Apr 2, 2008 7:04 pm US/Eastern
Senate Panel Approves Bill To Repeal Tech Tax
ANNAPOLIS, Md. (AP) ―
A plan to repeal an extremely unpopular tax on computer services cleared a hurdle Wednesday when a Senate panel voted to replace it with a new tax on the very wealthy, budget cuts and money from the state's transportation fund.
The 10-5 vote in the Senate Budget and Taxation Committee was the product of weeks of tough discussions about how to make up for an estimated $200 million that the so-called tech tax would have raised.
The bill includes a new tax on people who make a million dollars a year. The tax, which would be in effect for three years, would generate roughly $100 million.
Another $50 million would come from the state's Transportation Trust Fund over five years, and $50 million would come from budget cuts to be decided by Gov. Martin O'Malley and the Board of Public Works by July 1.
The repeal bill now heads to the full Senate.
O'Malley pushed for the three components after deciding that the computer services tax was too big a threat to information technology businesses in the state.
The committee rejected a proposed amendment by Sen. Richard Madeleno, D-Montgomery, that would have eliminated the tax on the wealthy, taking $150 million from the state's transportation fund instead.
Madeleno argued that the tax on the rich would drive businesses from the Washington suburbs to Virginia. But supporters of creating the new tax said that taking more from transportation funding would adversely affect jobs and badly needed projects in the state.
Sen. Robert Zirkin, D-Baltimore County, described the computer services tax as a "monster" whose repeal was of "paramount importance."
Senate President Thomas V. Mike Miller said he was optimistic the measure would pass in the Senate.
"We have a good sense of where the votes are, and I think a sufficient number of senators are going to vote to make this become a reality," Miller said after the committee vote.
Businesses in the computer services industry have been waging a lobbying blitz against the tax.
Julie Coons, CEO of the Tech Council of Maryland, said the difficult vote is in the best interest of the state's future.
"This is the first part in a four-act play, and we respect that the other bodies need to act and we certainly urge them to give a favorable report to this so we can get to a full repeal," Coons said.
House Speaker Michael Busch described the bill as "probably the best compromise," and he said he plans to work for the bill's passage. Busch described the new levy on the wealthy as similar to a tax used temporarily in the early 1990s to weather a recessionary period.
The tech tax was hatched in last fall's special session by the Senate in a scramble to make up for the money lost when lawmakers scuttled sales tax extensions to other businesses that rallied against them. The computer tax isn't set to take effect until July.
(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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