Maryland Digital Ad Tax

Annapolis, MD, February 1, 2021
—AAF Maryland Leaders: The Maryland House of Delegates is tentatively expected to vote February 8,one week from today,to try to override Governor Larry Hogan’s veto of the digital advertising tax. It is vital that the advertising industry continue to contact members of both the House of Delegates and Senate and urge them to vote against the override and let the veto stand.

The digital ad tax is bad for Maryland, bad for the industry and bad for consumers.

Please forward this alert to the members of your ad club and ask them and their colleagues to contact lawmakers in opposition to the tax. If they have not yet done so, urge them to sign theMarylanders for Tax Fairnesspetition supporting Governor Hogan’s veto of the tax.

Tax advertising is taxing speech.  The sponsors believe the digital ad tax would only affect large Internet companies. In reality, it would be passed down and negatively impact every Maryland company that uses advertising to communicate with consumers, as well as the advertising agencies, production houses, photographers and countless other suppliers that create that advertising. 

It is important that lawmakers understand the importance of advertising to the economy of Maryland.  Advertising is an important driver of economic growth and jobs in the state. 

According to a study designed by a Dr. Lawrence Klein, winner of the 1980 Nobel Prize in Economics:

  • Advertising helps generate $101.5 billion or 14.6% of economic activity in Maryland,
  • Advertising helps produce 393.667 or 14.9% of Maryland jobs,
  • Every $1 million spent on advertising supports 82 Maryland jobs.

Increasing the cost of advertising through a digital ad tax, would inevitably cause those numbers to fall.  Since most advertising budgets are fixed, increasing the cost of advertising would result in less advertising leading to many negative consequences.

Advertising is the main and often only source of revenue for the media.  Less advertising could lead to a reduction in jobs as well as a decreased ability to provide quality content and programming. Online media may have to resort to putting up a paywall which would have a disproportionate impact on low-income consumers. Many advertising dollars will leave the state altogether as marketers will choose advertising venues that do not charge a premium.

The negative affect would also be felt by other Maryland businesses such as the advertising agencies, production houses, web designers and other service providers used by clients.  Advertising services are very portable.  Clients can easily contract with out-of- state agencies and services providers to avoid the tax, thereby putting their Maryland competitors at a disadvantage.

Consumers would suffer also as less advertising means less information about available goods and services.  Advertising fosters competition which spurs innovation and often leads to lower prices.

Advertising is the engine that fuels the economy.  Less advertising means fewer sales.  Fewer sales means reduced revenue and fewer jobs.  Fewer sales also result in less sales tax revenue for the state.

Thank you for your continued efforts to oppose the Maryland digital ad tax. Please let me know if you have any questions or hear back from lawmakers.

Clark Rector

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