The Baltimore Sun Delegate Nic Kipke June 12, 2023
“The recent ruling by the Maryland Supreme Court on the state’s digital advertising tax is not the victory that some politicians in Annapolis would like Marylanders to believe. In reality, our highest court’s refusal to consider the merit of a law that has already been ruled unconstitutional is much more likely a harbinger of the law’s coming defeat.
“Let me be very clear: The Maryland Supreme Court has not ruled on the constitutionality of this law, despite what some might have you believe. The only time a Maryland court has ruled on the law’s merits was in 2022, when Anne Arundel County Circuit Court when Judge Alison Asti found it unconstitutional.
“That court ruled the law violated the U.S. Constitution’s prohibition on state interference with interstate commerce and violated the federal Internet Tax Freedom Act, which prohibits discrimination against electronic commerce.
“The Supreme Court did reverse the lower court’s previous ruling, but it did so based on procedural grounds. As the Democratic leadership in Annapolis knows full well, this issue is very likely heading to a different Maryland court. Despite this, politicians in Annapolis quickly sprinted off on their respective victory laps and related social media postings.
“At best, the various public comments by elected officials since the ruling show a grave lack of understanding of the court’s actions. At worst, they are purposely deceiving the taxpayers of our state to score short-term political points.
“Maryland’s digital ad tax was first passed by the legislature in 2020. Keep in mind this was during the earliest days of a pandemic that completely transformed the American economy, driving consumers to e-commerce and digital platforms in exponential numbers.
“Suddenly, adapting to online advertising was no longer a luxury. For many small and brick-and-mortar businesses, these digital tools meant one thing — survival.
“The digital ad tax was a terrible idea then. It was an even worse idea in 2022. And it is still a horrendous idea today.
“Politicians who support this tax are fast to claim that they’re taking on Big Tech and getting faceless corporations to ‘pay their fair share.’ Yet, in reality, the revenue from this tax will come directly from the pockets of Maryland businesses of all sizes. In today’s increasingly digital economy, that includes the small, women, and minority-owned businesses that these very same politicians purport to defend.
“Even elected leaders with the most basic understanding of digital advertising are aware of its power as an inclusive, accessible tool that levels the online playing field. Businesses of all sizes are utilizing it in today’s modern economy.
“A recent study from the Small Business & Entrepreneurship (SBE) Council found that 89% of small business owners believe access to digital platforms is key to starting their business. The Washington Post reported that digital advertising will account for more than two-thirds of all ad spending in the U.S. by the end of 2023 (and will continue to outpace traditional ads in the future).
“Most importantly, this judicial fight is far from over. The Supreme Court’s decision is in no way confirmation of the legality of this tax. By refusing to rule on the merits of the law, the court has left the door open to continued legal opposition.
“Meanwhile, the Maryland state government continues to collect and spend this revenue prematurely, without regard for the obvious: Every single dime they collect, hundreds of millions of dollars, eventually could have to be returned to the taxpayer in full.
“Once the dust has settled and this law is ruled unconstitutional once and for all, the state will be forced to return every penny that it took illegally from hardworking taxpayers and job creators.
“When that time comes, where will the money come from? The state’s coffers are now showing a $500 million dollar deficit despite a $5 billion dollar surplus in less than a year. It doesn’t take an accounting expert to recognize the budget disaster on the horizon.
“In the end, our state will still need to find other ways to fund its initiatives and close its budget deficit. My fellow elected officials would be wise to recognize the damage this tax will cause to Maryland’s economy and small businesses before it’s too late.”