Where to find $200M if services tax is repealed?

Wednesday, March 5, 2008

Where to find $200M if services tax is repealed?

Alternative revenue source is needed, senator tells executives

by Kevin J. Shay | Staff Writer

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The key to repealing the computer services sales tax is offering an alternative to offset the estimated $200 million that officials say it will bring in each year, a legislator told Maryland business executives last week.

‘‘Every business will be affected by this,” said Sen. Robert J. Garagiola (D-Dist. 15) of Germantown, whose bill to replace the tech tax with an increase in the gasoline tax has attracted six other sponsors. He urged the crowd of more than 150 business executives at a rally and lobbying day in Annapolis last week to ‘‘keep the pressure on” his colleagues through phone calls, e-mails and office visits.

But Del. Anthony J. O’Donnell (R-Dist. 29C) of Lusby drew the most applause from the sometimes boisterous crowd when he quipped: ‘‘We don’t have a revenue problem; we have a spending problem.” He added that he couldn’t support an increase in the gasoline tax with the price of gas continuing to climb above $3 a gallon, and that spending needed to be reduced.

House Republicans such as O’Donnell want to cut $203 million from Gov. Martin O’Malley’s budget proposal. They advocate cutting more vacant state positions, smaller increases in community college funding, reduced post-retirement benefit payments, deferring unused stem cell research funds and funding pay-as-you-go projects with bonds.

Sen. Jennie M. Forehand (D-Dist. 17) of Rockville wants to partly replace the tech tax with an increase in the state tax on beer, wine and spirits. The alcohol taxes have not been raised since at least the 1970s, Forehand said.

Maryland’s tax on beer of 9 cents per gallon was tied for fifth lowest among the 50 states and Washington, D.C., according to a survey taken about a year ago by the Washington anti-tax group Tax Foundation. Maryland’s tax on wine and spirits ranked 11th and tied for fourth lowest, respectively.

That measure could raise about $70 million annually, Forehand said. ‘‘I still need help in finding another $130 million,” she said.

Most tech executives voiced their support for more spending cuts, rather than increasing gasoline or alcohol taxes. One called for letting tech companies show state officials how they can save money through technology.

This report originally appeared in The Business Gazette.