New tax may be a goner

Some Democrats say tax on computer services already causing problems

‘‘I am hearing from businesses everywhere that if we had been able to have a full hearing on the bill, we would have heard how detrimental this tax would be,” said Kramer (D-Dist. 14) of Olney.

Computer services, she said, ‘‘was a casualty of the process.”

‘‘I think we should repeal it outright,” said Sen. Robert J. Garagiola (D-Dist. 15) of Germantown.

Of all the tax increases passed during the 22-day session, the computer services tax was the hardest for Democratic lawmakers to accept. Minutes before the Senate’s final vote on the tax, Sen. Jennie M. Forehand voted to continue a Republican filibuster because she objected to the levy. Forehand (D-Dist. 17) of Rockville is usually an easy vote for Democratic measures, and the motion to cut off debate failed by a single vote.

‘‘There is a quiet debate within the majority party,” said Sen. James Brochin (D-Dist. 42) of Towson. ‘‘There’s a belief the legislature went too far. What we did to the computer services sector is ridiculous. It needs to be repealed.”

The tax, however, is predicted to bring in $200 million a year to the treasury. Repealing it could have consequences beyond eliminating a tax.

The General Assembly passed the computer services tax and the sales tax increase thinking that a portion would go toward plugging a $1.5 billion budget deficit and a portion toward helping pay for $400 million in transportation projects.

A Pyrrhic choice

Without the computer services tax, the state might be forced to remove the contribution for transportation, Sen. Richard S. Madaleno Jr. said.

‘‘I don’t know they want to do that,” said Madaleno (D-Dist. 18) of Kensington. It might mean an increase in the gasoline tax, which lawmakers rejected early in the special session.

Brochin said the legislature could make up the revenue by cutting aid to private colleges, which is $64 million, and by giving state employees a 1 percent raise instead of 2 percent, which is $66 million.

‘‘I certainly think we can slow the growth of other nonessential departments to get the last $60 million,” he said.

Garagiola rejected those ideas and said he would be offering his own. He wouldn’t reveal them. ‘‘I want to vet them still,” he said.

On the House side, Del. Kumar P. Barve also has criticized the tax.

‘‘A number of state delegates have come up to me to put in legislation to repeal it. I don’t think an outright repeal is going to happen,” said Barve (D-Dist. 17) of Gaithersburg.

He expected his committee, Ways and Means, to look at all the tax measures of the special session.

‘‘I think it’s important for us to relook at it to see if there’s any instance to make exceptions or fine tune. I’d be surprised if an outright repeal can occur,” Barve said.

Playing the game

Republicans already have laid down markers that they will make taxes an issue in 2010.

‘‘It passed in the dark of night, run through without any serious concern for the effect on citizens or taxpayers with blind political loyalty to the Democratic Party to the detriment of the citizens,” Senate Minority Leader David R. Brinkley said.

The session is an opportunity, he said, ‘‘a clearly defining issue.”

‘‘People get lost on some of these issues with conservative, liberal, Republican, Democrat, pro-gun, anti-gun, abortion, anti-abortion,” said Brinkley (R-Dist. 4) of New Market. ‘‘Those issues are more and more philosophical rather than party. But taxes are a party issue.”

Despite Republican Ellen R. Sauerbrey’s near victory in the 1994 gubernatorial election, Maryland has stomached tax increases. But that’s because Maryland lacks recall drives and an initiative process, and statewide elections are every four years instead of two, said Grover Norquist, president of Americans for Tax Reform.

Norquist is critical of all the tax increases. The corporate tax increase, to 8.25 percent, pushes a company’s tax rate to 43.25 percent when you factor in the federal rate.

‘‘Why would you come to Maryland?” Norquist said.

And doubling the cigarette tax to $2 will mean an income tax in 10 years, he said. The tobacco tax declines, but government programs are established contingent on the revenue.

Then there’s the decision to apply the state’s 6 percent sales tax to computer services.

‘‘That was an odd decision by a state to trash the central part of the new high-tech economy,” Norquist said.

Laslo Boyd, a partner in Gonzales Research and Marketing of Columbia, said taxes dominate a Maryland election only when the voters’ attention isn’t diverted by other issues.

‘‘The next general election is so far off it’s unlikely that it will be about this tax increase,” said Boyd, who writes commentaries for The Gazette. ‘‘The governor’s challenge will be to make the case that the money is being used well. The Republicans will be in the position that they can’t just make the case that taxes are going up, but also that it’s not being spent well.”

Rumblings begin

Already there are signs that taxes will be on voters’ minds. Del. Luiz R.S. Simmons said he received at least a couple dozen e-mails from ‘‘primary voting Democrats” objecting to the taxes.

‘‘I do think there is a very undeniable uptick in the number of active Democrats who are concerned about taxes in Montgomery County,” said Simmons (D-Dist. 17) of Rockville. ‘‘People are going to feel it immediately, and it’s not something you can disregard. We will be experiencing a pushback.”

Brinkley will be there, hoping to organize that pushback.

‘‘In my opinion, this past special session showed the Democrats’ recklessness and disregard and a willingness to get into people’s pocketbooks,” he said. ‘‘We are confident the voters will remain angry and they will not forget.”

‘‘I don’t think Maryland voters forget anything,” Barve, the House majority leader, retorted. ‘‘More than a lot of people look at both sides of the equation. They want the school system. They want the school construction. They want us to hire more police officers and hire more prison guards.”

Brochin was less sanguine. But then again, Brochin is a Democrat who sided most closely to the Republicans’ position on taxes, voting against all of them and voting against every effort to cut off the GOP filibuster.

‘‘I think three years is a lifetime in politics,” he said. ‘‘I’m hoping in the next three years, there are going to be a lot of votes that will eliminate these tax increases.”

People have asked why Brochin hasn’t switched parties.

‘‘I’d like, as a Democrat, to reshape the focus of what we do,” he said. ‘‘We can’t do everything and we can’t be everything.”