Thursday, October 4, 2007

Sales Taxes on Services

I am particularly concerned about the Governor's plan to expand the sales tax to services. You see, I operate a service based business in Prince George's county, which is a short ride away from DC and a slightly longer way away from VA.

Currently I do not pay sales tax, because I am not selling any products. Over the years, I have found a competitive advantage and a niche for the business. What will happen if I have to suddenly pay a 6% sales tax?? Well, perhaps a service business located in DC will come and undercut my prices by 6%, and I will be out of work, along with 10+ workers living in the state of Maryland. So the state will lose all of our income taxes that they were getting. Or maybe I will relocate to DC so that I could stay in business, which would deprive MD of the property taxes, sales taxes on things that I buy, and income taxes that they currently get from me.

As I ponder my future, I can't help but notice the hypocrisy in the Maryland tax code. Maryland publishes the constant yield tax rate for property taxes, which designates the property tax rate that will provide municipalities with the same tax revenue as the year before. Since the value of houses go up (usually), the property tax rate can go down and achieve the same tax revenue.

Where is this thinking with the sales tax? If only some of the people (businesses selling goods) paid sales taxes before, and now the sales tax is expanded to more people, shouldn't the rate go down? I understand that the rhetoric is based on the theory that we need $1.7 billion in new money, and they would have us believe that merely collecting the same amount of taxes is not good enough*, but goodness gracious.

(*total poppycock.)

(A funny back story: in the first civics class I ever took in high school, our teacher would always refer to "rhetoric"....."what was Reagan's rhetoric", or "today we will examine the rhetoric", or things like this. But none of us ninth graders knew what rhetoric was, so one day we asked our teacher. He thought for a minute and responded: "Bullshit, I guess, I don't know....the philosophy of talk." How true.)

The Governor either doesn't know or doesn't care that his tax plan will hurt you and me. Might I suggest the following campaign slogan for his future Presidential run: "Martin O'Malley, stupid or ignorant, take your pick."

1 comment:

CherylT said...

Brian, I am with you on this one. An increase in the sales tax is one of the most regressive ways to increase state income. Ultimately, it doesn't work because the state just continues to expand its services and people who get fed up with the bigger dents in their wallets end up moving. What's wrong with cutting back services? Why are there so many subsidized services in this state anyway?