The Insider

Who is for us and who is agin' us?

TomLoveland — Thu, 28 Feb 2008 17:34:00 GMT

Review our Roll Call to identify legislators who support support repeal of the tech tax and also key legislators (members of the Senate Budget & Tax and House Ways & Means committees) who still need encouragement.

And keep in mind that legislators don't always report their true position. They may support one position, but find it advantageous to keep that close to their chest until the vote is taken. They may share their real point of view with just one or two trusted colleagues who are seeking votes.

Visit them. Call them. Give thanks or make your case as appropriate.

Write a letter to the editor. Praise the bill sponsors in public. Call on the others to support repeal.

And have some fun with this!

Success, Courage and Next Steps

TomLoveland — Thu, 28 Feb 2008 17:22:00 GMT

The report card on yesterday's event is in: A+!

"Hundreds of business people packed a rally... [They] filled a downtown Annapolis hotel meeting room and every stairwell, hallway, nook and cranny around it. ... [Legislators were] "shocked" by the turnout. ... After the rally, throngs headed to the House and Senate office buildings..." (Full article)

PRESENCE
We definitely made our presence felt in Annapolis. The dozen legislators who joined us had to muscle their way through the crowd to get into the room. Other legislators assumed by our crowds that yesterday was our hearing date. They haven't seen this kind of passion from business in awhile. And it moved the needle. Good job! Thank you all!

COURAGE
One of our objectives yesterday was to influence certain legislators. But we also emboldened our key legislative supporters. It takes a lot of courage on their part to stand up for our cause when the winds are blowing the other way. After yesterday they will fight on, stronger, encouraged that we have their backs.

PLEASE WRITE
I hope you feel emboldened by yesterday's outpouring! Now please send another round of messages to your legislators. The moment our volume let's down, our cause is lost. The more we keep the volume up, the more they'll appreciate that they simply MUST address this. Tell them it is clear from yesterday's mass rally that something must be done. Share your story. Share arguments you heard yesterday. Just keep on them!

NEXT UP: CALL
Our coalition is organizing a mass calling campaign. For greater impact, we all will call our legislators over a couple specific days, to be announced very soon. We will provide How To's for identifying your legislators and enrolling your employees/colleagues, and a sample script for the calls.

Dead vs. Dead Dead

TomLoveland — Thu, 28 Feb 2008 17:21:00 GMT

Yesterday some senior legislators said they believe the repeal is dead. That in light of projected budget shortfalls, it cannot happen.

Do not be discouraged by this! If a legislator uses this argument on you, remind them of the old saying in Annapolis: "There's 'dead'. And then there's 'dead dead'." Our repeal is NOT dead dead.

A lot of interesting things can happen in the last day of the General Session. There are many examples where bills that had been "dead" for weeks suddenly were passed in the final hours -- even the FINAL FOUR MINUTES -- of the Assembly.

No, our campaign for repeal is not dead. Because of your actions yesterday, it gained new life!

Computer Tax Will Hurt Md.

TomLoveland — Mon, 07 Jan 2008 06:44:00 GMT

Monday, January 7, 2008; D03

Maryland is proud of its strength in bioscience, financial services, health care, higher education and government contracting. Technology investment has driven innovation in those areas and kept our state nimble in a competitive global marketplace.

But the future of Maryland's strongest sectors is in jeopardy. In November, the legislature voted to extend the state's 6 percent sales tax to cover computer services. Many of us in Maryland's technology sector were astonished by the move, which will hurt the welfare of industries beyond our sector and will drive some businesses out of state.

This new tax, which takes effect in July, will put many Maryland businesses at a severe disadvantage. Innovative technology fuels business growth and job creation, but it can be expensive and risky. So it's often the last thing a business invests in, using the final dollars of its technology budget, if any remain. But now those final dollars will be diverted to the tax, significantly curbing investment in innovation and dampening job creation. Small businesses -- the least able to sidestep the tax and a key generator of new jobs -- will be particularly affected.

Of course, the tax will most deeply affect the computer services industry. Many customers simply will not be willing -- or able -- to absorb a 6 percent tax and will seek price concessions or use fewer services. To bypass the tax, large customers may stop issuing contracts for certain computer services and instead perform the work in-house. Customers with locations in multiple states will avoid the tax entirely by having their non-Maryland offices hire non-Maryland vendors. These actions will decrease demand for in-state computer services providers and send higher-paying technology jobs to other states, or even other countries.

It's important to note that this is not a 6 percent tax on profit, but on revenue. Some computer service firms follow business models that allow a profit of only 7 percent of revenue. Other companies -- including those having a bad year or investing heavily in their future -- earn a profit of less than 5 percent of their revenue or even take a loss. Add a 6 percent tax on revenue, and these companies may have no choice but to leave Maryland or shut down.

Consider my company, Mind Over Machines, which provides custom software applications and business intelligence solutions to clients in the mid-Atlantic region. Our headquarters are outside Baltimore, and we have an office in Bethesda and staff in New Jersey. Although our work is split between in-state and out-of-state customers, we have begun expanding our client base in Maryland. If the tax stands, we will abandon this uphill effort, focusing instead on helping out-of-state companies gain competitive advantage. And if the tax is interpreted to apply to them as well, we will seriously consider moving our headquarters outside Maryland.

Our story is not unique. Other companies are reconsidering their investments in Maryland. For example, CPSI is a 22-year-old, 150-person information technology staffing firm in Baltimore. If the comptroller's office issues a broad interpretation of the tax bill, CPSI's profit will be reduced by over 90 percent. John Eckenrode, CPSI's president, said, "We'll be forced to reduce staff, cut salaries, or both -- or move out of Maryland -- just to stay in business."

Many of us in Maryland's technology sector were caught off guard by the Legislature's action. The governor's proposed budget had targeted luxury services -- health clubs, tanning salons and property management -- all of which remain exempt. In the end, only computer services were added to the tax.

Passage of the new tax was a wake-up call for Maryland's information technology industry. In response, we formed the Maryland Computer Services Association, through which we will work together -- in coordination with the Maryland Chamber of Commerce, the Technology Council of Maryland and others -- to repeal this measure and ensure that the heart of the state's economy remains vibrant.

While we understand that Maryland needs to shore up its budget, this tax will have a particularly devastating impact on our state's economy, and we will do everything in our power to see it rescinded.

Tom Loveland is chief executive of Mind Over Machines and co-founder of the Maryland Computer Services Association, http://www.MarylandNeedsIT.org.

This Tax Will Harm Maryland Computer Service Firms

TomLoveland — Mon, 03 Dec 2007 13:35:00 GMT

As of July 1, 2008, you should include a new charge at the bottom of your invoices: "Maryland Sales & Use Tax: 6%." Actually, Maryland doesn't really care if you charge this 6% tax to your customers. However, you WILL report your company sales to the State and include a check for 6% of that amount, whether or not you collected it from your customers.

Many in our community see a problem with this:

Businesses generally are quite talented at avoiding easily avoided taxes, especially when those taxes represent material sums of money.
<6% becomes material very fast.
It is easy in many segments of the "computer services" industry to purchase competitive, quality service from geographically distant vendors.

Therefore, as a result of this tax, some amount of Maryland computer service revenue will be lost, both to out-of state vendors and to customers bringing computer service functions in-house.

Don't think that your customers will simply accept this tax and pay it without a thought. Some will ask you to make a price concession…or else. "As much as we love your services, we have a fiscal responsibility to evaluate other options that are readily available. Isn't there anything you can do to keep your cost competitive?"

Let's pretend you need to make full price concessions to keep all your customers. So multiply your revenue by 6%. Now, what's your profit margin this year? How do these two numbers compare? Feeling queasy yet?

At the very least, many of us will be distracted by this tax, jockeying to minimize its impact. Many of us probably will have to make some price concessions, cutting deeply into our profit and slowing or derailing plans for reinvestment and growth. Even worse, for some this tax could lead to lost clients and layoffs. Finally, if the yet-to-be-written regulations apply the law in full force, I firmly believe some companies will be put out of business unless they quickly hustle across the border. (All of this, by the way, reduces both the State's business and income tax bases.)