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Tax cuts, pay hikes heading to 2014 ballot

Aug 9, 2013Council in the News, NECN

By Peter Howe

The new Massachusetts sales tax on software and computer services may be barely eight days old – but it’s already being targeted for repeal at the November 2014 by some of the state’s most powerful technology and business groups. Wednesday was the deadline for people and groups seeking to put initiative petitions and referenda on the November 2014 state ballot to submit their measures to Attorney General Martha Coakley to rule on whether they are constitutional. A total of 33 got submitted – including several that are multiple versions of the same question aimed at enhancing the likelihood they pass muster with Coakley’s attorneys – and they would:

  • Raise the minimum wage to $10.50 by 2016.
  • Guarantee sick time based on how many hours people work.
  • Mandate maximum patient-to-nurse ratios to resist cutbacks in nursing staffs and address health and safety questions.
  • Apply the 5-cent bottle deposit to bottled water, juice and sports drinks.
  • Repeal the act authorizing up to three resort casinos and a slots parlor statewide.

One question being pushed by groups with major clout – the Massachusetts High Technology Council and the Massachusetts Taxpayers Foundation – would repeal part of the $800 million transportation finance and MBTA bailout bill that took effect July 31: applying the state’s 6.25 percent sales tax to certain software services and computer configuration and customization services.

Though billed as a targeted $160 million annual tax, more and more technology business owners and their trade groups are saying the law is so badly drafted and vague it could sweep up all kinds of high-tech consulting and programming activity. Many say it will whack the core of the state’s “innovation economy” with a new $500 million-plus annual tax burden and drive jobs out of state while creating an administrative nightmare – and huge bills from lawyers and accountants – to figure out what of their work is and is not taxable.

“What we’re doing is preserving the competitiveness of our tech economy,” said Christopher R. Anderson, president of the Massachusetts High Technology Council, which has taken part in six statewide ballot question fights over the last 30 years.

Anderson said the move to submit the ballot question is meant to “keep our options open” but stressed that for the council and taxpayers foundation to drop the ballot campaign, “It would take repealing the new tax on software and network design services. Only that would keep us from going to the ballot. There is no mitigating of that bad policy at any level that will prevent us from deciding to go forward.”

The ways and means chairmen of the House and Senate have asked the Revenue Department to honor the Legislature’s intention of keeping the tax as narrowly focused as they intended – essentially, to add the sales tax businesses now pay when buying software or computers or servers to also cover work done to modify, customize, or configure the newly-bought software and computers.

State House Speaker Robert DeLeo said in a prepared statement: “The tech revenue piece was part of a carefully-measured plan aimed at providing investments for transportation and other areas. While business leaders were briefed on this measure and others prior to passage, no complaints were raised until once the legislation was already in conference committee and alterations to non-conferenceable items cannot be made.” Ways and Means Committee Chairmen Rep. Brian “Dempsey and [Senator Stephen] Brewer have instructed DOR that the measure is intended to provide no more than $161 million and legislators are carefully monitoring developments to make sure that it remains within that amount. The House, which has passed a string of measures over the past half-decade to promote economic development in the Commonwealth, will continue to listen to the business community and work to perfect the legislation.”

Besides the push to repeal the software and computer services sales tax, which is likely to get millions of dollars’ worth of direct and indirect support from the state’s technology companies and associations, there’s also a second ballot question effort being pushed by Republican legislators around the gasoline tax portion of the transportation bill. Specifically, this ballot question would repeal the part of it that ties the amount of the tax – just raised from 21 cents a gallon to 24 cents a gallon – to inflation going forward, so that the 24-cent figure would rise as inflation rises.

Backers argued that idea makes sure the gas tax retains its current level of purchasing power for road and bridge repairs and support of mass transit, but critics say it establishes a very dangerous precedent.

“It’s taxation without representation,” said state Representative Steven Howitt, a Republican from Seekonk who is the ranking GOP member on the Joint Transportation Committee. Howitt and other Republicans contend any tax that automatically rises with inflation lets Democrats escape deserved political heat. “It’s a forever tax, is what it is, and I think the majority party found a way for them to avoid voting for a tax in the future” through the indexing feature.

Increasingly, the Massachusetts High Technology Council is stepping up to create, execute, and lead critical statewide competitiveness strategies. Fostering a vision for our innovation economy under the MassVision2050 banner, the Council solidifies its position as a thought leader providing valuable insights to navigate emerging technologies, facilitates long-term planning, and reinforces the Council's commitment to excellence and action in the evolving Massachusetts tech-driven economy.

To learn more, contact Council President Chris Anderson.