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Well, it's day 5 of O'Misery in O'Maryland, and already, business groups are pushing back on including computer services -- anything from web design to technical consulting to wiring cable -- in the new 6% sales tax.
All fine and good, but where in the hell were these supposed "business groups" during the Special Session?
I am going to hold my breath while I wait for an answer...
Okay, I started to breathe again, because I know the answer: no where.
Let's look at a couple of things with this addition to the tax.
First, most businesses don't give a rats ass when they get hit with higher taxes. Why? Because they can generally pass that tax on their customers. That is the way business taxes work. Business taxes always trickle down to the consumer. And that is why the business groups were no where to be found during the Special Session, despite the gobs of money they have contributed to O'Guvnah, O'Senate President, and O'Speaker.
Second, the businesses this really hits hard are the small LLPs and LLCs that don't have the benefit -- as Senate President Mike "Man Perm" Miller" stated tonight on State Circle -- to just "write it off". The second group of businesses it hits hard are the actual firms in Maryland that do this work, since their services now cost 6% more. If you are computer geek and do a lot of "side work" (like I used to do), you have zero incentive to do it anymore, since your prices just took and automatic bump. Furthermore, if you are a one man shop, your costs of compliance just jumped dramatically. Now, you have to file for a sales and use tax permit, make quarterly payments, and make sure all your "i"'s are dotted and "t"'s crossed. If I were still in the business of doing side work, I'd have to hire a tax account just to make sure I don't go to jail. This is what we in the prognosticator business call the "hidden cost of governmental stupidity".
Third, the General Assembly decided to go after the goose that lays the golden egg. They know, just as well as all smart Marylanders do, that computer services are becoming a huge business in Maryland. Huge business with -- typically -- high margins. This is mainly do the fact that the state lives off the teat of federal jobs, and has the attracted a lot of businesses to support the IT needs of federal government. BRAC only makes that goose more golden. Yes, it is true-- those companies don't have to collect sales tax on federal contracts. But, the federal business isn't their only line of business. And unless you are SAIC, CACI, Northrup Grumman, or Lockheed Martin, you can't live by federal largesse alone.
Plus-- computer services ALSO includes work done by GeekSquad and Firedog (Best Buy and Circuit City respectively) in people's homes. That is more of the golden goose they get to suck off of.
Given all this, the General Assembly -- as highlighted by ManPerm's comment -- thought this would largely be a great way to raise revenue. But what if some of these companies, which also have offices in Virginia, decided to close their Maryland offices, thereby removing themselves from having a "physical preference"?
Didn't think about that one, did they?
Or, what if businesses who need these services decide to go out of state for those services? With today's technology, you don't need to sit right next one to do training. And you don't need to be on site to do the work. My employer is located in Central Florida, I do all my work in Maryland. We have clients in New York, Indiana, Florida, Canada, and the United Kingdom. Technology changes the rules of time and space.
The basic lesson here is that increasing the marginal price of a product high in demand and pushes markets to seek out lower marginal prices. And when that happens, companies selling at the higher marginal price close.
So my response to the businesses pushing for a repeal is this: where in the hell were you when you weren't pushing this agenda in November?
And, are happy about all that money you gave to those slag whores in statehouse now?