Roadblocks to High-Tech Growth

March 03, 1993

Is Maryland hostile to high-technology companies? Judge for yourself:

* Manufacturers receive local exemptions from the state's personal property tax, but high-tech firms do not.

* High-tech firms must pay sales tax on sterile lab garments and test tubes, even though most other states give tax breaks for these research and development tools.

* Quality-control testing of a product isn't tax-exempt for most high-tech firms, but it is tax-exempt for many manufacturing processes.

Maryland's tax code is an artifact of our industrial past. It does not reflect the enormous surge of biotechnology and information technology firms in this state in the last decade. Unless things change, these discriminatory aspects of the tax code could drive high-tech jobs to more hospitable states.

In a welcome show of cooperation, high-tech councils from the Baltimore and Washington areas have banded together to fight to see that technology firms aren't hindered by the state's tax code.

Most of the legislature's top fiscal leaders have lined up in support of Schaefer administration bills to help high-tech companies. One bill would update the definition of what constitutes research and development so it includes the kind of R&D that is so critical to high-tech firms. Another bill would help computer programming companies that are now penalized under the sales tax code when they try to enhance another company's existing product. A third bill would give subdivisions power to grant a personal property tax exemption to high-tech firms for research and development equipment.

This last bill has turned controversial: certain counties and city lobbyists oppose it, fearing a loss of local revenue. That's a bogus argument. The bill simply gives subdivisions the right to grant an exemption. If a subdivision feels too strapped to foot the bill, its leaders should have the courage to just say no. Besides, localities already have the power to exempt manufacturers' R&D from the property tax. Why discriminate against high-tech firms?

It makes no sense to deter high-technology companies from operating in Maryland. During the 1980s, these companies created 35,000 new jobs here. It is a dynamic industry, one that is critical for future regional growth. Updating the state's tax code is the least legislators can do to give a boost to these important job-producing firms.

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