ANNAPOLIS (AP) — The House of Delegates yesterday approved a bill repealing a computer services tax that has become widely acknowledged as a terrible mistake of November’s special session.
The bill resembles repeal legislation already passed by the Senate to end the tax and make up for a $200 million budget hole.
The measure includes a new tax on people who make more than $1 million a year. It also includes $50 million in cuts to transportation and another $50 million in cuts that will be determined later by the Board of Public Works.
Gov. Martin O’Malley, a Democrat, supports the legislation; he proposed the details on how to replace the tech tax money.
The tax on wealthy Marylanders, which would create a 6.25 percent tax rate for three years, didn’t go over well with some delegates from Montgomery County, which is home to about 40 percent of the estimated 6,000 people who would be affected by the tax.
Delegate Charles E. Barkley, Montgomery Democrat, proposed an amendment that would have replaced the tax on the wealthy by using about $100 million from the state’s projected general fund balance, leaving about $839 million in reserve including the state’s Rainy Day Fund. Mr. Barkley cautioned that the new income tax would make wealthy people consider leaving the state.
“You can only hit a cash cow so many times,” Mr. Barkley said, before “they say, ’We’re going to take our milk somewhere else.’ ”
But Delegate Norman H. Conway, Lower Shore Democrat who chairs the House Appropriations Committee, said the state needed to protect the general fund balance in case the economy continues to slide. Lawmakers have been aiming to keep nearly $1 billion in reserve.
“Ladies and gentlemen, we must protect what we have,” Mr. Conway said.
The amendment was rejected. The House also rejected an amendment to replace the income tax money by eliminating unfilled government jobs and taking about $57 million from the Maryland Automobile Insurance Fund.
The tech tax would extend Maryland’s 6 percent sales tax to computer services. It was passed during November’s fast-moving special session to help address a $1.7 billion structural deficit.
Critics have complained it was passed without public hearings, a point the information technology industry has repeatedly brought up during its massive lobbying blitz for a repeal. The industry has argued the tax would drive computer services companies to leave the state.
The tax, which would not take effect until July, would apply to a wide range of computer services, including facilities management and operations, custom programming, disaster recovery, hardware and software installation and software maintenance and repair.
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