New tech tax getting a second look

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CAMBRIDGE, Md. (AP) — A key Democratic lawmaker said it may be difficult to keep Maryland's new tech tax on the books.

State Sen. Ulysses Currie, Prince George's Democrat who chairs the Budget and Taxation Committee, made the comments Friday at the Maryland Association of Counties winter conference. Mr. Currie said he would fight repeal efforts, but said it was going to be very difficult to retain.

"Especially in Montgomery County, where you have a lot of high-tech firms, a lot of computer firms — that's where you feel the pressure points," Mr. Currie said.

The tax is an expansion of the state sales tax to Web design, computer repair and other services. Opponents say the tax would put Maryland companies at a competitive disadvantage.

Meanwhile, state Sen. Rob Garagiola, Montgomery Democrat, said he plans to introduce a bill to replace the computer services tax with a gasoline tax increase.

"The chorus on repealing this has just begun and it's going to get louder and louder," Mr. Garagiola said.

However, the Montgomery County lawmaker acknowledged that increasing the gas tax at the same time crude oil prices are hitting $100-a-barrel would be a "tough hurdle to overcome."

Senate Minority Leader David R. Brinkley, Frederick Republican, said he also planned to introduce legislation that would repeal the service tax, although his proposal would not include an alternative revenue source.

Maryland Chamber of Commerce spokesman William Burns said a "Fight the Tech Tax" coalition of businesses and local pro-business associations is being assembled to mount a "full court press" to overturn the tax.

Gov. Martin O'Malley, a Democrat, said earlier last week that he didn't support a repeal of the computer tax. The tax was approved by lawmakers in a special session called by the governor to deal with a projected budget shortfall.

Senate President Thomas V. Mike Miller Jr. said Mr. Currie was merely sending a warning message to local government officials.

"If we can't make up the $200 million, then we're going to have to cut, and that cut will be felt by the counties," said Mr. Miller, Southern Maryland Democrat.

Mr. Miller declined to predict what would happen, but said he would fight to keep the tax.

House Speaker Michael E. Busch, Anne Arundel Democrat, said it would be difficult to find an alternative.

"People always talk about repealing revenue sources," Mr. Busch said. "But if people want to find a way to reduce the computer tax, they're either going to have to make $200 million more in cuts" or in new taxes.

David Taub, co-founder of a Baltimore-based 43-employee digital marketing firm, said he was concerned the tax would hurt his company's profit margins and make Maryland companies less competitive for out-of-state clients.

"We're very loyal to the state," Mr. Taub said. "But we do have a small office in Virginia, so there could be a possibility of shifting resources."

Another problem for Maryland companies is whether out-of-state clients would have to pay the tax.

Comptroller Peter Franchot has organized a task force to study how it should be applied, a spokeswoman for the comptroller said.

In the meantime, Mr. Franchot, a Democrat, supports repealing the measure because he is concerned it will be difficult to implement, said Franchot spokeswoman Caron Brace.