Sara Michael and Len Lazarick, The Examiner
2008-03-14 08:00:00.0
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BALTIMORE -

Gov. Martin O’Malley said he would support repealing the new 6 percent computer services tax, as long as lawmakers can come up with funding alternatives to fill the gap, such as the income tax increase on millionaires he had proposed in September. The governor called that “a fair alternative.”

O’Malley’s comments came as senators struggled with ways to make up the $200 million the tax would bring in, including cutting back on some of the increased transportation funding they had passed in November. Sen. Bobby Zirkin, a Baltimore County Democrat on the budget committee, introduced a bill Thursday that would tie repeal of the information technology tax to passage of the slots referendum.

“I’ve never been a huge fan of the computer tax,” O’Malley said Thursday after a Dundalk event. “It was something that was kind of tacked on” when legislators were looking for $200 million in revenue.

The information technology service industry provides an advantage to the state’s economy that “we want to grow, not an advantage we want to weigh down,” he said.

The computer services sales tax enacted in the November special session “has the potential to have repercussions and downsides economically,” O’Malley said. That view is widely shared by members of the Senate and House after intensive lobbying by many IT business people.

“I feel the tide is turning on that issue,” said Zirkin, who had strongly opposed the tax during special session. “But you will need to have a backfill of money,” though he thinks the new tax would never have raised the $214 million expected.

O’Malley said he was working with legislative leaders to find alternatives, with a focus on revenues. During the special session, lawmakers lacked the political will to impose a higher tax on millionaires, O’Malley said.

Sen. Verna Jones of Baltimore has proposed an income tax increase on the 7,000 households making more $750,000 a year. That would raise $175 million.

That tax increase was supported Thursday by the Tech Council of Maryland, but “only in the context that it is used to repeal the computer services tax,” said Tech Council President Julie Coons. If not, “we will oppose it vigorously,” she said.

The Maryland Chamber of Commerce and the Montgomery County Chamber are strongly opposed to the tax, as is Montgomery County Executive Isiah Leggett.

In a letter, Leggett told the Senate Budget and Taxation Committee that Jones’ income tax increase “will create a competitive disadvantage that will have long-term negative consequences not just for Montgomery County, but the entire state.”

llazarick@baltimoreexaminer.com