Computer Services Sales Tax and the Colts
Dozens of state lawmakers have signed on to legislation to repeal a sales tax on computer services, but there is no consensus around how to fill an estimated $200 million budget gap that would create. Today, Republicans trotted out their idea: Spending cuts.
The Republican House Caucus compiled a list of proposed budget reductions that they contend would not burden state government or important constituencies. They would eliminate 500 vacant positions on top of 500 cut under Gov. Martin O’Malley’s budget plan, slow the rate of increase for community college funding, and take $23 million in unused funding for stem cell research. In total, the reductions add up to $203 million.
Some lawmakers are floating an increase to the gas tax or alcohol tax to replace the revenue that would be raised by a computer services sales tax, but Republicans said those proposals were non-starters with them. “You don’t need additional taxes to replace this one,” said Del. Anthony J. O'Donnell, the minority leader from Southern Maryland.
The generally anti-tax Republicans also balked at other tax increases pushed by O’Malley during the special session. But the computer sales tax was the “most unfair” because it was considered with little public input, O’Donnell said. He also noted that the computer tax repeal is one that could generate bipartisan support.
David Fraser-Hidalgo, part owner of Sandglass, a Web site developer in Kensington, said he didn’t know about the sales tax being imposed on computer services until days after the special session ended. He said it reminded him of another blindside that has roiled Marylanders for years: The departure of the Baltimore Colts football team in the middle of the night back in 1984.
“The legislature just slapped this together,” he said. “No one knew anything about it.”

Comments
As a software developer, I am really concerned. I work for a company right now doing custom programming, but vision my own company on a daily basis. The computer services tax was truly a slap right in the face. I have to think twice about running my own computing business, at least in this state. If companies can outsource work to India, they surely can outsource it to a different state.
Posted by: Shane | January 30, 2008 2:09 PM