Mar 13, 2008 9:52 am US/Eastern
Tech Tax Opponents Raise The Heat On Lawmakers
ANNAPOLIS, Md. (AP) ―
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The Maryland Senate shot down a proposal to make room in the state's budget to repeal a highly criticized tax on computer services on Wednesday, but rising heat from the industry has lawmakers considering ways to soften the blow.
AP
The Maryland Senate shot down a proposal to make room in the state's budget to repeal a highly criticized tax on computer services on Wednesday, but rising heat from the industry has lawmakers considering ways to soften the blow.
On a day when opponents rallied against the so-called "Tech Tax," Sen. David Brinkley, R-Frederick, proposed an amendment to the Senate's budget bill to make up for an estimated $214 million the tax is estimated to generate.
The amendment would have paved the way to repeal the tax by drawing on $114 million in the state's fund balance and requiring Gov. Martin O'Malley to cut another $100 million from state agencies.
"This was a bad idea from the start," Brinkley said. "The question now is what do we do ... How do we get ourselves out of this quagmire?"
The computer services industry is infuriated by the tax, which was ushered through the General Assembly quickly during the special session -- after extensions of the sales tax to other services were nixed when targeted industries rallied noisily in Annapolis.
Brinkley found support with several Democrats, including Sen. Jennie Forehand, D-Montgomery, who held up tax legislation in the waning hours of November's special session because she didn't like the computer tax proposal.
Forehand said lawmakers will have no idea what the fiscal impact to the state will be, if the computer services industry folds up and "decides to go across the river into Virginia or somewhere else" to flee the tax.
But other Democrats, even some who favor a repeal, said Brinkley's idea wasn't the way to go.
Sen. Rob Garagiola, D-Montgomery, pointed out that the tax, which is set to last for five years beginning in July, would raise over a billion dollars, making Brinkley's proposal "a credit-card solution to this."
"I think we can find a solution to repealing this, but ... the math doesn't add up," Garagiola said.
Senate President Thomas V. Mike Miller, D-Calvert, said the tax likely will be changed so that it doesn't affect pre-existing contracts or government contracts. Miller said he talked to Gov. Martin O'Malley about the changes Tuesday night.
"I think he's amenable" to the changes, Miller said.
The debate in the Senate came on a day when lawmakers held hearings on proposed repeals to the tax.
Don Fry, president of the Greater Baltimore Committee and a tax opponent, said now is not the time to burden businesses with a broad new tax.
"This tax would place Maryland's IT services sector at a severe competitive disadvantage, not only in the mid-Atlantic region, but in the U.S. as a whole," Fry said.
But Sen. Richard Madeleno, D-Montgomery, said last week's $333 million drop in estimated state revenues means the state needs to have more cash on hand, and that the amendment would leave "our fund balance in a very precarious situation."
"We know we're at the edge of a potential further economic downturn," Madeleno said. "To pass this amendment -- and take this money out of our fund balance -- would leave us with very little cushion, should there be further economic downturns during this year."
Brinkley's amendment failed after 26 senators voted against it and 19 supported it.
(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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