It's a race with Virginia that Maryland is losing.

I have grown more and more concerned over the years that I moved my business from Virginia to Maryland. A few years after I did this the state representatives passed a bill to tax IT firms an additional 6% over other firms. Now while I am not opposed to paying taxes and in return creating a standard of living in our state. This bill was quickly reversed after a large outcry from Maryland businesses that got caught by surprise. My company and hundreds of others wrote dozens of letters to as many representatives as we could to ask for its repeal.

The problem is that it is indicative of the thinking of our representative base, and wrong thinking about small businesses. I have dozens of examples from friends across all industries.  I will post individual stories to this blog but for now lets just look at the effect this one bill would have had from the perspective of a small business.

Much of the IT business done in this state is federal in nature.  My company is a federal contractor getting 100% of our work from federal contracts that we compete for. Companies like mine are bound by the Federal Acquisition Rules (FAR). The FAR along with other guides from organizations like the GSA establish guidelines (although not specifics) about what a fair level of margin (profit) is on government contracts. That level on a competitive bid may be anywhere from about 6% to 15%. I have seen bids with margins as low as 2% or 3%. Companies in Maryland are in a fierce competition with all the companies in the surrounding states (Virginia, DC, Delaware, Pennsylvania and beyond). In order to win the contracts that bring money into the state in the form of salaries, taxes and increased standard of living, Maryland companies need to be very competitive with their pricing. In some cases I have seen bids that barely keep the lights on. Unless the company is a non profit, most companies are not in  business for free. They must make money to employ workers and need profits to hire additional people and invest in new products and services.

To have been taxed an additional 6% by the state would have meant that Maryland companies would have had to raise their bid prices making them less able to win business, a most undesired effect for all Marylanders.

Maryland representation at the federal level is quite good. With both Dutch Ruppersberger and Barbara Mikulski working hard to make Maryland a mecca for cyber security. But our state level representatives are not in sync with our Federal reps. Read this excerpt out of the recent clearancejobs.com compensation survey:

Virginia and Maryland are both working hard to attract and retain cybersecurity and defense industry business. A new marketing campaign launched by Virginia governor Bob McDonnell touts the over 300 cybersecurity companies based in Virginia, and Forbes recently ranked Virginia the second best state to do business. In the past five years defense contractors including Computer Sciences Corporation, BAE Systems and Northrop Grumman have moved their headquarters to Virginia. 

Maryland has actually been given a golden egg by the department of defense and has not in my mind really embraced it. The survey goes on to state:

BRAC and the standing up of U.S. Cyber Command have brought thousands of new jobs and companies to Maryland in the past several years, as well. An estimated 51 cybersecurity companies have relocated to Maryland, bringing about 5,000 new jobs, according to state representative James Malone.

Does governor O'malley believe that the real effect of the BRAC will be to help increase the republican base in Ann Arundel and surrounding counties? Instead of embracing the BRAC he is redistricting around it. If you want to read more on that just check this link out. This was unbelievably passed by the people. Upon further review of the way it was worded on the ballot, it asked the people if they were in favor of upholding the Maryland constitution. A sly trick indeed.

Our Maryland state representatives need to have a serious small business summit and learn how their legislation affects the Maryland economy. I am not against casinos but with the current favoring of casinos with tax breaks over small businesses surely in the long run Maryland will suffer. Besides it is in very poor form to beat up governor Bob Ehrlich over slot machines calling it immoral  and then hypocritically jumping on board with full fanfare and shady tax deals (any speakers of the house willing to claim that one?)

Every Maryland state level representative should be required to read Jim Clifton's book "The Coming Jobs War". Jim Clifton is the CEO of Gallop, a very respected organization. He describes the importance of supporting small businesses and how creating new and high quality jobs affects the local economy. One of those effects is that the tax base increases on its own without the need to focus on raising taxes and making Maryland companies non competitive.

If you are a business owner that has a story to tell about doing business in Maryland - good or bad - please share it. I would love to post your story and add it to the what I hope will be an instructional list for our state representatives. - joro