUTE

 

STATEMENT IN OPPOSITION TO PROPOSALS TO REPEAL THE SALES TAX ON COMPUTER SERVCES

SB 41, SB 46, SB 138

 

March 12, 2008

 

The Maryland Budget and Tax Policy Institute opposes legislation to repeal the sales tax on computer services.  The proceeds from this tax will support education, health care, and other critical public investments.  It is important for Maryland to continue to expand its tax base to cover the growing service economy.

 

The main focus of our state’s economy has shifted from goods to services.  Our tax laws are still based on the old, goods-based economy.  The main problem with the computer services sales tax is that it singled out just one sector to add to the list of 12 services currently subject to sales tax.  In the future, the state should move to include a broad range of services in the sales tax. In the meantime, the Assembly should not take a step backwards.

 

The revenues from the sales tax go mostly towards the cost of health and education.  These are important public functions with growing unmet needs.  The state cannot ignore these escalating needs in its budget, and it cannot ignore this large and growing business sector in its tax base.

 

Proponents of repeal claim the tax will cause technology jobs to stream out of state.  The Maryland Budget and Tax Institute believes that this claim is exaggerated.  Businesses are here to take advantage of Maryland’s well-educated workforce, to be close to Federal government agencies, or to be close to other customers.  The 6% tax is not going to outweigh those advantages in very many cases. 

 

The Maryland Budget and Tax Policy Institute requests the Budget and Taxation Committee to make an unfavorable report on SB 41, SB 46, SB 138 and similar proposals.

 

Contact:  Neil L. Bergsman, Director

410-727-6367 x17

nbergsman@mdnonprofit.org