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A Year After 'Tech Tax' Scare, Maryland Firms Follow Up With Lawmakers

By Kim Hart
Monday, February 23, 2009

A year ago, Maryland technology companies were holding rallies and pushing a last-minute lobbying campaign at the State House as they tried to persuade legislators not to impose a new tax on the industry.

On Thursday, many of the same firms were back in Annapolis for the first Maryland IT Showcase, an open bar event designed to remind lawmakers that tech is a big economic engine for the state and, more importantly, that the companies still don't want to be taxed.

"Last year was a big wake-up call for us," said Larry Letow, vice chairman of the Tech Council of Maryland and president of Glen Burnie-based Convergence Technology Consulting. "It's important for our industry that we maintain acknowledgment from the state."

The Maryland General Assembly passed a 6 percent "tech tax" during a special session last fall in which lawmakers were trying to fix the state's deficit. The tax was aimed at a range of technology companies, from software designers to data processors, and was projected to generate more than $200 million a year in revenue for the state before it expired in five years.

Tech firms from across the state quickly mobilized and hired lobbyists to fight back, saying that the levy would weaken the state's growing information technology sector and prompt firms to relocate. In April, lawmakers repealed the "tech tax" and instead filled the financial shortfall by imposing a surcharge on millionaires in the state, and they also took about $100 million from transportation projects and state agency savings.

Jay LaPointe, vice president of sales and marketing at DP Solutions, an IT company in Columbia, said the firm sent buses full of employees to Annapolis for every anti-tax rally. The "tech tax" could have driven them out of Maryland, he said, adding that the company was courted by Virginia while the battle was underway.

"Our customers didn't understand how it would affect them," he said. "They didn't understand that if our taxes go up, their rates go up."

The groups that had banded together to fight for the repeal -- the Tech Council of Maryland, the Chesapeake Regional Tech Council, the Greater Baltimore Technology Council and the Maryland Computer Services Association -- held last week's event to build on relationships with lawmakers they got to know last year.

House Speaker Michael E. Busch (D-Anne Arundel), has told tech executives not to worry about another tax, said John Eckenrode, president of the Maryland Computer Services Association.

"But anything's possible and it can happen very quickly in this environment," he said, referring to the ongoing economic downturn. "Next year is an election year, so it should be okay, but 2011 could be another story."

Senate President Thomas V. Mike Miller Jr. (D-Calvert) initially supported the tax but eventually advocated for its repeal. That made him quite popular at the event, which was held at the Governor Calvert House on State Circle.

"Not too long ago, all our jobs were manufacturing," Miller said soon after he walked in. "Now we have a knowledge-based economy" to which the IT industry is important.

Rick Harris, executive director of TCM, said companies are also trying to help legislators with their tech agendas.

"We want to ask what we can do to help back their initiatives," such as green tech projects, he said. "We know it's going to be a tough budget cycle, so we want to use that time to educate them about what we can do."

Harris formed a Facebook group called "Maryland IT Rocks" to promote what state businesses have to offer.

Mellenie Runion, marketing director for TeleBright, a Rockville firm that helps clients monitor costs such as cellphone bills and energy use, used Thursday night's event to pass out fliers about the company with a banner across the top that read "Thank you for the computer tax repeal."

"We're a small company," she said. "Every dollar matters."

She said TeleBright took a hit when one of its biggest clients, Lehman Brothers, disappeared. "Had we been hit by the tax as well, we might not be here now," she said.

Kim Hart writes about the Washington technology scene every Monday. Contact her at hartk@washpost.com.

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