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A Victory for Tech: Mass. Legislature Votes to Repeal Tech Tax

Sep 26, 2013 | Other

NOTE: To that point, Chris Anderson, president of the Massachusetts High Technology Council, said in a statement that the engagement has already begun.

“The Tech Tax has awakened a new generation of tech companies to the vital role they play in our state’s current and future economy; together, we look forward to forging a productive partnership with elected officials to advance policies that result in economic and job growth,” Anderson said in the statement.

By Sarah Kuranda
CRN

After 58 days of fighting since Massachusetts implemented its tax on software services, the state’s technology industry can now claim a resounding victory: The tech tax is dead.

After a vote of 156 to 1 in the Massachusetts House yesterday, the state’s Senate solidified the repeal Thursday with a unanimous 38 to 0 vote. The repeal will be retroactive, which means all taxes previously paid or billed do not have to be collected. The vote now waits on the governor’s signature to make it official.

The tech tax was voted into law as part of a transportation finance bill on July 24 and gave businesses only a week of breathing room before it was implemented. The tax was widely heralded as vague and unfair by businesses and was recognized as the highest such tax on services in the nation, with only four other states having a tax on software services.

“It is corrections day,” said Sen. Bruce Tarr in the session debate over the repeal. “It’s a day for us to join to do the right thing. And more than anything, … we are pleased that momentum now appears to have been gained to do the right thing.”

Those who previously voted for the tax said that they were working on the best information possible at the time and that they believed it was the best option presented to them.

“I’m not sorry that I voted for the tax, because when I did, I believed the tax would have a very small impact. And, I’m not ashamed to say I learned it had a bigger impact. And, I’m not ashamed to say I’m willing to vote renege that vote. But, I’m not ashamed to say that I’m looking for another way to raise the money,” said Sen. Cynthia Creem, who proposed a 5-cent gas tax amendment to replace the fund gap created by the repeal. The amendment was rejected, along with several others proposed by various legislators.

Sen. Stephen Brewer, chair of the Senate Ways and Means Committee, said that the legislature has demonstrated “flexibility and courage” to admit that the tax was the wrong move for the state and for business. Brewer voted for the tax and supported it initially after its implementation.

“I’m enormously pleased that we’re putting this behind us,” said Michael Widmer, president of the Massachusetts Taxpayers Foundation that helped organize the ballot initiative against the tax. “It would have been a terrible black mark on Massachusetts if we’d had to endure it over the next year before the voters repealed it. This is much cleaner. I applaud the legislative leadership and the governor for agreeing to the repeal. It’s not easy to change course, so I salute them for coming out and acting so quickly.”

At first confused and blindsided by the ruling, local tech businesses united under the common cause of repeal, forming advocacy groups like the Spark Coalition and organizing events such as the Beacon Hill Blitz. Those fighting against it attacked it from all angles, putting forward a ballot initiative, legislative repeal movement and court injunction.

“I think it shows how business can make a political difference,” said Rep. Ryan Fattman. “The business community has been unwilling up until now to take a stand on something and fight for it. I look at that and I say this is great, and it shows people can make a difference when they are seemingly outnumbered.”

Tech businesses have been awoken to not only their mobilization power but also engagement in the political sphere, said Widmer, of the Massachusetts Taxpayers Foundation.

“It takes a crisis like this to get people really energized. I think it opened their eyes to the reality of state government, and I think that’s a good thing,” Widmer said.

What the repeal amounts to, Fattman said, is a need to overhaul the way government operates in regards to business going forward. Fattman said that, if the necessary research and public hearings had been done, legislators would have seen ahead of time the effect it would have on businesses.

“We’re basically sitting here repealing this thing, wasting our time, because it shouldn’t have happened in the first place,” said Fattman “The whole idea of ‘Taxachusetts’ is taxing business and taxing industries and entrepreneurship to pay for excessive spending. The business community can learn a great amount of lessons from this. They can fight back and help bring balance to Beacon Hill and ideology.”

To that point, Chris Anderson, president of the Massachusetts High Technology Council, said in a statement that the engagement has already begun.

“The Tech Tax has awakened a new generation of tech companies to the vital role they play in our state’s current and future economy; together, we look forward to forging a productive partnership with elected officials to advance policies that result in economic and job growth,” Anderson said in the statement.

Andrew Faria, a leader in the Spark Coalition and CEO of iMedia Solutions, said that groups such as his will continue to act as an advocate for the tech industry in the state going forward so that businesses can be more unified and forewarned about another such tax on their services.

“There has to be collaboration among organizations, there has to be collaboration among businesses, there has to be collaboration among those two pieces and the government, which I’m already seeing happening,” said Faria. “The engagement has already begun. It’s not what are we going to do next — we’re already doing it.”

Leaders of Massachusetts’ Innovation Economy

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