Gov. Martin O'Malley and top General Assembly leaders met yesterday evening to develop a plan to repeal Maryland's new computer services tax, but they failed to reach a consensus on new tax increases or budget cuts to make up for the $200 million a year the tax is expected to generate.
Although leaders in the Senate and House of Delegates declared they would work together toward a repeal, they found themselves no closer to agreement than they were after a similar meeting two weeks ago. The Democratic leaders discussed a range of options - including creating a higher income tax bracket for millionaires or using money earmarked for transportation projects - but made no steps forward.
Senate President Thomas V. Mike Miller said lawmakers from Montgomery County held the key to breaking the deadlock, noting that they were the most adamant opponents of both the "tech tax" and the proposed levy on those earning more than $1 million annually. He said the county also receives the most in state transportation funding, leaving its representatives reluctant to redirect that money.
The county "is in the eye of the storm," he said.
Miller also said the negotiations could center on whether to make spending cuts or tax increases permanent.
Del. Luiz R.S. Simmons, a Montgomery County Democrat, said Miller was to blame, not Montgomery legislators, for the "feckless tax on a very important growth industry in the state."
"What we really do need is a broader-based tax, like a gas tax, to replace the sales tax on computer services," he said. "Montgomery County has more than paid its dues with respect to holding up its end of the responsibility for state taxes."
The meeting came on the eve of budget talks between the two chambers that could grow rancorous in the coming days. Lawmakers have to agree on more than $300 million in spending reductions, and they have only two weeks left in the legislative calendar to find a way to repeal the computer tax that was passed in November's special legislative session.
Other potential bones of contention between House and Senate lawmakers include funding for stem-cell research, raises for providers of care for the mentally and physically disabled, the implementation of a vast health care expansion and the size of the state's contribution to a government retiree pension fund.
But many expected the question of repealing the tech tax - which business groups say would lead some technology companies to leave the state - to dominate the discussions of the negotiating committee of delegates and senators.
Busch said last night that the powwow had been "very productive," but he said he remains reluctant to make up the shortfall from a tech-tax repeal with money that had been set aside for transportation.
"All the revenues we have in place right now are very important," he said, before adding that the computer tax, if allowed to stand, would put Maryland "at a competitive disadvantage."
Sen. Ulysses Currie, a Prince George's County Democrat who chairs the Senate committee that oversees the state budget, said O'Malley needed to put forward a proposal to settle the matter.
"The ball is in his court," Currie said.
bradley.olson@baltsun.com
Sun reporter Gadi Dechter contributed to this article.
