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CLT UPDATE
Thursday, September 19, 2013
With tech tax fading will replacement tax follow?
|
The preferred terminology was “evolve,” which is a more pleasant
way of describing the Darwinian contortions undertaken this week by
Beacon Hill’s powerbrokers who, watching President Obama deal with
Congress on Syria, realized they, too, needed an exit strategy.
The sales tax on software design services may not rise to the
sensitivity level of walking back a proposed military strike on a
foreign nation, but its prospects for repeal needed a bit of
finessing nonetheless.
The drumbeat for abandoning the more simply-dubbed tech tax has
been growing for months, thumped by Republicans, a few Democrats and
the tech sector itself. The crescendo peaked Tuesday when Gov. Deval
Patrick called the tax “a serious blot” on the state’s reputation as
a hub for innovation, and called for its repeal.
The governor’s principled stand with the business community
required a bit of short-term memory loss, glossing over the fact
that he first was the first to propose a broader tax on computer and
software services. "Do I still support? I've vetoed this, remember.
So, no,” he said when asked to clarify his position on the tax, even
though his veto of the transportation financing bill had nothing to
do with the software tax.
But Patrick, like House Speaker Robert DeLeo and Senate President
Therese Murray, would eventually come around to owning their
mistake. Just don’t call it a flip-flop....
So will repeal completely erase the stain of the 2013 tech tax on
the 188th General Court? Probably not. But it’s easier to campaign
on a willingness to fix a problem than to try to defend one. Imagine
the smiles on Republican faces next fall if Democrats were trying to
explain an unpopular tax hike amid a well-financed, business-led
ballot drive to repeal it. Actually, that’s probably just the type
of imagining that occurred before this week’s reversals.
“I think I heard the word evolution,” House Ways and Means
Chairman Brian Dempsey said, by way of explanation for the abrupt
reversal unseen in these parts since Bill Weld took office in 1991
and signed a repeal of a three-month-old sales tax on – you guessed
it – services.
State House News Service
Friday, September 13, 2013
Weekly Roundup – Ooops, they did it again
Now, did anybody in the Massachusetts Legislature wonder why
there was so little resistance to what we now know as the tech tax,
applying the 6.25 percent sales tax to computer services?
During the run-up to the July vote on a transportation bill, we
spent the spring fixated on the 3-cent gas tax increase and the
extra buck on a pack of cigarettes.
The computer tax, part of Gov. Deval Patrick's original proposal
to pay for transportation projects, was barely mentioned, if at all.
While some tea party-like groups such as
Citizens for Limited
Taxation and Government were sounding the alarm, the legislative
leadership was getting so little resistance that the tech tax made
hardly a ripple. It was such a non-issue that there wasn't even a
hearing dedicated to it or a study of its potential side effects....
CLT's Barbara Anderson told me, "We strongly came out
against this thing in April and we waited for the (Massachusetts
Taxpayers Association). They were talking about the gas tax but no
mention of this.
"Then they gave one week to the Department of Revenue to get
ready. It was insane," she said.
Late but not too late, the technology community jumped in with a
ballot initiative for repeal, and Attorney General Martha Coakley
approved.
The next step would be the collection of signatures, which
Anderson told me would be a cakewalk.
"The high tech community will hire a company, pay to get
signatures, get on the ballot, and win. That is so certain," she
said....
Suddenly Massachusetts' signature industry was going to be
subject to the most onerous tech tax in the nation, and we were
about to enter more than a year's worth of ugly political and
economic repercussions if it weren't repealed.
Finally, last Thursday, the leadership got in front of the
parade, and there was agreement all around, including the governor,
that repeal is the right thing to do.
Just another chapter in Beacon Hill Profiles in Courage.
The New Bedford Standard-Times
Monday, September 16, 2013
Tech tax fiasco entirely predictable
By Steve Urbon
After taking off August, Gov. Deval Patrick has evolved on the
tech tax, to the point where he now opposes the measure that he
originally proposed.
How John Kerry of him!
But of course, Democrats evolve. Republicans flip-flop....
The pomp and circumstance of the House will return soon.
Lawmakers will vote to repeal the tech tax they passed — pleading
ignorance — so Democrats can repair their relationships with their
business campaign donors and get the money flowing into their war
chests.
As if you are a peasant, you will be told to be grateful.
November 2014 is our time to revolt. Off with their heads at the
ballot box.
The Boston Herald
Monday, September 16, 2013
State overdue for a serious House cleaning
By Holly Robichaud
Until recently, the lords of Massachusetts’ new tech universe
were too cool to care about state politics.
But then state lawmakers decided to impose a sales tax on
computer and software design services — in other words, on them.
Suddenly, a new generation of tech leaders cared a lot about
state politics. They tweeted their unhappiness. They launched heated
online forums. Some even went beyond virtual complaining and met the
old-fashioned way — face-to-face — with Governor Deval Patrick.
Their newfound political activism worked to the point that
Patrick — who first proposed the tax last January in his $1.9
billion tax reform plan — is now calling for its repeal. It’s a
“serious blot” on the state’s innovation reputation, the governor
now believes.
Welcome to the real world, techies, where politicians bend when
outside pressure is applied....
The Massachusetts High Technology Council — which has been
fighting the computer sales tax since it was first proposed — is
happy to have the new kids on board. Will they stay is a key
question, acknowledges Christopher Anderson, the council’s longtime
president....
Unlike the Massachusetts Taxpayers Foundation, which is willing
to consider the need for more tax revenue, the council almost always
opposes taxes as a way to increase revenue. Its mission statement
warns that “efforts to disguise unrealistically high taxes by
collecting them through corporations will result in inflated prices,
loss of competitiveness, and damage to the economy.” ...
That’s the debate the new tech universe ducked.
It’s in it now for selfish reasons — but for how long?
The Boston Globe
Sunday, September 15, 2013
Governor Patrick’s tech tax wakes up a sleeping giant
By Joan Vennochi
Gov. Deval Patrick chided lawmakers yesterday for their plan
to replace the revenue of the soon-to-be-repealed tech tax with
surplus funds, slamming it as an irresponsible “roll (of) the
dice” amid the state’s still-stretched budget.
“I feel that the responsible thing, knowing what all the
pressures are on this budget, is to plug the hole. There are
others who say let’s just repeal the tech tax and roll the dice,
and I don’t think that’s the responsible thing,” Patrick told
the Herald yesterday after making the rounds with tech industry
startups at a Seaport District event.
“I’ve heard all kinds of ideas being floated … one of them is
to use the surplus,” Patrick said. “The Legislature has already
spent half that surplus. So that surplus is not enough.”
Despite previously saying he had “ideas” of how to account
for the $161 million the software services tax was expected to
generate, Patrick was coy on what he viewed as a replacement.
The Boston Herald
Thursday, September 19, 2013
Deval Patrick: Surplus no substitute for tech tax
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Chip Ford's CLT
Commentary
Echoing last Thursday's CLT Update headline ("Oops
— screwed up again"), the State House News Service's Weekly
Roundup on Friday was titled "Ooops, they did it again," also
reporting on the tech tax fiasco on Bacon Hill. A week later
imminent repeal of this new tax seems inevitable by unanimous
acclamation of those who proposed and passed
it — only two months ago.
In our memo to every member
of the Legislature on April 24 ("Tax
Hikes, Sales Tax on Computer Services"),
CLT tried to wake them up to the folly of this tax. Our memo
reminded them of history and bad results. In part it read:
July 1990. A year after promising voters that the income
tax rate hike from 5% to 5.75% would be “temporary,” a
conference committee recommended raising it to 6.25
percent. In the same tax package, a new tax on services
was created. Legislators were told it would apply only
to “professional” services (legal, accounting,
engineering and architectural) paid mostly by “the
rich.”
The package passed quickly, before research could be
done; it was set to go into effect early in 1991. Before
that date, conservative Democrat Greg Sullivan (later
Inspector General), went to the House floor with the
list of the services that would actually be taxed. As I
recall, he rolled it out on a long paper scroll that
touched said floor. Much to the surprise of those who’d
voted for it, the sales tax actually applied to every
service imaginable, from arbor planting to zoo feedings,
including lawn mowing, haircuts, paper delivery and
veterinarian bills for injured puppies.
A few legislators rightfully lost their jobs over that
in November, and new Governor Bill Weld had no trouble
getting a vote to repeal the entire service tax before
it went into effect.
So you might want to learn more about the sales tax on
computer services before your final vote on it. An
example of a service that would be taxed seems to be
providing software to help a company automate the
collection and archiving of laboratory data.
You’re creating a new tax on collecting lab data that
could cure cancer? Really?
We at CLT tried to give them a heads-up, alert
them to a mistake in the making that'd been made before.
If they had given our memo some consideration,
they could have avoided this embarrassment.
Had they only considered CLT's collective "institutional memory,"
learned something from history — they would now not be doomed to
repeat it.
Not many in the high-tech community were even aware they were in the
state's revenue bull's-eye until it was too late. It took their
responsive threat of a repeal ballot question to finally get Bacon
Hill's attention. Once everyone woke up to what just happened, the
pols ran for cover and suddenly everyone was opposed to it.
I just hope the high-tech and business communities behind the ballot
question know enough to not drop their petition
signature-gathering within its brief time limitation just on a
promise from politicians. We longtime taxpayer activists know too
well how that will end.
Collection of the recently
imposed tax on computer services, dubbed "the tech tax," has been
suspended for a month by the Department of Revenue until the
Legislature decides whether to repeal or not —
so even more confusion and chaos has been injected into this fiasco.
Governor Deval Patrick is
now also against the tech tax —
after he not only was for it but first proposed it.
But if he can't have his tech tax, he'll settle for any other tax he
can get his hands around. “I feel that the responsible
thing, knowing what all the pressures are on this budget, is to plug
the hole," he said yesterday.
Leaders in the House and Senate don't seem
enthralled with reverting to tax-hike mode so soon. Many
legislators, having had a painful epiphany after being recently
duped, now think that revenue can be found elsewhere without raising
taxes someplace else.
We'll have to watch this evolve over the next
week or two.
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Chip Ford |
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State House News Service
Friday, September 13, 2013
Weekly Roundup – Ooops, they did it again
Recap and analysis of the week in state government
By Matt Murphy
The preferred terminology was “evolve,” which is a more pleasant way
of describing the Darwinian contortions undertaken this week by
Beacon Hill’s powerbrokers who, watching President Obama deal with
Congress on Syria, realized they, too, needed an exit strategy.
The sales tax on software design services may not rise to the
sensitivity level of walking back a proposed military strike on a
foreign nation, but its prospects for repeal needed a bit of
finessing nonetheless.
The drumbeat for abandoning the more simply-dubbed tech tax has been
growing for months, thumped by Republicans, a few Democrats and the
tech sector itself. The crescendo peaked Tuesday when Gov. Deval
Patrick called the tax “a serious blot” on the state’s reputation as
a hub for innovation, and called for its repeal.
The governor’s principled stand with the business community required
a bit of short-term memory loss, glossing over the fact that he
first was the first to propose a broader tax on computer and
software services. "Do I still support? I've vetoed this, remember.
So, no,” he said when asked to clarify his position on the tax, even
though his veto of the transportation financing bill had nothing to
do with the software tax.
But Patrick, like House Speaker Robert DeLeo and Senate President
Therese Murray, would eventually come around to owning their
mistake. Just don’t call it a flip-flop.
"Some of the people who were advocating that we reconsider this were
advocating then that it be passed and that it be passed over my
veto, so I think a lot of us have evolved over time and we've done
that by listening and that's a good thing," Patrick said.
Standing in the speaker’s office with three well-known business
figures, Murray and DeLeo said Thursday they would put a repeal of
the software sales tax before the members in the coming weeks,
almost assuredly a slam dunk. Legislative leaders made the best
decision they could at the time with the information at hand, Murray
and DeLeo said, but circumstances changed. Some, like High Tech
Council President Chris Anderson, attributed the chain of events
that led to the tax to the runaway train school of modern Bay State
political science.
Even Massachusetts Competitive Partnership’s Dan O’Connell was there
to share in the shame. We in the business community underestimated
the negative impacts of this tax,” said O’Connell, a former Patrick
economic development advisor.
And as for the $161 million from the tax used to balance the fiscal
2014 budget? Months ago those were critical new funds desperately
needed to anchor transportation and budget investments. Well, we
might not need it after all. Let’s just wait and see, they said.
There may be other pots of dough available.
So will repeal completely erase the stain of the 2013 tech tax on
the 188th General Court? Probably not. But it’s easier to campaign
on a willingness to fix a problem than to try to defend one. Imagine
the smiles on Republican faces next fall if Democrats were trying to
explain an unpopular tax hike amid a well-financed, business-led
ballot drive to repeal it. Actually, that’s probably just the type
of imagining that occurred before this week’s reversals.
“I think I heard the word evolution,” House Ways and Means Chairman
Brian Dempsey said, by way of explanation for the abrupt reversal
unseen in these parts since Bill Weld took office in 1991 and signed
a repeal of a three-month-old sales tax on – you guessed it –
services.
STORY OF THE WEEK: Filed under “If I had known then what I know
now,” Patrick, Murray and DeLeo retreat from software services tax
and back repeal. Question on replacement is still a point of
contention.
The New Bedford Standard-Times
Monday, September 16, 2013
Tech tax fiasco entirely predictable
By Steve Urbon
Remember the invasion of Iraq, where our troops rolled into Baghdad
with almost no resistance from Saddam Hussein's army? I couldn't
have been the only person to think, "Uh-oh. We're walking right into
a trap."
Now, did anybody in the Massachusetts Legislature wonder why there
was so little resistance to what we now know as the tech tax,
applying the 6.25 percent sales tax to computer services?
During the run-up to the July vote on a transportation bill, we
spent the spring fixated on the 3-cent gas tax increase and the
extra buck on a pack of cigarettes.
The computer tax, part of Gov. Deval Patrick's original proposal to
pay for transportation projects, was barely mentioned, if at all.
While some tea party-like groups such as Citizens for Limited
Taxation and Government were sounding the alarm, the legislative
leadership was getting so little resistance that the tech tax made
hardly a ripple. It was such a non-issue that there wasn't even a
hearing dedicated to it or a study of its potential side effects.
After all, it doesn't take the Fed chairman to understand what a
stimulus package this was for southern New Hampshire.
CLT's Barbara Anderson told me, "We strongly came out against
this thing in April and we waited for the (Massachusetts Taxpayers
Association). They were talking about the gas tax but no mention of
this.
"Then they gave one week to the Department of Revenue to get ready.
It was insane," she said.
Late but not too late, the technology community jumped in with a
ballot initiative for repeal, and Attorney General Martha Coakley
approved.
The next step would be the collection of signatures, which Anderson
told me would be a cakewalk.
"The high tech community will hire a company, pay to get signatures,
get on the ballot, and win. That is so certain," she said.
Late last week, state Senate President Therese Murray jumped on the
repeal bandwagon, saying: "It is now evident that the impact of the
tax is broader than any of us ever anticipated or intended."
Thus she demonstrated that our legislators pay about as much
attention to computer technology as the computer industry pays to
Massachusetts politics.
Truth is, nobody knew what the impact might be. The governor's
original proposal guessed that it would be a $265 million item. But
the tech companies estimated it would be twice that.
No one seemed able to explain just what was covered and what was
not. The governor's original proposal made the point that computers
are shifting away from software (taxable) and toward the tech
services in the "cloud" (non-taxable).
The idea was that taxing the cloud would simplify things. But it
didn't. It made things worse. Suddenly Massachusetts' signature
industry was going to be subject to the most onerous tech tax in the
nation, and we were about to enter more than a year's worth of ugly
political and economic repercussions if it weren't repealed.
Finally, last Thursday, the leadership got in front of the parade,
and there was agreement all around, including the governor, that
repeal is the right thing to do.
Just another chapter in Beacon Hill Profiles in Courage.
The Boston Herald
Monday, September 16, 2013
State overdue for a serious House cleaning
By Holly Robichaud
After taking off August, Gov. Deval Patrick has evolved on the tech
tax, to the point where he now opposes the measure that he
originally proposed.
How John Kerry of him!
But of course, Democrats evolve. Republicans flip-flop.
It took a monthlong holiday for the governor to have a change of
heart on the job-killing tax. How much downtime does the
Massachusetts House need?
Patrick’s time off pales in comparison to the vacation taken by
House members. They have not met in full formal session since the
end of July. In fact, the House has only gathered in 17 full formal
sessions — for a grand total of 20 working days — this year. That’s
less than three days per month. Is that full time?
It’s hard work raising taxes rather than demanding accountability of
our tax dollars.
With such a light schedule, House members must be studying the bills
to be well-informed of the content.
Yet what has been accomplished during these 17 sessions? They voted
to raise our taxes on multiple occasions, but failed to hold a
public hearing on the tax bill.
Well, at least, they tackled the welfare fraud problem. Nope! When
an applicant is not required to produce a Social Security number to
receive benefits, you know that the so-called reforms were just
window dressing.
They must have passed reforms to prevent another crime lab scandal?
Rejected.
They must be requiring more oversight of labs such as NECC after the
64 meningitis deaths last year? Nope.
After three House speakers have been convicted of felonies, they
must have supported measures for more transparency? No way.
You might think the silver lining is taxpayer savings, because
lawmakers are not driving to the State House to collect their per
diems for commuting to work. No such luck.
Democrats will claim that they are getting the people’s work done at
informal sessions. The average attendance is six out of 160 members.
The pomp and circumstance of the House will return soon. Lawmakers
will vote to repeal the tech tax they passed — pleading ignorance —
so Democrats can repair their relationships with their business
campaign donors and get the money flowing into their war chests.
As if you are a peasant, you will be told to be grateful.
November 2014 is our time to revolt. Off with their heads at the
ballot box.
Holly Robichaud is a Republican consultant.
The Boston Globe
Sunday, September 15, 2013
Governor Patrick’s tech tax wakes up a sleeping giant
By Joan Vennochi
Until recently, the lords of Massachusetts’ new tech universe were
too cool to care about state politics.
But then state lawmakers decided to impose a sales tax on computer
and software design services — in other words, on them.
Suddenly, a new generation of tech leaders cared a lot about state
politics. They tweeted their unhappiness. They launched heated
online forums. Some even went beyond virtual complaining and met the
old-fashioned way — face-to-face — with Governor Deval Patrick.
Their newfound political activism worked to the point that Patrick —
who first proposed the tax last January in his $1.9 billion tax
reform plan — is now calling for its repeal. It’s a “serious blot”
on the state’s innovation reputation, the governor now believes.
Welcome to the real world, techies, where politicians bend when
outside pressure is applied.
Of the reluctance to mix it up on Beacon Hill, “I think it’s less
generational and more attitudinal,” said Stephen J. Adams, the
former head of the conservative Pioneer Institute, who now runs the
American Institute for Economic Research in Great Barrington. “The
tech guys — and they’re all guys — assume people understand how
important they are. They don’t think they should have to stoop to
talking to legislators.”
The Massachusetts High Technology Council — which has been fighting
the computer sales tax since it was first proposed — is happy to
have the new kids on board. Will they stay is a key question,
acknowledges Christopher Anderson, the council’s longtime president.
“Having the Legislature target this part of the economy was a
terrific wake-up call,” said Anderson. “But there are a lot of
residual questions about what really is the strategy on Beacon Hill
for economic development. Many of these small businesses, I hope and
expect, will remain engaged.”
Beacon Hill leaders now say they back Patrick. But the council, in
partnership with the Massachusetts Taxpayers Foundation, is seeking
to repeal the sales tax via voter referendum. That takes old-school
organizing, since it requires the gathering of 70,000 signatures to
get the measure on the 2014 ballot.
According to Anderson, there are 400 tech firms headquartered in
Massachusetts with revenue over $20 million, and 10,000
Massachusetts-based tech firms with revenue less than $20 million.
He said 184 belong to the council, which leaves a large universe of
tech firms immersed in individual concerns, versus collective ones.
From the vantage point of 2013, the council harkens back to the
dinosaur era. Launched in the early 1980s, it’s where Republican
Charlie Baker — who is now making his second run as governor — first
took a job as communications director after getting his MBA.
Unlike the Massachusetts Taxpayers Foundation, which is willing to
consider the need for more tax revenue, the council almost always
opposes taxes as a way to increase revenue. Its mission statement
warns that “efforts to disguise unrealistically high taxes by
collecting them through corporations will result in inflated prices,
loss of competitiveness, and damage to the economy.”
After his stunning reversal, Patrick said lawmakers should seek a
replacement for the software tax, which was projected to generate
$160 million annually. But identifying a new tax revenue source
isn’t part of the high tech council’s “pro-growth” agenda. High Tech
Council lobbyists “weren’t helping to figure out what tax to raise”
during the previous budget debate, said Anderson, and don’t plan on
doing that now.
Is that no-tax line in the sand where the new tech generation wants
to be?
The tech crowd is used to being gushed over. Many political promises
— from better schools to improved infrastructure, from happy hours
to longer-running public transit — are aimed at pleasing this
constituency. Massachusetts doesn’t want to lose it.
But delivering on those promises takes money. Who foots the bill for
better roads and T service? Taxpayers, of course. During the last
budget debate, Beacon Hill concluded more tax revenue was necessary.
Indeed, Patrick wanted more than he got; he vetoed the tax bill —
which included the computer sales tax — because he said it didn’t
raise enough revenue.
That’s the debate the new tech universe ducked.
It’s in it now for selfish reasons — but for how long?
The Boston Herald
Thursday, September 19, 2013
Deval Patrick: Surplus no substitute for tech tax
By Matt Stout
Gov. Deval Patrick chided lawmakers yesterday for their plan to
replace the revenue of the soon-to-be-repealed tech tax with surplus
funds, slamming it as an irresponsible “roll (of) the dice” amid the
state’s still-stretched budget.
“I feel that the responsible thing, knowing what all the pressures
are on this budget, is to plug the hole. There are others who say
let’s just repeal the tech tax and roll the dice, and I don’t think
that’s the responsible thing,” Patrick told the Herald yesterday
after making the rounds with tech industry startups at a Seaport
District event.
“I’ve heard all kinds of ideas being floated … one of them is to use
the surplus,” Patrick said. “The Legislature has already spent half
that surplus. So that surplus is not enough.”
Despite previously saying he had “ideas” of how to account for the
$161 million the software services tax was expected to generate,
Patrick was coy on what he viewed as a replacement.
House Speaker Robert A. DeLeo and Senate President Therese Murray
have both vowed to not propose another tax, and instead pointed to
excess revenue. Tax revenues, they argued, are currently $140
million beyond projections.
“The ball is in the Legislature’s court right now,” Patrick said.
Tech sector entrepreneurs greeted Patrick with open arms at
yesterday’s event celebrating seven startups that “graduated” from
education technology accelerator, LearnLaunchX.
They’re poised to join the tech industry that was slow to react to
the tax, but rode a groundswell of opposition to pressure lawmakers
to reverse their stance.
“I definitely need to keep an eye on Beacon Hill,” said Matt Rantz,
co-founder of Countdown, an online curriculum planning tool. “The
whole tech sector (does).”
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Citizens for Limited Taxation ▪
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