Apps Tax, Mortgage Deduction, Tobacco Tax Under Scrutiny

Maryland Senate President Mike Miller likes to download his music.

"I have 1,800 songs that range from 'If I Knew You Were Coming I Had Baked a Cake,' to The Drifters sinking 'Up on a Roof,' " Miller told WBAL News today.

Miller says if brick and mortar stores have to collect the sales tax, so should online merchants.

"It doesn't make sense for our small businesses and shopping centers to close their doors and put for sale signs on the window, because people are buying online and not paying the sales tax that they pay, when they shop locally," Miller added.

The Senate President believes lawmakers will pass the portion of Governor Martin O'Malley's plan that would extend the state's 6% sales tax to online purchases including smart phone apps, downloaded music and online newspaper subscriptions.

The governor says extending the sales tax will generate $21-million in its first year.

Republicans are highly critical of the plan.

"The governor is floating a tax a day. The governor needs to get some sensitivity training about how tax increases impact people's lives every day on a negative basis," Senate Minority Leader E.J. Pipkin told WBAL News.

Pipkin believes that this proposed tax extension is far worse than the so-called "tech tax" that lawmakers approved in a special session in late 2007, only to repeal it a few months later in 2008.

Pipkin says that plan which extended the sales tax to Internet services is far narrower than the one the governor proposed last week.

In defending the tax, Lt. Gov. Anthony Brown told WBAL News that extending the sales tax to online purchases reflects a shift in the economy from one based on manufactured, tangible goods sold in stores, to services and digital goods sold electronically.

"The proposal the governor and I are making says hey let's recognize the evolution and the change in our economy, to make sure everyone is paying their fair share of taxes," Brown told WBAL News.

Cancer Society, Advocates Rally To Support Tobacco Tax Hike

Lt. Governor Brown today joined officials of the American Cancer Society and other health advocates at a rally to support the governor's plan to increase the state tax on cigars and other tobacco products so that it is at the same level as cigarettes.

Under the governor's tax proposal, the price of a single cigar could go up around 80-cents.

Advocates say it would discourage people, particularly teenagers from smoking.

The advocates cite statistics that flavored cigars are the tobacco product of choice for teenagers because they are less expensive and easier to obtain than cigarettes.

The O'Malley Administration says raising the tobacco tax would generate an additional $19-million in its first year.

Home Builders Criticize Mortgage Tax Deduction Changes

Home builders are giving lawmakers an earful about the governor’s proposal to limit the home mortgage interest deduction for individuals making more than $100,000 a year and families making more than $150,000.

Tom Farasy, the immediate past president of the Maryland State Home Builders Association, says the timing of the governor’s proposal comes as home prices are still depressed, and limiting the deduction won’t make the situation any better.

"Look at the reality of who buys a home, even a $300,000 home, and what do you have to make in order to qualify for that house? You have to make $100,000, so it's knocking everybody out," Farasy told WBAL News.

Under the governor's proposal, the deduction would be capped 90% for those earning more than $100,000, and 80% for those earning more than $200,000.

The mortgage interest payment deduction is part of a package of deduction changes that the governor says would generate about $181-million for the state every year.