Marylanders for Tax Fairness, a coalition of businesses, advocacy groups and individuals, launched a campaign on Tuesday to oppose the General Assembly’s potential override of a $350 million tax revenue bill vetoed this spring by Gov. Lawrence J. Hogan Jr. (R).
The digital advertising bill was originally introduced by Senate President Bill Ferguson (D-Baltimore City). In the final days of session, it was combined with other revenue-generating tax bills as part of an overall plan to cover increased costs of education reform.
Ferguson and Democrats who supported the legislation said it was intended to target only a small number of massive companies.
“This tax affects companies only making $100,000,000 or more a year on the free exploitation of Marylanders’ personal and private data,” Ferguson’s office said in response to the ad. “We have, and will continue to stand side-by-side with small businesses to protect them from being taken advantage of by multinational corporations. Shame on these out-of-state corporations that are looking to harm Maryland small businesses instead of paying their fair share.”
Opponents in the legislature and business community argue that the costs of the legislation will be passed on to smaller companies — and in turn to consumers.
“Although this looks like a tax applicable to only large companies, businesses and consumers should not be fooled,” said Cailey Locklair, president of the Maryland Retailers Association. “Ultimately, small businesses will bear this cost and consumers at the end of the day will pay for it.”
Mike O’Halloran, state director of NFIB in Maryland, an advocacy group for small businesses, said the tax was coming at a time when companies are turning more frequently to the internet and social media to get their names in front of a tech-driven customer base.
“Our members should not be the first in the nation to pay a new tax when they’re struggling to keep the doors open and Marylanders employed,” he said.
Other groups have argued that the bill is an infringement on free speech, including the Maryland Delaware D.C. Press Association, to which Maryland Matters is a member.
In April, Maryland Attorney General Brian E. Frosh (D) wrote to lawmakers that there is a chance the law could be struck down as unconstitutional, though the individual provisions of the bill are not clearly unconstitutional.
The bill passed along party lines on the frenzied last day of the 2020 General Assembly session, which ended abruptly as coronavirus spread through the state.
A Department of Legislative Services fiscal analysis concluded that the digital tax could generate as much as $250 million in state revenue annually. The amended bill also includes an increase of the state’s tobacco tax, as well as an expansion to electronic smoking devices. The tobacco tax increase could generate as much as $100 million in the first year of implementation, but would be expected to decrease in subsequent years, according to analysts.
The proposed digital tax is the first of its kind in the U.S.
Other states have considered a similar digital tax, but not passed legislation. Several European countries, where internet and social media laws are much different, have considered such a tax; Hungary and France have implemented one.
Hogan vetoed the tax bill ― as well as the education reform plan and other revenue bills ―in May, citing the estimated costs and economic uncertainty.
The coalition said it includes nearly 100 businesses, organizations and individuals “who have joined together to fight against unfair taxes thrust upon the state’s leading job creators in the middle of a worldwide pandemic and the worst possible time in modern history.”
The campaign also released a video on Tuesday featuring Tim Bonner and Pat Bonner-McElroy, who own Tim’s Automotive and Towing in Baltimore County.
“Meet Pat and Tim. They own a small business here in Maryland. They advertise on the internet,” an ad begins. “Meet the Maryland legislature. They decided to tax digital ads and thousands of small businesses.”
“Governor Hogan said no. Now the legislature wants to overturn Hogan’s veto,” the ad continued. “A new $250 million tax during a pandemic. So stand with Governor Hogan and small businesses like Pat and Tim’s. Tell your legislators, stop the digital ad tax. It’s a bad time for a bad idea.”
A national group of a similar name, Americans for Tax Fairness, advocates for comprehensive tax reform that includes requiring corporations and the wealthy to pay more.