GOP Lawmakers Tout Tech Tax Repeal Bill
Republican legislative leaders on Monday said finding a new revenue source to replace the estimated $161 million that would be lost by repealing a tax on software services is not necessary, and trying to fix the controversial new tax won’t work.
More than two dozen House and Senate Republicans called for the repeal of the new computer and software design services tax at the offices of a South End technology company, releasing a draft of legislation that will be filed this week that mirrors the proposed 2014 ballot question to repeal the tax.
House Minority Leader Brad Jones and Senate Minority Leader Bruce Tarr spoke for their GOP colleagues alongside John Grayson, the CEO and president of Genuine Interactive, a software design firm specializing in brand advancement, Web design and interactive kiosk development.
“Fixing it is unacceptable. Replacing it is unnecessary. We think the clear-cut solution to this problem is the outright repeal of this wrongheaded, ill-conceived, misguided tax that is an assault on our innovation economy and if (we) let (it) stand as a tax on services, will become the thin end of the wedge for future ideas to tax other services in our commonwealth,” Jones said.
Though no Democrats attended the press conference, Tarr said he is optimistic of winning support and co-sponsors from across the aisle where many Democrats have also expressed concern about the tax.
Gov. Deval Patrick has said any discussion of revisiting the tax must be accompanied by ideas to replace the lost revenue counted upon to finance his administration’s transportation agenda, including upkeep of the MBTA and highway systems and targeted expansion projects.
Republicans say the lost revenue could be found through savings-minded government reforms, future gaming revenues, the legalization of online gaming or other mechanisms that don’t require raising taxes. Tarr even suggested he would be open to tapping into the state’s main reserve fund if an “insurance policy” was necessary.
The Republican leaders plan to file a bill that would exempt the newly taxed software services from the state’s 6.25 percent sales tax, retroactive to July 31 when the new law took effect.
In defense of the tax, Democrats in the Legislature have said revenue from the new tax will pay for investments in education and local aid. The tax was included as part of a $500-million new revenue package for transportation investment, and leaders promised to limit the scope of the tax if it produces more than the estimated $161 million.
Grayson said the new law has created such confusion about what will be taxed that he had to freeze invoices after its passage to wait for clarification from the Department of Revenue and determine how to bill clients.
For a business that operates on a monthly cash flow, Grayson said, billing delays have created financial problems for his company that won’t go away when he’s required to remit taxes to the state on Sept. 20 but has yet to receive the payment from clients.
“When Rep. Jones used the word ‘disaster,’ I think that’s an understatement,” Grayson said.
Some groups, like the Massachusetts Taxpayers Foundation, have suggested the tax could net as much as $500 million from businesses purchasing software. The foundation published a study Monday detailing the Massachusetts tech tax as the broadest and highest tax on software services in the country.
“When folks tell you this tax is limited and it’s confined, it’s neither of those things. And when we tell you that it’s destructive, we have plenty of evidence to back it up,” Tarr said.
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