March 14, 2007

Legislative Activity

Before the Maryland House of Delegates Committee on Ways and Means
March 14, 2007

Good afternoon. My name is Clark Rector. I am senior vice president – government affairs for the American Advertising Federation. Our members include the advertisers who sell products and services, the advertising agencies who make the advertising for them and the media than run the advertising. We also represent over 200 local advertising associations across the country, including the Advertising Association of Baltimore and the Greater Frederick Advertising Federation. Many members of the Advertising Club of Metro Washington are Maryland businesses also. While my office is located in Washington, D.C., I am a resident of Howard County.

I am here to ask you to oppose House Bill 448, which would tax many creative services. I want to emphasize that if this bill were to pass, you will be putting Maryland businesses at a competitive disadvantage. In essence, they will have to charge a five percent markup over competitors from out of state.

Creative services, public relations, direct mail, photography and business consulting services are highly competitive fields. They are also very portable. An additional five percent on the invoice could easily be the factor that sends a client to an out-of-state business.

With the state of communications technology today, physical access to a client is not necessary to provide outstanding service. And in truth, in a state like Maryland, clients have easy access to businesses in Washington, D.C., Alexandria, Wilmington, Philadelphia and even New York City.

You don't have to take my word for it. Experience shows that clients will go where they get the best value for their dollar. In 1987, Florida passed a services tax—and repealed it after six months, in large part because of the exodus of business to out-of-state service providers.

Now I will grant you that the Florida tax was much more extensive than House Bill 448. But just think of the advances in communications technologies in the last 20 years. It will be infinitely easier for clients to work with out-of-state businesses than it was for all of those who took their business away from Florida.

Of course there is another part of this equation. Less work done by Maryland businesses means that sales tax revenue will be less than anticipated. Less work will also lead to fewer jobs, less income tax revenue and a migration of creative talent to other more hospitable locations.

I urge you to reject House Bill 448. Thank you for your consideration.