Maryland businesses and employers are no strangers to policies and initiatives that make doing business in our state more costly and challenging. Fortunately, over the years, we have consistently found ways to adapt to new regulations or the increased costs of doing business.
However, unlike in the past, today, an overwhelming number of our state’s business owners are on an economic rollercoaster, fighting for their survival amid an unpredictable global pandemic. Comptroller Peter Franchot has estimated that as many as 30,000 Maryland small businesses will close permanently by year-end. This is a tragedy and a long-term consequence of COVID-19 that will be with us for years to come.
It seems obvious, then, that this is the worst possible time to layer new costs in the form of a tax on digital advertising services on Maryland’s job creators. This is obvious, of course, to everyone, except the legislators pushing to overturn Gov. Larry Hogan’s veto of House Bill 732, the $250 million digital ad tax.
As reported in The Wall Street Journal, “Small-to-midsize businesses in particular have flocked to digital advertising during the pandemic …” – furthering demonstrating why the governor vetoed HB 732 and why the legislature needs to allow it to stand.
Today, businesses of all sizes are marketing online. Access to online platforms is direct and easy to manage, and the digital advertising ecosystem creates untold benefits across the entire spectrum of Maryland’s economy. In today’s hyper-virtual world, businesses increasingly must use online platforms to advertise their services and reach new customers.
Despite this, as the General Assembly returns to Annapolis, it will attempt to override the governor’s veto of HB 732 and implement this new tax on Marylanders and Maryland businesses. If the override is successful, the result will be increased costs for every single person and business that uses digital advertising.
Most importantly, this tax and resulting costs will not be borne by large, out-of-state tech companies, it will be passed on to Maryland businesses and consumers.
Maryland can look to France as a prime example of what to expect. In 2019, the country passed its own digital service tax.
A Deloitte study determined that the increased tax burden will mostly be borne by consumers and businesses that utilize digital marketplaces. It found that approximately 55% of the total tax burden will be borne by consumers, 40% by businesses that use digital platforms, and only 5% by the large internet companies that it intended to target.
Adding insult to injury, if the veto is overridden, Maryland would have the notorious distinction of being the only state in the country to enact an online advertising tax.
One thing is certain during these unpredictable times: the economic burden of this tax is more than Maryland businesses and consumers can currently bear.
Maryland job creators are struggling with economic uncertainty while trying to maintain operations to continue serving the communities where they live and work. Members of Maryland’s General Assembly should be doing all that they can to support our state’s job creators in overcoming the consequences of a global pandemic, not creating new obstacles to their survival by adding yet another cost to doing business in our state.
The issues and problems facing Maryland legislators are historic in their breadth and number. They should focus their limited time and attention on supporting the men and women who employ the vast majority of Marylanders.
They will find a waiting and willing partner in the Maryland Chamber of Commerce if they do.
— CHRISTINE ROSS
The writer is the president and CEO of the Maryland Chamber of Commerce.