Mar 13, 2008 5:42 pm US/Eastern
O'Malley Supports Repeal Of Tech Tax
DUNDALK, Md. (WJZ/AP) ―
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Governor Martin O'Malley says he supports a repeal of a tax on computer services.
Gov. Martin O'Malley said Thursday he supports repealing a tax on computer services that has infuriated the industry because he believes it could have serious repercussions on the economy.
O'Malley said he supports instead a higher income tax on millionaires, which he says is closer to what he originally proposed during November's special legislative session.
"I really hope that they will look at the alternatives in terms of the revenues and particularly for people that make a million dollars or more," O'Malley said. "I hope we take a second look at asking them to pay a slightly higher rate."
The governor toldÂ
Pat Warren that the challenge facing lawmakers is how to make up for the estimated $200 million hole a repeal would put in the state's budget, which has already taken hits because of an economic downturn.
"I've never been a big fan of the computer tax, and the more we look at it and the more we look at the potential downsides of the computer tax, the more convinced I become that we should look for some alternative," the governor said.
The General Assembly approved the tax in the special session.
The 6 percent sales tax extension doesn't take effect until July, and it is set to be on the books for five years.
Leaders in the industry have complained since the tax was passed, saying it was quickly ushered through the General Assembly without an opportunity for them to raise concerns about how it would affect their businesses.
State senators settled on the tax after proposed extensions to other services, such as health clubs and real estate management, were dropped following loud protests in Annapolis.
O'Malley said Thursday that the tax came "out of left field" because lawmakers didn't have the political will to follow through with additional taxes on millionaires.
The computer services that will be affected include support services for computer systems or data processing facilities, custom computer programming, consulting services regarding computer systems design, and computer disaster recovery services.
There has been some uncertainty about the mechanics of how the tax would be implemented.
Lawmakers in Annapolis responded with relief Thursday to O'Malley's announcement. They were already considering doing away with the sales tax on computer services in favor of other measures.
"It is an incredibly bad idea to put a roadblock in the way of information technology," said Sen. Robert Zirkin, D-Baltimore County, who introduced a bill Thursday to undo the computer sales tax as long as voters approve slot machine gambling in a November referendum.
Zirkin told reporters "the tide is turning" on the computer sales tax and that its enactment would have cost Maryland jobs.
"That's the economy of the future," Zirkin said, though he doubted lawmakers would go along with O'Malley's plan to raise income taxes to make up the difference.
"There is not the sentiment for any new taxes," said Zirkin, who is pushing instead for cuts to transportation projects.
(© 2009 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)
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