The measure would spare consumers the 5 percent sales tax on such items as potato chips and pretzels starting in 1997. It has already been approved in the House of Delegates as part of a business tax relief bill.
The proposed legislation has the support of Gov. Parris N. Glendening and legislative leaders. Hundreds of jobs tied to future expansion at a Frito-Lay Inc. facility in Harford County may hinge on its passage.
But the Senate Budget and Taxation Committee, which approved the repeal Tuesday, rescinded its approval two days later and is now holding the bill.
Sen. Barbara A. Hoffman, who chairs the committee, said the proposal's $14 million cost to the state and pressure tactics by Frito-Lay were responsible for the unusual maneuver.
"In light of what we've done so far in cutting business taxes, we had some reluctance to take another big tax bite," said Senator Hoffman, a Baltimore Democrat.
Representatives of Frito-Lay, a Pepsico subsidiary, have warned state officials they will halt growth at the company's Harford County pretzel plant and warehouse if the tax is not repealed.
Currently, the facility employs about 150 people, but the company would hire another 500 within eight years if the expansion goes forward, officials said.
Some legislators claim Frito-Lay's position amounts to corporate blackmail. They view it as particularly galling since consumers, not Frito-Lay, pay the snack tax.
"There's a sense we're being held up by Frito-Lay," said Sen. Christopher J. Van Hollen Jr., a Montgomery Democrat who opposes the repeal. "There's definitely some reaction to that."
The Senate committee has approved a handful of "targeted" tax relief measures this session, including other tax breaks proposed by Governor Glendening.
Senators expressed some concern yesterday that too large a break for businesses could jeopardize their most prized tax relief initiative, a reduction in personal income tax they expect to approve next year.
The proposed fiscal 1996 budget sets aside $250 million to help finance the future income tax break.
House Speaker Casper R. Taylor Jr. said he did not believe Frito-Lay had "strong-armed" anyone and hoped the committee would change its mind.
The fact that senators chose to hold the bill rather than kill it gave the measure's proponents some comfort.
"I'm hoping that the business community, the governor and the secretary of the Department of Economic and Employment Development will keep lobbying the committee," said Delegate Taylor, an Allegany County Democrat.