Doesn’t compute; Massachusetts software tax a terrible idea
Gov. Deval L. Patrick and state lawmakers are fond of touting Massachusetts’ comparative economic advantages, including high technology, computers and education.
Nothing combines those advantages quite like computer and software services, yet the transportation finance bill being contested on Beacon Hill would extend the state’s 6.25 percent sales tax to those very services, putting Massachusetts in the unenviable position of having the highest such tax in the nation.
Make no mistake, this is a major tax increase at a time when the state continues its uncertain recovery, and it’s one that neither the governor nor lawmakers seem willing to take off the table.
Perhaps both sides are hoping that voters will be distracted by talk of whether the state will increase taxes by “only” $500 million, as the Legislature favors, or much more, as Mr. Patrick hopes — and thus forget all about this new tax.
Well, we doubt that any business or consumer will forget about this tax hike.
An analysis by the Massachusetts Taxpayers Foundation suggests that the computer and software services tax would cost employers in Massachusetts $500 million in annual sales taxes. That’s money that would come directly out of the pockets of consumers and businesses and go directly into the coffers on Beacon Hill.
Given the broad wording of the legislation, no one really knows what services would be subject to the new tax, or how many jobs it might destroy.
It is clear, however, that we don’t need a new tax burden on the state’s most productive industries, including the life sciences, health care and finance.
Arguing that state government needs the revenue ignores the fact that the private-sector economy needs that revenue still more. And suggesting that Massachusetts should follow the lead of other states in the name of tax fairness is foolishness. Massachusetts has a technological edge precisely because we do not tax these services, as many other states do.
Individual taxpayers and businesses who rely upon computer technology and innovations — that includes most everyone — should let lawmakers and Mr. Patrick know that the state shouldn’t throw away an economic trump card for the sake of growing government.