Delegates see vindication on `tech tax'

House committee likely to vote on a repeal bill today

April 05, 2008|By Gadi Dechter | Gadi Dechter,Sun reporter

The House Ways and Means Committee objected to Maryland's new tax on computer services during November's special legislative session, so when it was its turn yesterday to take up a bill to repeal the unpopular levy, some delegates saw it as an occasion for vindication.

"We all know the Senate unfortunately made a mistake," Del. Frank S. Turner, a Howard County Democrat, said to the repeal bill's sponsor, Sen. Jennie Forehand. "Isn't that so, senator?"

Forehand, a Montgomery County Democrat who had also fought the so-called "tech tax" last year, deflected the question. "Excuse me," she said to committee Chairwoman Del. Sheila E. Hixson. "May I be excused? My committee is voting."

The exchange came at the start of a hearing on a bill, passed this week by the Senate, that would scrap the $200 million levy on computer services and replace it with a combination of cuts and a surcharge on personal earnings of more than $1 million.

The measure, which has the strong backing of House leadership and Gov. Martin O'Malley, is widely expected to pass the General Assembly. House Speaker Michael E. Busch and Majority Whip Talmadge Branch, a Baltimore Democrat, sat in on parts of yesterday's 90-minute hearing.

Under the bill, the $200 million sales tax on computer services, scheduled to take effect July 1, would be scrapped and replaced with about $110 million in annual revenue generated by a new income tax bracket of 6.25 percent on earnings above $1 million. The income tax increase would expire after three years.

The bill would also cut $50 million from the state's $400 million Transportation Trust Fund for five years and direct the governor to trim an additional $50 million from his budget by July 1.

O'Malley's budget secretary, T. Eloise Foster, told delegates she had a "three-pronged approach" to cutting $50 million more from an already trimmed state spending plan.

Foster said she will first ask state agencies to cut as much as $10 million from the fiscal 2008 budget. Another $10 million would be saved by extending a hiring freeze. The rest would come from "targeted reductions" to state agencies, Foster said.

Transportation Secretary John D. Porcari said the $50 million cut to his department would have "no impact on system preservation" work to state roads but would slow new projects.

The Maryland Chamber of Commerce and Montgomery County Chamber of Commerce provided written testimony to the panel supporting a tech tax repeal but opposing the millionaires' tax and cuts to transportation projects.

"It makes no sense to ... divert funds from transportation," the Maryland Chamber of Commerce statement said, noting billions in unfunded needs. The business association recommends a gas tax increase instead.

Hixson, a Montgomery County Democrat, said her committee would likely vote on the bill today.

gadi.dechter@baltsun.com

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