Friday Five | March 6, 2020

Did you know that on this day in 1902, the permanent U.S. Census was created by legislation passed by Congress? A good segue into item #2 in today’s Friday 5.


1. Coalition of business organizations unites against tax on services; HB 1628 dies in the House

Thank you to our members who took time out of their busy schedules on Monday to join the Maryland Chamber and fellow business organizations in speaking out against HB 1628: Tax on Services.

They say a picture is worth a thousand words—and the image of representatives from 29 business organizations standing alongside one another to reject this misguided bill won’t soon be forgotten. It was captured by numerous media outlets, including the Associated Press, the Washington Post, WBAL-TV and the Maryland Reporter—just to name a few who covered the press conference.

Late Wednesday evening, the House Ways & Means Committee Revenues Subcommittee issued an unfavorable report on House Bill 1628, ending the legislation’s run this session.

While the subcommittee vote to kill the bill shows that the House heard and received the upswell of opposition from the business community—a tax on services is still very much in play this session.  The House is also considering a bill that was heard in Ways & Means on Monday, House Bill 1354, which expands the sales tax to a list of specified services which the bill sponsors have deemed “luxury” services.  It presently includes things like marina services, golf memberships, jewelry and watch repair, to name a few. It is our understanding that the list of covered services will grow as amendments to the bill are offered.  The subcommittee moved to table the vote on HB 1354 until later this week.

The bottom line is that any expansion of sales tax to services is bad policy—it picks winners and losers from among industries and puts these businesses, many of which are small businesses, at a distinct competitive disadvantage relative to our neighboring states who do not have a similar tax on specified services.

2. Census Day 2020

Every 10 years, the U.S. Census Bureau aims to count every person living in our country, as required by the U.S. Constitution in Article 1, Section 2. The data collected determines the number of seats Maryland has in the U.S. House of Representatives and is also used to make funding decisions around critical programs like Medicare.

Census data, which includes income levels, household size and homeownership, can also help businesses in Maryland understand their potential customer base, select ideal business locations, implement consumer pricing strategies and make informed decisions overall. Members of Maryland’s congressional delegation would like to know if you have any examples of a business decision you have made after taking census data into account. The Maryland Chamber of Commerce is collecting those examples and aggregating them to provide to our members of Congress. If you have any examples you would like to share, please send them to Andrew Griffin, senior policy analyst, at agriffin@mdchamber.org.

Click here for more information on the census in Maryland, and make sure you are counted on Census Day 2020 (April 1).

3. Taking precautions for coronavirus

Just yesterday, three cases of coronavirus have been confirmed in Maryland. Governor Hogan has since declared a state of emergency for the state. He has said that the state is taking every precaution to keep Marylanders safe. According to WBAL-TV, earlier this week, the Maryland State Public Health Laboratory was approved to test for the coronavirus, which means test results no longer need to be sent to Atlanta and the wait for results will shorten. In addition, the Maryland Emergency Management Agency raised the state’s activation level to “enhanced” to mobilize additional resources. The Hogan administration is also submitting a supplemental budget, which includes $10 million in an emergency coronavirus preparedness fund. Emergency legislation was also submitted to allow for the potential transfer of any available resources from the rainy-day fund for costs stemming from the state’s coronavirus response efforts.

As of this morning, 31 Maryland patients had been tested; three cases have tested positive; 17 cases came back negative and the remaining 11 were pending. Marylanders can call 211 for more information or click here for up to date information.

4. House of Delegates fast-tracks education reform bill  

The Maryland House of Delegates is on track to approve a massive overhaul of its public education system by the end of this week.  On Wednesday, the House Appropriations and Ways & Means Committees voted favorable with amendments on HB 1300, the Blueprint for Maryland’s Future-Implementation (Kirwan Commission), and it now heads to the floor for consideration by the full House of Delegates. It is our understanding that the House intends to vote it out favorably by the end of the day.

On Tuesday, key subcommittees voted in favor of an amended bill that drastically slashes local funding obligations for Baltimore City and Prince George’s County. Fifteen other counties also would see a reduction in their obligations. Republicans on the subcommittees voted against the measure, calling the price tag fiscally irresponsible. That same day, the Baltimore Sun editorial board addressed the new developments in an opinion piece (“Maryland legislators adjust for reality in Kirwan costs”).

If the House of Delegates approves the bill, it would go to the state Senate for approval. If the Senate approves the bill, it would then be sent to Governor Hogan, who has been an outspoken critic of the “Kirwan plan’s massive tax burden.”

5. Hearings happening today

Members of the Maryland Data Center Coalition will testify today in support of House Bill 1339, legislation which would level the playing field and attract data center business to Maryland.

Data centers are secure facilities that house the computer and network equipment that store, process and distribute large amounts of data. They are considered the foundation of today’s digital economy and the backbone of the rapidly growing technology sector.

The economic impact—both direct and indirect—of data centers is substantial. According to a report by the U.S. Chamber of Commerce Technology Engagement Center, during construction, a typical data center employs roughly 1,700 workers, provides $77.7 million in wages for those workers, produces $243.5 million in output along the local economy’s supply chain and generates $9.9 million in revenue for state and local governments.  Every year thereafter, the same data center supports roughly 160 local jobs, paying $7.8 million in wages, injecting $32.5 million into the local economy and generating $1.1 million in state and local revenue.

However, the positive economic impact of data centers does not stop there. The incremental local taxes paid by data centers directly and indirectly support schools and law enforcement, as well as improving local public infrastructure including the expansion of broadband.

House Bill 1339 would provide a sales-and-use tax exemption for the sale of qualified computer technology—including computer equipment, software, servers, routers, connections, and other enabling hardware—for use at a qualified data center. Today, thirty-five states provide data centers with some sort of sales-and-use tax exemptions for the purchases of required equipment.  In 2019, Illinois, Indiana, and Alabama passed significant legislation helping to attract data centers to come to their states.  Locally, Pennsylvania has also introduced key legislation to expand existing incentives.  As well, within the last 5 years, no large-scale enterprise data center has located in a state that imposes its full sales tax burden on data center equipment which underlines the importance of this legislation to states seeking to share in the benefits of the digital economy.

According to a study conducted by Mangum Economics on behalf of the Maryland Chamber Foundation, the potential economic and fiscal impact of data centers in Maryland is immensely positive.  The study analyzed four Maryland counties for economic and fiscal impact of just one large data center locating in their jurisdictions. In their preliminary findings, analysts determined that a large data center would provide a very high benefit to cost ratio for these counties in terms of the tax revenue it would generate relative to the government services that it and its employees would require.

The cross-file, SB 397, was heard by the Senate Budget & Taxation Committee last month.


Other important upcoming dates:

March 10th – Committee reporting courtesy date (Each committee must report their bills out by this date.)

March 16th – Crossover Date (Each chamber must send the bills they intend to pass favorably over to the other chamber.)

March 30th – Budget bill must be passed by both chambers.

April 6th – Sine Die (adjournment)

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