As I see it

e thought the 2024 Maryland General Assembly session was going to be challenging, but we had no idea how bad it would become for businesses, particularly small businesses.

In a sad case of premonition, when the opponents of the passage of the Blueprint for Maryland’s Future expressed concern about how the program’s out years would be funded two years ago, the supporters of the bill dismissed those fears as unfounded.

Well, those fears weren’t only valid, they were understated.

Now, as a means of addressing this self-created fiscal cliff, the General Assembly is considering House Bill 1515, Sales and Use Tax — Rate Reduction and Services.

The bill might lead one to believe that the practical effect of the bill is to reduce the sales tax rate. And it does, by lowering the effective rate of the sales tax from 6 cents per $1 to 5 cents per $1.

This might normally generate great enthusiasm from ratepayers, but as with most draft legislation, the title of the bill doesn’t tell the whole story.

In addition to the one-penny reduction in the rate, HB1515 dramatically expands the goods and services to be covered by the Maryland sales and use tax. In fact, this bill represents an historic increase in taxation, with the potential to generate as much as $2.8 billion per year once fully implemented.

Look at it like this: If you need a service, basically any service, under this proposal, you will pay Maryland sales tax for that service.

We talk a lot about the ALICE (Asset Limited, Income Constrained, Employed) population. ALICE households need all of these services, too. They don’t have the discretionary income that wealthier households possess, so paying a sales tax becomes a major burden for them.

The same is true for those on a fixed income. Before any bill is passed, the General Assembly’s Department of Legislative Services offers a Fiscal & Policy Note, a plain English commentary on the purpose and effects of the bill. Legislators can review this note before they vote on a bill.

On a bill substantially like HB1515 offered during the 2020 legislative session, here’s what the state’s fiscal policy experts expressed: “Small Business Effect: As discussed above, expanding the number of services subject to the sales tax may result in a decline in consumer purchases of these services in the State. To the extent possible, residents may purchase services in neighboring states where these services are not taxed (or are taxed at a lower tax rate) or may choose not to purchase these services at all. The extent to which this may occur cannot be reliably estimated, but a majority of Maryland residents live within a short distance to a neighboring state and, therefore, could have access to service providers located in other states. While the percentage will vary from service to service, it is likely that many of the service providers in each of the service categories are small businesses.” Fiscal & Policy Note HB1628 (2020 Session) Anywhere in Frederick County is effectively a drive of 15 to 20 minutes or less to Pennsylvania, Virginia, and West Virginia.

Everybody supports the best possible education for our students. Our national economy is still facing serious uncertainty due to the effects of inflation.

Our employee costs have risen dramatically due to compensation and benefit mandates from the federal and state government. Our cost of goods has grown significantly, yet consumer confidence is still affected by the recent global pandemic.

It’s time that our legislators are held to a simple premise: While we want the best possible education for our students, it should not be done at the expense of tens of thousands of small businesses across our great state.

Rick Weldon is the president and CEO of the Frederick County Chamber of Commerce and a former Maryland state delegate.

Editor’s note: The Maryland House of Delegates’ Ways and Means Committee has a hearing on HB1515 scheduled for March 11 at 11 a.m.