3 Proposed Taxes Could Hurt Anne Arundel Businesses, Leader Says

ANNAPOLIS, MD — One would tax digital advertisements. Another would tax some property transfers. The final would tax wealthier residents at higher rates. All three would be bad for the local economy, one business leader said.

Patch recently partnered with several local organizations to bring you their latest news. This guest contribution comes from the Anne Arundel Chamber of Commerce. Here's what President and CEO Mark Kleinschmidt wrote about the proposed taxes:

"There has never been a more challenging and stressful time to operate a small business. The COVID-19 pandemic has hit the small business community very hard[,] but this week[,] as I was talking to business owners, many expressed optimism about the start of an economic recovery. It seems warmer weather and the desire for many consumers to “get out” and return to normal activity is fueling [an] increased level of business. COVID-19 restrictions are also being relaxed and the vaccination rate is going up while the number of positive COVID cases is going down.

These are all good signs and hopefully the trend will continue and the economic recovery will pick up steam. While business owners are happy about the increased level of activity, they are quick to note that sales are still way below pre-COVID levels. In addition, they expressed some concerns about a series of tax proposals that can slow down the recovery and cost business owners and consumers money. The Chamber shares their concerns and has reached out to State and County elected officials to let them know our thought about the following tax proposals.

Digital Advertising Tax

This is a controversial tax that the General Assembly approved by [overriding] the Governor’s veto. It creates a new tax on digital advertising on platforms such as Facebook, Google and other digital platforms. It will operate pretty much like a sales tax and the big tech companies will pass the tax along to [consumers]. The fight is not over, as the US Chamber of Commerce, the Internet Association, NetChoice and the Computer and Communications Industry filed a suit against the State of Maryland citing that it violates the Internet Tax Freedom Act and is an infringement of the Due Process Clause of the US Constitution.

The Chamber supports the concept of not taxing digital advertising since it will increase the cost of advertising[,] particularly for small businesses. The tax makes Maryland the first state to tax digital advertising and establish a precedent for additional taxation and sends the wrong message to businesses of all sizes.

Surcharge on Transfer Tax

Anne Arundel County has asked the General Assembly for the power to create a surcharge on the transfer tax for real estate purchases valued at more than one million dollars and use the proceeds to start a new affordable housing fund that has not been set up.

The Chamber does not like this bill because it will be harmful to the economic growth of the economy and disproportionately hurts small [businesses that are] seeking to expand or relocate. The Chamber recognizes the need for affordable housing in the County and supports a comprehensive approach to increasing the supply of affordable [housing] but does not support the allocation of tax dollars to the proposed [and] undefined housing fund. If the General Assembly passes this bill[,] the County Council would have to pass legislation to implement this tax.

Progressive County Income Tax

Several County Executives, including Steuart Pittman, have lobbied the General Assembly to give the County the power to create a progressive tax schedule for the County’s portion of the income tax. This would allow the County to raise the income tax rate and implement a progressive tax structure with [a] higher tax rate for higher income.

If the General Assembly [gives] each county the authority to do this, the County Council would have to pass legislation to establish the new rates and brackets.

The Chamber believes this legislation would make Anne Arundel County a much less attractive place for businesses and high-income individuals[;] both would seek to locate and reside in lower tax counties or states. Trying to establish ... a “progressive tax structure” that is equitable would be difficult and create great political turmoil for Maryland counties which would have to ultimately vote on the new tax structure.

My role as President of the Chamber gives me the opportunity to talk to a lot of business owners and learn more about the challenges they are facing. I am also able to share their concerns with members of the General Assembly and County Council. The last twelve months have presented unprecedented challenges and new levels of stress for business owners. There is great hope to see economic activity return to pre-pandemic levels[,] but it is going to take a lot of shots in the arm and smart public policy. We have already lost hundreds of small businesses and the last thing the remaining businesses need are tax increases that drive up their costs and hold back economic growth.

Mark Kleinschmidt is the President and CEO of the Anne Arundel Chamber of Commerce located in Annapolis, MD."

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