Annapolis (Map, News) - The members of the House Ways & Means Committee are thrilled to repeal the sales tax on computer services they initially rejected in November —feeling "vindicated" that they can kill a levy shoved down their throats.

But based on tough questions they asked at a hearing Friday, they are not quite ready to enthusiastically embrace the solution Gov. Martin O'Malley and the Senate are pushing to replace the tech tax - higher taxes on millionaires, cuts in transportation and budget reductions.

Nevertheless, Ways & Means Chair Sheila Hixson predicted it will be passed after a number of amendments are considered.

"We're getting rid of a bad tax and putting another one on," said Del. Page Elmore, an Eastern Shore Republican whose sentiments appeared to be shared across the political spectrum.

There were concerns that small businesses would be hurt as badly by the millionaires' surcharge, since 25 percent of the 6,500 tax returns in that bracket are filed by entrepreneurs and partners. Elmore objected to cutting $50 million from the $400 million boost in highway funding the legislature enacted in November when business groups pleaded for $600 million to meet the state transportation needs.

Joe Bryce, the governor's top legislative aide, said finding a compromise on these issues "is a tremendously difficult challenge. This is not any easy combination of things."

Bryce said he was not happy to be in front of committee asking for a tax increase again, nor contemplating cuts in hard-won highway funds.

"The governor favors a progressive income tax," Bryce said, noting that high earners have received a 12 percent federal income tax cut since 2000.

"We're headed down the wrong road again," said Del. Craig Rice, a Montgomery County Democrat. It was the House committee that had cut O'Malley's proposed income tax rates, and he saw no reason to "trust the Senate again," since they had proposed the tech tax and forced the House to accept it.

llazarick@baltimoreexaminer.com