Senate OKs repeal of tech tax

ANNAPOLIS — A repeal of Maryland’s widely dreaded computer services tax was approved last night by the state Senate.

The measure passed on a 30-17 vote after Democrats squashed Republican efforts to prevent a new surcharge on wealthy Marylanders to help take its place.

The so-called “tech tax” still must pass the House, where Speaker Michael E. Busch, Anne Arundel Democrat, has indicated he thinks the bill is a good compromise.

The repeal legislation would make up for the $200 million that the tech tax is expected to generate by creating a 6.25 percent tax on people with incomes higher than $1 million a year. That would raise about $110 million. Other money to balance the effect of a repeal would come from a $50 million cut to transportation and additional cuts to be determined by July 1.

The surcharge on the wealthy would affect about 6,000 people in the state, and it would be in effect for three years.

Sen. Alex X. Mooney, Frederick Republican, questioned whether the tax would chase wealthy residents out of Maryland. He asked Sen. Ulysses Currie, Prince George’s Democrat, whether that concern had been raised when the new tax was considered.

“It’s only for three years, and we felt that with the housing market now, it would take them three years to sell the house and they might want to stay,” Mr. Currie said.

The formula to repeal the tax was proposed by Gov. Martin O’Malley, a Democrat who pushed unsuccessfully during November’s special legislative session for a higher tax on the state’s wealthiest residents.

•••

In a move that could jeopardize a settlement between Constellation Energy and the state of Maryland, the state Senate amended legislation yesterday that is needed to complete the deal.

The amendment, which was approved by a 27-18 vote, would subject new electricity generating assets built in Maryland to state regulation. Sponsors argued that the change was perhaps the only way to return some regulatory control lost in the state’s 1999 decision to deregulate electricity.

“We’re expressing confidence in the ability to clean up the problems of the past, get money back by passing this bill to our ratepayers, but make sure that when we go forward we don’t repeat the mistakes of 1999,” said Sen. James C. Rosapepe, Prince George’s Democrat.

Opponents said the bill threatened to derail the agreement because the settlement hinged on the bill passing as first written.

“If it’s accepted, it puts the agreement in jeopardy,” said Sen. Thomas McLain Middleton, Charles Democrat.

He said the Public Service Commission is studying how to return to regulation, and that lawmakers should let that study take its course before making any decisions.