ANDY ROSEN
Daily Record Business Writer
April 2, 2008

ANNAPOLIS - As Senate leaders worked late Tuesday to find a way to repeal the unpopular computer services tax, it became more apparent that the tax's projected revenue may be replaced with transportation spending cuts.

In his most favorable statement yet on the tax, Senate President Thomas V. Mike Miller Jr., D-Calvert and Prince George's, told reporters that he expected his chamber to be able to repeal the tax, but had not yet determined how to replace the more than $200 million it is expected to generate.

"We're going to get it done," Miller said. "The question is how we're going to get it done?"

One possibility, he said, is a compromise plan proposed by Gov. Martin O'Malley that would involve an income tax surcharge on the state's wealthiest earners along with transportation cuts and other spending reductions. Still, he said it could also be done entirely with cuts.

The House of Delegates has been waiting for the Senate to complete its work on the computer services repeal proposal before taking up the matter. House Speaker Michael E. Busch, D-Anne Arundel, predicted Tuesday that transportation spending would take a hit if the tax is repealed without any new revenue to go along with it.

"If we repeal the computer tax with cuts, I think it will all come out of the transportation trust fund," Busch said, referring to the state's pot of money earmarked for transportation spending. He said the transportation money could be replaced if state revenues recover in future years.

Miller spent Tuesday afternoon measuring the level of support for the various proposals to come up with $200 million. The Senate Budget and Taxation Committee, which had originally planned to vote Monday on repeal proposals, did not bring up the issue at its Tuesday meeting.

Around 5 p.m., Miller released a written statement that said his office is "still working to get a firm sense of the level of support for various aspects of the Governor's proposal. ..."

A major transportation spending cut may prove a tough sell, both with members of the business community and Gov. O'Malley. Still, the income tax proposal has met with resistance in the Senate, both from Republicans and Montgomery County Democrats.

Donald C. Fry, President and CEO of the Greater Baltimore Committee, said his organization - a strong advocate for transportation spending - would not favor a transportation fund reduction even though the group supports the computer services repeal.

Groups including the GBC and the Maryland Chamber of Commerce had asked during last year's special legislative session for $600 million in new spending to address the state's transportation needs and resolve congestion issues. Though the General Assembly ultimately put less than $400 million aside, it was still a rare concession during a session that raised more that $1 billion in new taxes, including the computer services levy slated to take effect July 1.

"I think the legislature short-changed the state of Maryland during the special session in the area of transportation funding to begin with," said Fry, of the GBC. "To raid the transportation trust fund, I think is inappropriate and is not something that we could be supportive of."

O'Malley Spokesman Rick Abbruzzese said it is unlikely that the computer services tax would be repealed solely through transportation cuts.

"We've had a number of years with the transportation trust fund being raided time and time again," Abbruzzese said.