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Republicans slam bill that would extend sales tax to services

Members of the House Ways and Means Committee heard nearly six hours of testimony Tuesday on a series of tax hikes from raising the income tax rate on millionaires and capital gains to changing the way corporations are taxed. But the measure that drew the fiercest opposition from a long list of witness was a bill to extend the sales tax to 30 new services, including car repair.

If imposed, the expanded sales tax would generate an estimated $296 million in fiscal year 2013.

Speaking before a room packed with opponents from the auto service industry, supporters testified that expanding the sales tax was ultimately inevitable, particularly as the state faces more budget cuts and continues its search for additional revenue sources.

Neil Bergsman of the Maryland Tax and Budget Policy Institute argued that expansion of the sales tax to services considered to be non-necessities was a revenue generator worth pursuing.

“The biggest erosion of our tax base over the last decades has been the failure of the sales tax to apply for services,” Bergsman said.

Republicans expressed opposition to what they viewed as a regressive tax. Del. Andrew Serafini, R-Washington, questioned the aftershocks of the proposed tax, arguing that any tax on businesses would simply lead to higher prices that consumers would be left to make up.

Bergsman did not disagree with Serafini, but said that the repercussions of cuts to schools, health care, and public safety are far more damaging.

“The effects of those [cuts] are way more regressive than any tax increase any of you are likely to consider,” Bergsman said.

Small business owner and Baltimore County Republican Del. Joseph Boteler said the bill appeared to be an “assault” on small business owners and such actions would ultimately kill the economy.

The doomsday budget the Senate budget is considering shadowed much of the hearing as revenue alternatives were considered. Committee Chair Sheila Hixson, D-Montgomery, lead sponsor of the sales tax expansion, reminded the committee that the Senate had presented its budget earlier in the day and that while all of the bills before the committee would be equally considered, few would ultimately be enacted.

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