The much-hated-in-anticipation Maryland tax on computer services is repealed. But to replace those revenues …
The General Assembly repealed a new sales tax on computer services before it went into effect and replaced the unpopular $200 million levy with a combination of cuts and a three-year individual income tax surcharge on earnings of more than $1 million. Passed in the final hours of last year’s special session, the so-called “tech tax” was opposed by a broad consortium of business groups that warned the measure would destroy Maryland’s high-tech economy and cause a migration of well-paying employers out of state.
Ah, that’s the strategy. A mighty wave of unrest rose against the tech tax: It was a broadly based tax that also hit a large, vocal group of people with organizational and communication skills, so they mobilized an effective lobbying force. Upper-income taxpayers represent a smaller group and if they complain, you can beat them up for being selfish.
Except what’s the consequence to the state? The Maryland Chamber, which opposed the tech tax, had a good primer on the alternative tax scheme:
The proposed new income tax bracket of 6.25% would make Maryland’s top rate the 4th highest in the country (combined state and local), behind only California’s 10.3%, Rhode Island’s 9.9%, and Vermont’s 9.5%. The new combined rate of 9.45% would be significantly noncompetitive with our neighboring states of Virginia (5.75%), West Virginia (6.5%), Delaware (5.95%), the District of Columbia (8.7%) and Pennsylvania (3.07% gross). We believe that this income tax increase would be counterproductive to Maryland’s economic development.
Not a good campaign slogan: Making Maryland Less Competitive!
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