The software industry lacks political clout

So I’m still upset at this new Maryland tax on software services. I hope it is not a harbinger of what is to come. Hopefully it is just a bad move that is a short term fix for whatever is ailing Maryland’s budget. But I think it points out something that is broken about the software industry. We lack political clout.

The Washington Post had this to say in its lead editorial today titled O’Malley Increases Influence With Wins on Taxes and Slots:

Interest groups with savvy lobbyists and deep pockets got special breaks; car dealers, for example, were treated to a subsidy worth $80 million. Those who lacked comparable clout, like some segments of the computer services industry, will be hit by a sales tax increase that, inexplicably and illogically, still does not apply broadly to most services in the state.

Now, I’m not saying that we need to have any subsidies, tax breaks, or any other sort of special consideration. But it is completely unfair that the computer services industry was singled out for a new tax. We should at least be able to defend ourselves from getting sand kicked in our collective face.

Perhaps it is because thankfully, we’ve been successful. The Washington Post had this to say in its main article yesterday about the new tax titled Md Lawmakers Approve Package:

The only service agreed to yesterday by House and Senate fiscal leaders was computer services — largely because of the nearly $200 million a year in estimated revenue it could generate.

There is some hope that it will be reversed in 5 years when they review it:

Computer services that would be subject to the tax include consulting and programming help, as well as software installation and hardware maintenance. Legislative analysts said at least nine other states tax computer services. The group of legislators agreed to revisit the issue in five years to determine what effects the tax has had.

But I wonder… will we be in any better shape then as an industry to defend ourselves?

3 Replies to “The software industry lacks political clout”

  1. This outcome doesn’t have to mean a lack of political clout. Part of it, I think, is the way the legislative process worked. At the beginning of the special session, lawmakers held hearings on taxing a specific set of services– health clubs, for one. And lobbyists representing those services came to Annapolis and told lawmakers not to do it. Lawmakers listened (incorrectly, I’d say), and dropped these services from their tax package. But then, late in the game, after the public hearings had been completed, they came out of left field with this computer services idea. Lobbyists simply didn’t have time or warning to respond. And some lawmakers took the floor to complain, for the record, that lobbyists for affected computer industries should have had the opportunity to say what they thought about this idea.

    Of course, the $200 million price tag didn’t hurt either.

  2. So it looks like it may apply to all computer services businesses that do business in the state, that’s unclear; also two other states have taxed computer services before and repealed them later New tax plan draws scorn and praise – Levy on computer services decried:

    In general, the sales tax is applied to any company that sends employees into the state to meet with clients or provide services, Syrylo said. But there are stickier questions, such as what happens if several companies partner on a program, she said.
    ‘‘It can cause administrative nightmares,” Syrylo said. In some states, such as Pennsylvania and Florida, similar laws have been repealed, she said.

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