Maryland CPAs want to be part of the solution, and sales tax on services is not the answer
A recent article and some of our members are asking about our opposition to House Bill 1628, which calls for a sales tax on professional services. One Baltimore Sun reader expressed her frustration with us in a letter to the editor, "Lawyers and accountants are quick to oppose taxing themselves, slow to offer alternatives to fund Kirwan."
She concludes her letter with, "Both professions might enjoy more public and legislative sympathy if they were to apply their prodigious legal and financial expertise to helping to solve the funding dilemma posed by our state’s ambitious education goals instead of reflexively opposing the first option that affects them directly."
Like many things today, there is more, much more to the story.
Our opposition to HB 1628 is not related to its use as a funding source for the Blueprint for Maryland's Future (a.k.a. the Kirwin Commission). Rather, it is the administrative and technical complexities that make it a bad bill.
Our opposition is also not reactive or reflexive. It is proactive and meant to prevent a bad tax policy from being passed that may be doomed to repeal once the realities of the complexity and cost of implementation, administration, and collection are realized.
On Jan. 23, about 200 CPA members of the Maryland Association of CPAs visited dozens of legislators in Annapolis and handed out a booklet titled, "Guiding Principles of Good Tax Policy." It is a guide created by our State Tax Committee and members of the national organization, the American Institute of CPAs, to advise lawmakers of how to craft good tax laws. We have been handing out that guide and offering our expertise to the Maryland legislators in Annapolis for the past decade. The proposed tax on services actually violates 6 out of 12 principles of good tax policy.
Additionally, we have supported two current bills — the Commission on Tax Policy Reform and Fairness HB 185/SB 223 and the Maryland Tax Revision Commission HB 765 — and requested amendments to add at least one licensed CPA to these study groups to help craft good tax policy legislation in the future. We have a long history of volunteering to be at the table when legislators, the Comptroller and the Governor want help in explaining the implications of proposed tax policies. In fact, we were at the table when the federal Tax Cut and Jobs Act was enacted to discuss the impact on Maryland taxpayers and the government.
In this case, when our members were at CPA Day in Annapolis, we proactively warned legislators of the implications of the significant and complex compliance costs that come from taxing professional services.
Our members were told by many legislators that we should not expect sales tax on services this year (see article, "Education is top priority for Maryland General Assembly leaders, who pledge reforms without a big tax increase"). As CPAs, we believe it is essential to advise lawmakers about the implications of enacting tax policy and have been there to educate our legislators year after year.
To wit, five major states enacted similar legislation in the past few years and had to repeal it due to the complexity and costs of compliance (Florida, Michigan, Minnesota, Massachusetts, and Utah). Only three states with very low populations have any type of tax on services (New Mexico, South Dakota, and Hawaii). I hope you agree that allowing legislation to pass that would ultimately be repealed is not a good tax policy and ultimately would not help fund Maryland’s Blueprint for the Future.
Maryland CPAs stand ready to lend our "prodigious financial expertise" to help solve Maryland’s funding dilemmas and reach its ambitious goals, as we have since our founding in 1901.
MACPA legislative advocacy reports:
- Maryland CPAs converge on Annapolis to help protect their profession
- Maryland sales tax on services proposal violates principles of good tax policy
- MACPA taking action to oppose sales taxes on services
- Baltimore Business Journal article Accountants, lawyers decry Maryland's latest effort to hike taxes
- Leading Maryland Democrats: No rate hikes to income, property or sales taxes in 2020
- Expanding state sales tax to pay for school improvements would ‘destroy our economy,’ Maryland Gov. Hogan says
- Lawyers and accountants are quick to oppose taxing themselves, slow to offer alternatives to fund Kirwan | READER COMMENTARY
- MACPA response in Baltimore Sun CPAs would be happy to help state government plot a strategy to finance education
- Surprise: Democrats propose more taxes as poll finds Marylanders think they’re already too high
- Facebook post with list of 80 services proposed to be taxed, from Maryland Reporter