The full Maryland Senate on Thursday night was poised to repeal the 6 percent computer services sales tax and pass a new surcharge on taxable incomes over $1 million.
The Senate tentatively approved the measure earlier in the day, rejecting five Republican amendments that would have eliminated the tech tax passed in November and replaced the $210 million it generated without raising taxes. None of the GOP attempts to use spending cuts, surpluses and transfers as substitutes came close to gaining a majority, indicating the legislation was likely to pass with votes to spare and be sent to the House.
Gov. Martin O?Malley hailed the progress as a victory for the state?s working class.
“We?re tightening our belts,” O?Malley said. “And we?re not going to be shy about asking our fellow citizens who earn more than $1 million each year to pay three quarter percent more to defend our quality of life.”
Senate President Thomas V. Mike Miller said the repeal and tax increase “must pass.” He is now describing the measure as “a $700 million tax cut,” because the millionaire surcharge raises $110 million a year but lasts only three years, and the computer tax was expected to raise $210 million and expire after five years.
Even Sen. Norman Stone, a fiscally conservative Democrat who has rarely voted for tax increases during his 41 years in the Senate, including none of the tax increases in the November special session, said he was prepared to vote for the repeal and tax increase. Stone said there were many computer services businesses in his Dundalk district that would be hurt by the tax that takes effect in July, and no millionaires live there.
Gov. Martin O?Malley signed and initially defended the tech tax passed in the final hours of the special session, though it was not part of his initial plan to cure a $1.5 billion structural deficit. As information technology firms and business groups mounted pressure for repeal, O?Malley and lawmakers began searching for ways to backfill the financial hole it would leave.
The solution was to again raise taxes on the wealthy ? about 6,500 households that earn an average of $3 million a year. Each would pay an additional $17,000 a year in state income tax ? $110 million. Another $50 million would be transferred from the transportation fund, which gets an infusion of cash this year, and O?Malley would make another $50 million in spending reductions by July.
Senate Republican leader David Brinkley offered amendments that would have still repealed the tax, but would take more money from transportation. Sen. James Ed DeGrange, chairman of the transportation budget subcommittee, said the measure would cost 2,700 construction jobs.
Examiner Staff Writer Jaime Malarkey contributed to this report.
