Special session promises in jeopardy | Maryland Gazette (HometownGlenBurnie.com)

The movement to repeal the "tech tax" is growing in the Senate as public opposition continues at high pitch. The General Assembly passed the tax last fall during the special legislative session, as part of a plan to close the state's $1.5 billion deficit.

However, Mr. Miller said March 14 there is little need to hike taxes in the last several weeks of the General Assembly session to cover for the estimated $200 million that would be lost if the tech tax is struck down. In fact, the senate president has previously declared no more taxes will be raised during Mr. O'Malley's term.

The statements illustrate a bigger quandary surfacing in the legislature. During the past three months almost all of the good things that were supposed to have come out of the special session have been threatened.

Marylanders were told for the better part of last year that they would have to sacrifice to help close the state's $1.5 billion deficit, but in the end they would still be rewarded.

Taxes would go up, but there would expanded health care, better roads and bridges, the creation of a trust fund for cleaning the Chesapeake Bay, a new formula to give more school money to places where education costs the most. And there would be a jumpstart on revenue that would leave the next budget in better posture so funding would not be deeply cut again.

"The governor is mindful of the economic downtown, but imagine how worse off we would be as a state had we not made those difficult decisions," Christine Hansen, a spokesman for Mr. O'Malley, in a statement.

But the buyer's remorse surfacing with the tech tax shows how the General Assembly can make few budget decisions without starting to cannibalize the promises it has made.

For example, Mr. Miller said a repeal of the tax with no corresponding revenue source would probably result in eliminating the $75.8 million "Geographic Cost of Education Index," a formula that gives more education dollars to the jurisdictions that have the highest costs. Anne Arundel County would receive about $2.6 million because of the GCEI in fiscal 2009.

Ultimately, it will be up to the governor to put his ideas "on the playing field," Mr. Miller said. "I call balls and strikes," he said, noting his role as presiding officer.

Tough choices

When Mr. O'Malley unveiled his budget package last fall, its success was partially predicated on getting a jump start on revenue right on Jan. 1.

The infusion of cash that was expected from increasing taxes at the beginning of the new year, however, will not appear, because the drowning economy managed to take that special session prediction down with it.

About 70 percent of the expected revenue in the first six months of 2009 disappeared with a stroke of the pen this month when the Board of Revenue Estimates wrote-down Maryland's income expectations.

In effect, the timing of the special session really resulted in only $35.3 million of extra revenue, according to a report of the Senate Budget and Taxation Committee. That's just 2 percent of the deficit.

When the Senate approved the state's $15.2 billion operating budget on March 14, it significantly rolled back two of the highest-profile initiatives from the special session.

The Chesapeake Bay Trust Fund was cut from $50 million to $25 million for the next two years, and a health care expansion was delayed six months to save $24.3 million.

And trying to get rid of the computer services tax causes other political problems.

One solution, proffered by Sen. Verna Jones, D-Baltimore, would increase the income tax on high-earners making more than $750,000 a year. The bill is similar to what Mr. O'Malley proposed during the special session, but the governor's measure failed when Democrats from Montgomery County refused to let their constituents carry the majority of that pain.

Sen. Bobby Zirkin, D-Baltimore, has filed a bill to repeal the tech tax if the slot machine referendum passes in November and said the lost revenue could be made up by cutting $200 million worth of transportation spending.

Transportation, however, was one of the biggest priorities during the special session, and lawmakers repeatedly said a new infusion of cash was needed now to prevent Maryland's infrastructure from corroding.

But keeping high taxes in a faltering economy is much worse than putting off new roads, Mr. Zirkin said.

"It will be a priority (in the future) but you have to make choices here," he said.

For its part, the House is trying to hold the line on both the bay fund and health care expansion, by insuring more Marylanders on time and increasing the bay money to its original $50 million in fiscal 2010.

The state's priorities will be preserved, said House Speaker Michael E. Busch, D-Annapolis, noting there are hundreds of millions of dollars still set aside for initiatives such as school construction, and that the college tuition freeze continues.

"You are going to leave here with all that intact," he said.

The largest unresolved question is what to do about the computer tax, Mr. Busch said, and the other differences between the House and Senate spending plans will be ironed out with little difficulty.

"The budget will go relatively smoothly," he said.