Maryland's "tech tax" is dead.
The House of Delegates passed a bill yesterday evening repealing the new sales tax on computer services, wiping the unpopular levy from the books before it could ever go into effect.
"I'm looking forward to signing it," said Gov. Martin O'Malley, a Democrat, after the 93-44 vote. "We're repealing a tax that hits a lot of growing small businesses and entrepreneurial people, the very sort of creative people that we want to encourage to stay."
The repeal bill, which has already passed the Senate, replaces the computer tax with a combination of cuts and a three-year individual income tax surcharge on earnings of more than $1 million.
"I think it would have been a huge mistake to leave here without repealing that tax," said House Speaker Michael E. Busch, an Anne Arundel County Democrat. "The essence of the growing economy in Maryland ... really revolves around the success of the technological fields."
The extension of the state's sales tax to computer services such as Web design and database management has never been popular in the House, where it was accepted by lawmakers as a last-minute compromise during November's special session of the General Assembly.
Business groups argued that the tax, which would have gone into effect July 1, would have sparked an exodus of computer services firms from Maryland, a fear stoked by recruitment letters from Pennsylvania and Delaware that started appearing in some companies' mailboxes. Some firms said they were already talking to real estate brokers in neighboring states.
Although the Senate struggled for weeks to build a coalition around a repeal plan, the measure, approved by that chamber last week, sped through a House committee hearing and onto the floor within 24 hours.
"I urge you to kill this thing right here, right now on this floor," Del. Kumar P. Barve, the majority leader from Montgomery County, told his colleagues during last night's debate.
The House action caps a drastic about-face by Senate leaders and O'Malley, who just weeks earlier said it was unrealistic to try to repeal the new levy.
"There is no sin in saying you are wiser one day than you were before," Senate President Thomas V. Mike Miller said yesterday. "Although this seemed like a very viable option at the time, and I believe it could have worked well for the state, there were others who didn't want to take the risk of people moving jobs out of the state."
