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Maryland correcting things that shouldn't have to be corrected

April 14, 2008|By TIM ROWLAND

Legislative sessions will always be necessary, if for no other reason than to correct the mistakes of past legislative sessions.

The computer-service industry had been humming right along, obliviously doing the things that businesses do -creating jobs, revenue and economic activity - rather than paying the Maryland General Assembly much mind.

Silly them.

Last fall, the Maryland legislature lumbered into action to mend a widening chasm between the amount of money the state collects and the amount of money it spends. Spyglasses were produced to closely inspect every revenue stream that could potentially be tapped for state use. And there sat the lucrative computer shops without so much as a hound to guard the door.

Without warning, the Senate scrapped some service taxes on a couple of loudly protesting professions and shifted them to the unsuspecting circuitry set.

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The next circumstance was predictable; the computer services industry bought itself some hounds - or in this case, lobbyists, which are pretty much one in the same.

Most any tangible good that you can hold in your hands is taxed upon its purchase through the universal sales tax. But that's not the case with services, such as dry cleaning or - more tellingly - legal fees.

During another fiscal crisis in the early '90s, a plan was hatched to tax services, just as goods are taxed. It's a reasonable idea, because both goods and services are items of value, so why financially punish one while the other skates free?

That question is answered by considering the number of attorneys who double as lawmakers. Needless to say, the services tax went nowhere.

Had the legislature taxed services 15 years ago, it's too much of a leap to suggest that the financial crisis of the past couple of years could have been averted. By now, that revenue would have been spent up on this or that and the spending would have continued until we were right back in debt.

But at least it would have prevented such a crazy, out-of-the-blue broadside against an industry that can easily pack up its bags and leave.

At many hospitals, when you have a medical test after hours or on weekends, it's possible the results of that test will be read and interpreted in India and the results flashed back to the local medical staff. Such is the portability of data. A person's Web site in Washington County may be hosted by a small business in Texas.

It's no skin off a tech company's cell phone to hop across a state line if its profits are under attack in Maryland. That it would take a lobbyist to explain this obvious situation to a lawmaker is prima facia evidence of why government these days is so poorly executed.

To its credit, the General Assembly recognized the error and repealed its November action, thus making the computer-services levy the most short-lived tax in the history of the state. Needing another obvious target to make up the revenue, so the burden fell on the wealthy.

This "aw screw it, we'll just stick it to the millionaires" approach isn't likely to cause much heartburn in Washington County - only 3 percent of the state's millionaires live in all of Western Maryland - but still, a few of the aggrieved have predicted a flight of the wealthy out of Maryland. But at the risk of losing Daniel Snyder or someone to fix your laptop when it crashes, most will tell the millionaires, "don't forget to write."

But the computer tax wasn't the only item that fell into the category of the state correcting things that shouldn't have to be corrected. Among the bills passed this session was this gem: Mortgage lenders must make sure that the person who receives the loan has the ability to pay.

That such a fundamental tenant of good business practice would have to be codified just shows the depths to which the mortgage industry has sunk. If your job is lending money, a large part of that job should be ensuring that you get it back. But, as we know now, that wasn't happening.

Business, and not without merit, routinely complains about the regulatory hoops it must jump through, courtesy of legislation-happy governments. But the truth of the matter is that for many of these regulations, business has no one but itself to blame.

The complex Sarbanes-Oxley accountability regulations would not have been necessary were there no Enrons or WorldComs. Environmental regulations would not have been necessary had industry demonstrated common sense about what could or could not be spewed into the air or waters.

In the name of profits, too many businesses have demonstrated that given free rein, they will run as fast and as far as they can, not caring who gets trampled in their wake.

The shame of this is that corporate good citizens, which are likely the majority, get tied up with the same ropes intended to bind the scofflaws. And business has been painfully slow to recognize that if it doesn't police itself, someone else will.

A century ago, liquidity crises had to be tidied up by the likes of the mighty financier J.P. Morgan. He was no fan of government regulations as a general thing, and saw to it that the capitalists kept their own house. It's just as well that he didn't live to see the day that a government would pass a law stipulating that when he lent money he would be sure to get it back. That was something, even his enemies would have told you, he was quite capable of doing on his own.

Tim Rowland is a Herald-Mail columnist.

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