Computer services tax stays, for now

Republican questions sincerity of effort to repeal bill

Del. Richard B. Weldon Jr. said he does not relish voting against the budget bill in the House of Delegates, as he and 33 others — all Republican — did on Thursday.

But the debate over the computer services tax, which included votes on Wednesday to reject Republican-sponsored efforts to repeal it, was short on substance, he said.

It was ‘‘disingenuous” for the House to debate the budget amid ‘‘rumors” that leadership is working on a repeal, he said.

‘‘I think it has mostly been rhetoric, and it’s a big part of why I voted against the budget today,” said Weldon (R-Dist. 3B) of Brunswick.

With the House of Delegates passing its version of the $31.2 billion fiscal 2009 budget, both chambers have passed a spending bill without addressing one glaring issue: How to repeal the computer services tax and, with it, what to do about the $214 million hole it would leave in the state’s budget.

Republicans offered compromises and cuts, he said.

‘‘The rest is just being put out there to keep the people who are affected by this from writing more e-mail and calling and protesting,” he said.

One of those people, John Eckenrode, who owns a computer services agency in Catonsville, said he does not know what to make of the debate.

‘‘Being in business, you get pretty good at gauging sincerity,” said Eckenrode, a co-founder of the Maryland Computer Services Association. ‘‘But being new to the political process I can’t really say” what’s going to happen.

Democrats and Republicans alike admit that the alternatives are not attractive.

A proposal to transfer money from the Transportation Trust Fund to cover the lost revenue is a ‘‘bait and switch,” Weldon said.

‘‘Three-card monte, that’s what it is,” he said. ‘‘It’s ‘Can you follow the pea under the cup?’”

It is a matter of repealing a tax that is unpopular with business while still having enough revenue to provide services that people want, said House Speaker Michael E. Busch (D-Dist. 30) of Annapolis.

‘‘How do you find a fair and equitable way to pay for services?” Busch said, listing education and transportation among important services that people do not want to see cut.

‘‘People will always tell you they don’t want to support a revenue source, but they want services somehow provided to them and everyone else,” he said.

Senate Budget and Taxation Chairman Ulysses Currie said the Senate was leaning toward repealing the tax.

‘‘I believe it’s not a matter of our repealing,” said Currie (D-Dist. 25) of Forestville. ‘‘It is one of finding $200 million.”

The repeal would likely come in the form of a combination of a number of repeal bills heard in the House Ways and Means and Senate Budget and Taxation committees last week, Currie said.

Details of the legislation would likely be done in a conference committee meeting of fiscal leaders from each chamber.

As the clock ticks down on the 2008 session and long lists of legislation come up for final vote, lawmakers said they do not want the repeal to fall prey to the same trap as the original tax.

‘‘You don’t want to do more harm than you’ve already done,” said Del. Roger Manno (D-Dist. 19) of Silver Spring.

One idea gaining traction this week would use the half-cent of the sales tax dedicated to the Transportation Trust Fund to fill the gap if a repeal of the computer services tax were to pass.

‘‘It’s certainly a pool that could be beneficial until we get another solution,” said Sen. James E. DeGrange Sr. (D-Dist. 32) of Glen Burnie, who opposes any tax alternatives.

Sen. Robert A. Zirkin, who last week introduced a bill to repeal the tax contingent on state voters voting on the November ballot to legalize slot machine gambling, said he wants to replace a tax not with a tax, but with a cut.

The place to cut from is transportation, said Zirkin (D-Dist. 11) of Owings Mills.

‘‘I would be happy to halt [transportation] projects in my district,” he said.

Not everyone shares that sentiment.

‘‘That impacts some jurisdictions more than others,” said Brian J. Feldman (D-Dist. 15) of Potomac, chairman of Montgomery County’s House delegation.

Late last week saw a flurry of activity around a repeal. Legislators proposed several late plans for filling the revenue gap. Comptroller Peter V.R. Franchot (D) released draft regulations for the tax on the same day that Gov. Martin O’Malley (D) came out strongly opposed to it.

The shadow of the special session looms over the tax debate.

DeGrange said he wished Franchot had worked with the legislature during the special session in looking at how the tax would be implemented, a sentiment that Senate President Thomas V. Mike Miller Jr. (D-Dist. 27) of Chesapeake Beach has also expressed.

‘‘It certainly would have been helpful to have him engaged in the debate on that issue,” DeGrange said.

Franchot on Wednesday said that he was ‘‘the earliest opponent” to the tax, producing a letter sent Nov. 8, in the middle of the 22-day special session that he said was ‘‘trying to support the hearings that were never held” on the tax.

A repeal ‘‘should happen on the merits,” Franchot said. ‘‘It’s a bad tax. It was passed with very little analysis or review. Already it hurts the state’s economy. And if it’s allowed to go into effect July 1 it’s going to damage the state’s economy. So it should be repealed, and I hope that the legislative leaders will respond to the governor.”

O’Malley reiterated his call for a repeal on WTOP radio’s ‘‘Ask the Governor” program on Wednesday morning.

‘‘I do believe the downside of that computer services tax outweighs the upside of the revenues,” O’Malley said.

Of the choice of new taxes or cuts, ‘‘It’s not an easy or a pretty picture,” he said.