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New Group of Businesses Protest Sales Tax Expansion

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Special Report: Special Session 2007: Budget Crisis

By Kate Prahlad
Capital News Service
Wednesday, Nov. 7, 2007

ANNAPOLIS - Landscapers, computer businesses and arcades said they first learned of a proposal to extend the sales tax to their services Tuesday night -- the same night a Senate committee was adding those businesses to an administration tax bill.

"The first we heard of it was yesterday, which was also the first time our lobbyist heard of it," said Beth W. Palys, the executive director of the Landscape Contractors Association. "In our understanding, there was no public hearing and it was all done from behind closed doors."

Compare that to health club employees, Realtors and massage therapists, who were included in the original version of the bill and were able to mobilize workers in opposition to the $60 million in new taxes the bill would have imposed on them.

When the Senate Budget and Taxation Committee met Tuesday night, it struck health clubs, real estate services and massage therapy from the bill; landscapers, computer services and arcades were added, to the tune of about $300 million.

The proposal to extend the sales tax is just one part of Gov. Martin O'Malley's plan to close a projected $1.7 billion budget gap. The administration's tax bill would also increase the sales and income tax rates and close corporate tax loopholes.

"We think it's unfair and unwise to impose this type of tax without even one public hearing," said Ron Wineholt, vice president for government affairs at the Maryland Chamber of Commerce.

Some senators seemed to feel the same way Wednesday, when the tax bill reached the floor of the Senate.

Sen. Richard Colburn, R-Dorchester, asked if the newly targeted industries just "woke up this morning" to find out from a newspaper that their services could be taxed, whereas Realtors got the chance to protest.

"I think you summed up the process," said Sen. Ulysses Currie, D-Prince George's, who is also chairman of the Senate budget committee.

When asked if there would be time for additional testimony, Currie said testimony might be heard when the House Ways and Means Committee examines the bill.

Palys already has set her sights in that direction.

"The concern is now about the House, because while there is nothing in their current bills that deals with a sales tax on us, there wasn't anything in the Senate's either," she said.

Association members will write letters to House members, but "it's interesting that we have to write after the fact," Palys said. "It doesn't seem like due process."

Other businesses are left pondering what recourse they have and what effect this will have on business.

"We had no idea and this was completely out of the blue," said Charlie Mello, chief operating officer for My PC Guy, a Glen Burnie computer services company. "Had we known that the proposal would have singled us out as an industry, we would have been very proactive in doing something."

Wineholt estimated that computer services would account for $250 million of the $300 million the new additions would raise under the bill.

Larry Merritt, night manager and technician at Sportland Arcade in Ocean City, said he first heard co-workers and other technicians discussing Wednesday the how the tax proposal was snuck on.

"I mean, I know we have to pay for the roads," he said. "But we're so close to Rehoboth, if they do that, someone may well drive the extra 22 miles" to not pay a sales tax in Delaware arcades.

Mello said opponents are in a "quandary about just who is an ear that we would speak to."

"We are by nature not a group of people that has lobbyists at beck and call," he said. "But we'll explore who it is."

"Beyond that, we're going to have to take a look at what it means to operate in Maryland," he said.

-- CNS reporter Bernie Becker contributed to this report.

Copyright 2007 University of Maryland Philip Merrill College of Journalism

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