Budget Revisions Prompt Questions

By Philip Rucker and Ovetta Wiggins
Washington Post Staff Writers
Thursday, November 8, 2007

Budget writers in the Maryland Senate were peppered with questions yesterday about whether their deficit reduction plan protects the interests of working families and why they had decided, with no public debate, to propose taxing landscaping, video arcades and visits from the Geek Squad and other computer services.

The pointed discussion on the Senate floor and elsewhere came as lawmakers prepared to start voting today on proposals to raise taxes and hold a referendum on slot machine gambling in an effort to close a projected budget shortfall of at least $1.5 billion.

"If we fail, we will be simply sticking our heads in the sand," Sen. Ulysses Currie (D-Prince George's), chairman of the Budget and Taxation Committee, told his colleagues.

Currie's panel voted Tuesday night to make several significant changes to proposals by Gov. Martin O'Malley (D) in the special legislative session. Among the amendments that received the most attention yesterday was the panel's proposal to apply the state sales tax to landscaping, arcades and computer services.

Legislative analysts said taxing those services would yield about $250 million a year in revenue, far more than would be generated by taxing a handful of other services, including health clubs and tanning salons, that O'Malley had specified and that were the subject of public hearings. Those were taken out of the bill after an outcry by those affected.

Sen. Richard F. Colburn (R-Dorchester) asked Currie whether landscapers, arcade owners and computer service operators knew that levies would be placed on their services. "Or did they wake up this morning and look at the paper and find out we're in?" he said.

"I think you summed up the process," Currie replied.

Business owners in the three industries said they were caught off guard by the amendment.

Robert Kaitz, owner of My PC Guy in Anne Arundel County, said he thinks taxing his industry is "crazy."

"It puts our prices sometimes out of reach of small businesses," Kaitz said. "The money doesn't come out of my pocket. It's coming out of my clients'."

Increased sales tax revenue is by far the largest component of the deficit reduction plan. Besides applying the tax to some new services, the Senate panel endorsed O'Malley's proposal to raise the rate from 5 to 6 percent, which would yield an additional $680 million next year.

The sales tax is considered among the most regressive levies imposed by the state, because it accounts for a larger share of low-income residents' wages than that of higher-income earners.

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