Editorial: Reversing course on tech tax
It takes a big person to admit they were wrong.
Massachusetts residents are hearing rare mea culpas in the halls of the Statehouse recently when it comes to a part of the revenue package enacted for this budget year. The tax having a number of lawmakers — including Gov. Deval Patrick — eating legislative crow, is the 6.25 percent sales tax on computer, networking, telecommunications and software services.
“I think it’s a serious blot on our reputation as an innovation center,” the governor said just last week.
You would have thought that someone in the Legislature would have argued long and hard against the idea of a “tech tax” when it first came up. But such recognition doesn’t always compute with those interested in finding new revenue sources for the state.
The idea is a new one, given that there are only three other states with such a tax, so its implications may have been obscured.
And, at the time, people in the commonwealth were focused on what was happening between the governor and the House and Senate over proposed increases in the gas and tobacco taxes.
Thankfully, those who objected to this tax, many of those in the computer service industry and their clients, didn’t go quietly when it went into effect. They kept up the noise and the pressure. This includes the Massachusetts Taxpayers Foundation, which did a 50-state study of the matter and found “Massachusetts now has the most burdensome tax on computer and software services in the nation ... this new law strikes at the heart of the innovation economy that is central to the state’s economic future.”
“Repealing the tax would return Massachusetts to the mainstream of the 50 states,” said foundation President Michael J. Widmer. “With Massachusetts losing 3,000 jobs since January, placing the highest tax burden in the country on innovation and technology — the state’s greatest economic strength — is simply bad policy.”
To their credit, lawmakers were willing to listen and have voiced support for repealing the tax. In turn, the Department of Revenue has imposed a delay in having to report the sale-and-use tax on computer and software services. On the DOR website, Amy Pitter, commissioner of revenue, said, “This extension is designed to minimize administrative burden on vendors during a period when the Legislature is likely to be considering repeal of these new tax provisions.”
In the case of bad tax policy, however, recognizing the mistake needs to be followed by action. Until this tax is repealed, those opposing it have to keep up the pressure.