Opposition to Tech Tax Comes to Wakefield

03Sep13

GOP Legislators meet with members of business community
tech_tax_roundtableWakefield last week became a flashpoint of opposition to the broad new 6.25 percent sales tax on custom software and network design services when The Savings Bank hosted a roundtable discussion with state legislators and technology industry professionals. Thursday’s meeting was the last of eight such technology tax business roundtables that have been held around the state.

bruce_tarrSeveral dozen people attended last Thursday’s meeting, including seven Republican state legislators led by Senate Minority Leader Bruce Tarr of Gloucester and House Minority Leader Bradley H. Jones of North Reading, who have spearheaded the effort to repeal the tax. Other legislators in attendance were Rep. Donald Wong who represents Saugus and part of Wakefield, Rep. James Lyons of Andover, Rep. Leah Cole of Peabody, Rep. Lenny Mirra of West Newbury and Rep. Brad Hill of Ipswich.

brad-jonesJones called the tech tax “a mindbogglingly stupid idea” and a “tax on innovation,” while Tarr said that the tax “reflects how out of touch the leadership in the commonwealth is.”

The technology tax was part of a transportation financing bill that also included a three cent hike in the state’s gas tax. GOP lawmakers maintain that the tech tax will be a job-killer and hurt the technology sector in particular, which has been a mainstay of the Massachusetts economy. They fear that inherently mobile technology firms will simply relocate out of state rather than deal with the tax.

Rep. Lyons left no doubt as to where the tax originated.

“This is a Democratic piece of legislation,” said Lyons. “The Republican Party was unanimously against this in both the House and the Senate. One-Party rule is what’s hurting us. Democrats only look to solve problems one way – by raising taxes. We have to get Democrats to understand that taxation is going to hurt small businesses.”

Albert J. Turco, speaking as a member of the Wakefield Chamber of Commerce and a director of the Wakefield Cooperative Bank, agreed with Lyons. He warned that as a result of the tax, businesses will be “gun-shy” about pursuing new ventures and would possibly relocate out of state.

“This is a Democratic issue,” Turco insisted. “We have to convince a majority of Democrats that this tax should be repealed.” Turco offered to serve as a liaison between business owners and those Democratic legislators willing to listen.
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Opponents have also pointed out that the tax is so complex and confusing that even vendors in the tech industry aren’t sure what’s taxable and what isn’t.

Carl Rubin of Monument Data Solutions went through a litany of areas that would be “taxable” or “not taxable” according to his conversations with the Massachusetts Department of Revenue.

“I hit DOR with so many questions that they just couldn’t answer,” Rubin said. “The problem here is not what this tax is on, but how to apply it. The administrative costs of a tax that you can’t understand are just unbearable.”

Tarr agreed that there was “tremendous uncertainty as to what this tax will apply to.” He noted that it “taxes the innovation economy” and for the first time taxes a service in Massachusetts.

“The best way to generate revenue isn’t to increase taxes or to tax new things,” Tarr insisted, “but to increase the number of taxpayers and economic prosperity that then yields revenue for the state.”

Wakefield Finance Committee member Gerard Leeman, who works in the biotech industry, pointed out the irony of the proponents’ claims that the tax is needed to fund transportation, yet it is aimed at a green industry where people often work from home.

“They are targeting an industry that leads the league in green innovation,” Leeman argued, “that leads in people staying home and not burdening the transportation system.” He maintained that the proponents of the tax “look at tech as just a cash cow.”

Shirley Singleton, CEO of Wakefield-based Edgewater Technology said that part of her company’s growth has involved buying smaller tech companies. “This tax is another roadblock for people who take those risks,” she said.

Jim Green, CEO of Analogic, said that his company installed about $15 million worth of new software just before the tax went into effect on July 31.

“We have operations in all parts of the world,” Green said. If the cost had been one million dollars more due to the tax, “we could have easily run those tools in Pennsylvania,” he said. “There are significant downsides to this that people won’t realize until people are gone. It means fewer jobs.”

But Green was confident that the tax would be repealed “pretty quickly,” he told GOP lawmakers at the meeting. “The Democrats are trying to beat you to it.”
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Eric Classen, who works as a CPA for State Street Staffing, said that the new tax would impact everyone, not just the technology industry.

“Every business, regardless of what they do needs to hire people,” Classen said, “and everybody who sits at a desk has thousands of dollars’ worth of software in front of them. It’s everybody.”

A mother who said that she works from home feared that any of the tech work she does from her house would now be a taxable “software service” under the tech tax. “Every single business and every single consumer has a computer and will be affected,” she added.

Wakefield Chamber of Commerce Executive Director Kendall Inglese cautioned that employees of firms that flee the state because of the tax will find that other states don’t have the infrastructure that Massachusetts has.

“I firmly believe that Massachusetts is the best state in the union,” Ingelse said. “Quality costs money, and we shouldn’t be always on the defense attracting industry.”

A Wakefield business owner questioned why the state would tax software services of all things. “Of all the things you could tax, there’s nothing you can get easier somewhere else,” he said. “Tech can be gotten anywhere.”

One speaker wondered why there is so much more opposition now, after the bill passed, than was heard beforehand.

“A lot of people didn’t think it would pass,” said Rep. Brad Hill.

Tarr added that most people were focused on the easier to comprehend gas tax. In addition, he pointed out that the bill was taken up in a rare Saturday session, with hundreds of amendments filed the Friday night before.

Tarr warned against the notion that if the tech tax is repealed, there would have to be an alternative revenue source. He noted that the state finished the last fiscal year well ahead of revenue benchmarks.

“If you believe projections from the DOR of $161 million (in expected revenue from the tech tax),” Tarr said, “We should be able to easily cover that assuming we stay on a relatively stable growth pattern.”

Eryck Bredy, Chief Technology Officer of bnmc in Andover had a different perspective.

“The mere fact that they’re saying that there has to be an alternative revenue source means that it was their money to begin with,” Bredy said. “It started off as our money. Why do we need to replace it?”

[This story originally appeared in the September 3 Wakefield Daily Item.]

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One Response to “Opposition to Tech Tax Comes to Wakefield”

  1. 1 Lyn Engle

    I wrote a column on this which appeared in the Winchester Star, a few weeks ago.


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