Is the Computer Tax Here to Stay? (Updated)

The Washington Post reports that Maryland’s Senate has not reached a consensus on how, or whether, to replace the much-despised computer sales tax. But Maryland Politics Watch readers have seen this coming.

Remember the now-legendary blogger interview of Senate President Mike Miller back in January? When we asked him about the computer tax, the Senate President answered, "The computer tax is not a good tax, but it’s $200 million and I’m going to fight to keep it... No one can agree on a replacement." And here’s our report on House Majority Leader Kumar Barve's comments:

"The House got rid of the computer sales tax but it came back. It’s bad public policy. It’s unwise to tax businesses that are mobile," Barve stated. "But unless we’re willing to find $200 million in extra revenues, it will be very difficult to get rid of." And why was the computer industry vulnerable? "In politics, when something unpleasant has to be done, it’s usually done to whoever squirms around the least!" Barve noted that Senator Rob Garagiola (D-15, MoCo) had a proposal to replace it with a gas tax, "but that is a non-starter." Added to Mike Miller’s comments, Barve’s opinion indicates that the computer tax is not going anywhere because there is no other way to raise the money.

Mr. Miller’s and Mr. Barve’s political predictions have been proven correct. When the Republicans proposed spending cuts and tapping "unallocated funds" to pay for a repeal, the Senate rejected it. When Senate Democrats proposed an income tax surcharge on the rich, Montgomery County officials opposed it. Time is running out: the current session has less than a month left and the computer tax is due to take effect this summer.

The tragedy is that it didn’t have to be this way. Governor O’Malley never proposed this tax. The House of Delegates did not propose it. And there were other ways to raise the money. An extra point hike in the corporate income tax could have raised at least $100 million and Maryland’s rate would still have been lower than Pennsylvania and D.C., equal to New Jersey and barely higher than West Virginia and Delaware. Combined reporting on corporate income taxes could have raised $25 million. Progressive Maryland believes it could have been worth $100 million. The legislature could have kept the Governor’s original higher income tax rates on individuals making $150,000, raising perhaps tens of millions more. And the legislature could have aggressively gone after tax-cheating employers but so far has not done so.

Instead, we are left with a looming, devastating tax on a knowledge-based industry critical to the state’s future. Everyone hates it. But no one has figured out how to get rid of it. Surely the Democrats in Annapolis can do better than this.

Update: The Sun reports that a surtax on millionaires is gaining ground. Democratic Senator Verna Jones's (D44-Baltimore City) proposal would raise $230 million by instituting a surcharge rate of 6% on incomes between $750,000 and $1 million and 6.5% on incomes above $1 million. But Montgomery County Executive Ike Leggett has written in opposition to the plan.

Update 2: The Governor has come out in favor of replacing the computer tax with the surcharge. However, Democratic Senator Robert Zirkin (D11-Baltimore County) has proposed to repeal the computer tax if the slots referendum passes. He also favors cutting transportation projects.

Senator Zirkin, I know my Montgomery County delegation is split on taxing the wealthy. But I would hope that all of them would stick together on opposing transportation cuts. All they hear is how horrible traffic congestion is from both their constituents and our County Council. Good luck in getting our eight State Senators to cut State Highway and transit projects in our county.

A Note on Labor Endorsements in CD4

Here's a quick observation from a labor guy on union endorsements in the Wynn-Edwards race.

The labor movement has been unusually divided between the top two contenders in CD 4: Al Wynn, the incumbent and Donna Edwards, the returning challenger. Wynn's biggest labor endorsers are the MSTA/NEA funds (the state teachers), the Washington Metro AFL-CIO, the Maryland-DC AFL-CIO, SEIU Local 400 (Prince George's local schools employees), AFSCME Local 2250 (Prince George's government employees) and the Washington DC Building Trades. Edwards' endorsers include the national SEIU, the national UNITE-HERE, UFCW Local 400 (grocery workers) and Progressive Maryland. She has also earned important non-labor endorsements from NOW, the Sierra Club and Emily's List.

When labor unions endorse, they bring either money, people power or both. In the Wynn-Edwards race, both of the leading candidates have enough money to compete. And both of them already have lots of name recognition in the district. So the labor endorsements that will matter the most will come from unions that 1. have lots of members in the district, 2. can get their members to turn out, and 3. have volunteers that can handle other tasks on behalf of the campaigns, including communication with non-members.

On the Wynn side, the most meaningful endorsements come from the Teachers. Both MCEA and PGCEA use Apple Ballots in their campaigns. But there are real questions as to whether either Apple Ballot will be used for a federal race and whether either affiliate will truly work hard for Wynn. On the Edwards side, the most meaningful endorsements come from UFCW Local 400 (grocery workers), the national SEIU and especially Progressive Maryland. PM has a large email list and engages in plenty of door-to-door work. But it will have to be just as active in Prince George's as it usually is in Montgomery to maximize its impact for Edwards.

So my best guess is that if the Teachers go all-out for Wynn, he'll have the edge. If they don't, PM will give the edge to Donna Edwards. But labor support is only one small dimension in this race. The overriding factors will be the level of satisfaction with Wynn inside the district and the relative skill each side shows in getting turnout. And the minor candidates could drain a few votes from Edwards, though none has yet demonstrated real strength in the district.

Two other interesting facts stand out. First, the 7000-member UFCW Local 1994 (the MoCo government employees) has not endorsed either candidate. Second, it is extremely unusual for a local union (SEIU Local 400) to take an opposite position from its parent. I cannot recall this happening inside my union, where the international and the regional councils closely align. It is probably a sign of the unusual volatility and strong feelings in this particular race.

Stop Slots Maryland Promises Aggressive Campaign

Aaron Meisner, Chairman of Stop Slots Maryland, promised a group of MoCo activists today that his organization would wage an aggressive campaign to defeat the slots referendum. What is his plan and will it work?

Meisner made his remarks at a public meeting of Progressive Neighbors, a liberal group based in Silver Spring and Takoma Park. He started by noting that most recent slots referenda have failed, a point previously demonstrated by Free State Politics blogger Eric Luedtke. So while slots have a 60%+ favorability in Maryland polls, victory is possible.

"We can win, but it won't be easy," Meisner said. "It's not easy to transform a grass-roots lobbying organizations into a statewide campaign. It's taking time to shift gears." Meisner indicated that the organization is recruiting political operators with statewide campaign experience in Maryland and is in heavy talks with several religious groups. He described the evolving coalition as a group of "strange bedfellows" including secular progressives, rural values voters and religious organizations. "It's a big challenge to get organized," he admitted.

Meisner did not get into specifics, but upon reading a hard copy of this blog post, he indicated that the new plan would resemble what we have outlined. Overall it seems that Stop Slots Maryland is just getting moving. As he says, they have a real challenge: radically changing the organization in the midst of waging its most critical and difficult campaign yet. It is very, very tough for any organization to change so much while on the move, but that is what has to happen for them to win.

Right now, the big questions on this issue are:

1. Will the Governor campaign in favor of the referendum?

2. How will Stop Slots Maryland raise the money needed to win?

3. How will the organization liaison with the street-level activists who will be critical to victory?

Elbridge James, President of Progressive Maryland, hinted at the answer to a fourth big question at the same meeting. When asked whether Progressive Maryland would "help lead the fight against slots," James said that the issue would be decided at a board meeting of the group in late January. "The question is will we oppose slots vigorously, oppose slots passively or not oppose them," he said. While James declined to provide a hard prediction of what Progressive Maryland would do, few of us left the meeting believing that the group would fight hard against slots. Several of the group's union affiliates may in fact support slots because of hopes to unionize casino workers, perform the construction work, or gain more public funding. This creates a significant possibility that Progressive Maryland will sit out this fight, thus lessening the chances of slots opponents.

Pay attention to this one, folks. The fighters are still in their robes, bouncing in their corners. Michael Buffer is only now reaching for the mike. I'd advise you to place your bets, but ah... maybe that's the wrong metaphor.