With a 29-17 vote, the Maryland Senate voted Feb. 12 to override Gov. Larry Hogan’s veto of a digital advertising tax, enacting the controversial law and drawing sharp criticism from advertising and fair tax groups.

The Maryland tax, which applies to revenue from digital ads that are displayed inside the state, is based on the ad sales a company generates. A company that makes at least $100 million a year in global revenue but no more than $1 billion a year will face a 2.5 percent tax on its ads. Companies that make more than $15 billion a year will pay a 10 percent tax. Facebook’s and Google’s global revenues far exceed $15 billion, according to the report in The New York Times.

The vote drew a rebuttal from Marylanders For Tax Fairness, an independent coalition of Marylanders, businesses of all sizes, and pro-economic growth advocates:

“In Senate President Bill Ferguson’s short tenure as a leader, he has managed to do what no other Senate President has ever done – raise taxes and costs on Marylanders in the middle of a worldwide pandemic. There is no doubt what took place today was a historic event, but not in the way President Ferguson hoped. This tax increase was historically shortsighted, foolish, and harmful to countless small businesses and employees, and Marylanders will remember it that way.

“While the Senate President and his allies are congratulating themselves and celebrating their power to raise taxes, hard-working Marylanders are left worrying about how to put food on the table and wondering why their leaders would take such irresponsible actions during these unprecedented times.

“Ultimately, far too many Members of the Maryland General Assembly were unwilling to fight for their constituents in the face of political pressure from their leadership. Luckily, this coalition of Marylanders is immune to that pressure. We will continue fighting this regressive tax wherever possible, including in a court of law. All Marylanders deserve to know how their elected representatives voted on this day. We will make sure of that.”

The Internet Association called the tax “flawed” in a statement and said Maryland has the “dubious honor” of being the only state with such a law on the books.

“At least Maryland businesses and consumers can rest easier knowing that the courts will have the last say on this matter, and that the law, not politics, will decide the outcome,” the statement read.

According to a study designed by Dr. Lawrence Klein, winner of the 1980 Nobel Prize in Economics:

  • Advertising helps generate $101.5 billion or 14.6% of economic activity in Maryland,
  • Advertising helps produce 393,667 or 14.9% of Maryland jobs,
  • Every $1 million spent on advertising supports 82 Maryland jobs.
  • Increasing the cost of advertising through a digital ad tax, would inevitably cause those numbers to fall.
  • Since most advertising budgets are fixed, increasing the cost of advertising would result in less advertising leading to many negative consequences.

Talking points from the American Advertising Federation say the negative affect would also be felt by other Maryland businesses such as the advertising agencies, production houses, web designers and other service providers used by clients: “Advertising services are very portable. Clients can easily contract with out-of- state agencies and services providers to avoid the tax, thereby putting their Maryland competitors at a disadvantage.”

Photo: Senate President Bill Ferguson Facebook Page

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