Discussions heat up on computer tax repeal

Budget conferees begin meetings

‘‘The governor’s going to have to get votes if he wants the tax repealed, but we don’t have votes at this time to move his compromise tax forward,” Senate President Thomas V. Mike Miller Jr. (D-Dist. 27) of Chesapeake Beach told reporters on Thursday.

O’Malley wants to replace the roughly $200 million in projected revenue from the computer services tax with a combination of cuts and new tax brackets on wealthy Marylanders.

But that proposal already has met resistance, particularly from some Montgomery County lawmakers who believe higher income tax rates will disproportionately affect their residents.

‘‘I don’t think we have to apologize” for fighting higher taxes, said Del. Henry B. Heller (D-Dist. 19) of Leisure World. ‘‘Montgomery County, instead of [being] a major decision-maker ... will end up either being the obstructionists or having to go along with it.”

The so-called ‘‘millionaires tax” will cause Montgomery residents to move across the Potomac River to Northern Virginia, weakening the economy, Heller said. It would impose a 6.25 percent tax rate on taxpayers who earn more than $1 million, or 0.2 percent of Maryland taxpayers. That would raise roughly $110 million, according to legislative analysts.

Some of the cuts O’Malley is seeking would come from the $400 million Transportation Trust Fund, which Montgomery legislators also feel would disproportionately affect them.

‘‘The question is how do we replace those revenues in a way that is true to our progressive values and fair to Montgomery County,” said Del. Jeffrey D. Waldstreicher (D-Dist. 18) of Kensington.

But others said the ‘‘tech tax” must be repealed at all costs.

‘‘We would be decimating an industry that we should be fostering in this state,” said Sen. Robert J. Garagiola (D-Dist. 15) of Germantown, a leading repeal proponent.

That puts him on the same side with Republicans, who sent a letter to O’Malley on Thursday urging him to resolve the matter solely with budget reductions. It also calls on the administration to work publicly to reach consensus.

‘‘We are troubled that the reckless process that surrounded the initial passage of the computer services tax is again evident in the new effort to repeal it,” said the letter, which is signed by House and Senate GOP leaders. ‘‘During the special session, there was a get-it-done quick, consensus-at-any-price mentality that paid little attention to the long-term damage that could be done by the computer services tax. Now, we see much of the same; rather than an open public debate on how best to repeal the tax, the decisions are again being made behind closed doors.”

While most lawmakers expressed confidence that the tax will be repealed by Sine Die, there seems to be little consensus on how it will be achieved.

‘‘We’re trying to work together,” said House Majority Leader Kumar P. Barve (D-Dist. 17) of Gaithersburg, who was disturbed that Montgomery lawmakers are being labeled as impediments in reaching consensus. ‘‘I wish the Senate president would stop singling out one jurisdiction for criticism when in this legislature everyone participates.”

While House Speaker Michael E. Busch favors a repeal, he conceded the difficulty in finding a replacement revenue source. ‘‘I think the vast majority of members feel that way, but then it comes down to the options, do you want to cut programs you just funded?”

Legislators could find one-year fixes to fill the hole a repeal will create, but that doesn’t solve the long-term problem, he said. And the same pro-business groups lobbying for a repeal are seeking more money for transportation.

Replacing the tax revenue with cuts would mean passing costs for education, health care, public safety and transportation on to local and municipal governments, said Busch (D-Dist. 30) of Annapolis.

One other option would link a repeal to the passage of the November slots referendum, which would be risky, said Sen. James E. DeGrange (D-Dist. 32) of Glen Burnie.

‘‘The problem with that is we need to get it resolved now and not be waiting until November and seeing what happens,” he said. If slots fail, ‘‘we’re right back in the same position again.”

Meanwhile, lawmakers on Thursday began ironing out differences in each chamber’s fiscal 2009 budget. The prickliest issues, which include reductions to stem cell research, deferral of money to expand health insurance and the transfer of money for higher education, were left unresolved until at least today, when budget writers plan to continue discussions.

The panel did agree to reduce by about $100 million the state’s contribution to future retiree health benefits. Senators had been wary to accept that House proposal because it may have jeopardized the state’s coveted triple-A bond rating, but were reassured that it would not.

Conferees said they’re making progress in key areas that will help Maryland weather the economic downturn and that they are not as far apart as in past years.

‘‘Everybody is interested in finding common ground and getting everything resolved,” said House Appropriations Chairman Norman H. Conway (D-Dist. 38B) of Salisbury.

‘‘It’s a tough budget year and there are a lot of difficult choices to be made,” said Sen. David R. Brinkley (R-Dist. 4) of New Market. ‘‘We’re going for a lot of short-term choices and trying to get through this year.”

Staff writer Audrey Dutton contributed to this report.