Computer tax repeal eyed

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DUNDALK, Md. (AP) — Gov. Martin O'Malley said yesterday he would support repealing a tax on computer services if an alternative is found, because he now thinks the tax could have repercussions on Maryland's economy.

Instead, Mr. O'Malley said he supports a higher income tax on the very wealthy, which is closer to what he originally proposed during November's special legislative session to tackle the state's $1.7 billion structural deficit.

"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," Mr. O'Malley said.

While Mr. O'Malley has left the door open for a possible repeal before, his comments yesterday reflected a much stronger interest in moving away from the tax.

In January, he told a disgruntled audience at the Tech Council of Maryland dinner that the tax became necessary to reach legislative consensus in a difficult mix of taxes and budget cuts. At the dinner, he said he'd prefer to "make it work and have it understood and not have an adverse impact on the tremendous potential that we have here."

But that understanding hasn't emerged for the better in the minds of business owners, who are threatening to flee the state.

Mr. O'Malley yesterday distanced himself from the tax altogether, emphasizing several times it was not his idea and that the tax came "out of left field."

The governor said lawmakers "did not have the political will" to go along with his plan for a higher income tax rate on the wealthy. Mr. O'Malley, a Democrat, said lawmakers decided on the computer tax, "which had not been as fully vetted and considered as it might have been."

Mr. O'Malley said a repeal depends on finding $200 million to replace the revenue.

The trouble has become even harder than it was during November's special session, because of a recent state revenue write-down of $333 million due to a sliding economy.