Governor Patrick’s tech tax wakes up a sleeping giant


Until recently, the lords of Massachusetts’ new tech universe were too cool to care about state politics.

But then state lawmakers decided to impose a sales tax on computer and software design services — in other words, on them.

Suddenly, a new generation of tech leaders cared a lot about state politics. They tweeted their unhappiness. They launched heated online forums. Some even went beyond virtual complaining and met the old-fashioned way — face-to-face — with Governor Deval Patrick.


Their newfound political activism worked to the point that Patrick — who first proposed the tax last January in his $1.9 billion tax reform plan — is now calling for its repeal. It’s a “serious blot” on the state’s innovation reputation, the governor now believes.

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Welcome to the real world, techies, where politicians bend when outside pressure is applied.

Of the reluctance to mix it up on Beacon Hill, “I think it’s less generational and more attitudinal,” said Stephen J. Adams, the former head of the conservative Pioneer Institute, who now runs the American Institute for Economic Research in Great Barrington. “The tech guys — and they’re all guys — assume people understand how important they are. They don’t think they should have to stoop to talking to legislators.”

The Massachusetts High Technology Council — which has been fighting the computer sales tax since it was first proposed — is happy to have the new kids on board. Will they stay is a key question, acknowledges Christopher Anderson, the council’s longtime president.

“Having the Legislature target this part of the economy was a terrific wake-up call,” said Anderson. “But there are a lot of residual questions about what really is the strategy on Beacon Hill for economic development. Many of these small businesses, I hope and expect, will remain engaged.”


Beacon Hill leaders now say they back Patrick. But the council, in partnership with the Massachusetts Taxpayers Foundation, is seeking to repeal the sales tax via voter referendum. That takes old-school organizing, since it requires the gathering of 70,000 signatures to get the measure on the 2014 ballot.

According to Anderson, there are 400 tech firms headquartered in Massachusetts with revenue over $20 million, and 10,000 Massachusetts-based tech firms with revenue less than $20 million. He said 184 belong to the council, which leaves a large universe of tech firms immersed in individual concerns, versus collective ones.

From the vantage point of 2013, the council harkens back to the dinosaur era. Launched in the early 1980s, it’s where Republican Charlie Baker — who is now making his second run as governor — first took a job as communications director after getting his MBA.

Unlike the Massachusetts Taxpayers Foundation, which is willing to consider the need for more tax revenue, the council almost always opposes taxes as a way to increase revenue. Its mission statement warns that “efforts to disguise unrealistically high taxes by collecting them through corporations will result in inflated prices, loss of competitiveness, and damage to the economy.”

After his stunning reversal, Patrick said lawmakers should seek a replacement for the software tax, which was projected to generate $160 million annually. But identifying a new tax revenue source isn’t part of the high tech council’s “pro-growth” agenda. High Tech Council lobbyists “weren’t helping to figure out what tax to raise” during the previous budget debate, said Anderson, and don’t plan on doing that now.


Is that no-tax line in the sand where the new tech generation wants to be?

The tech crowd is used to being gushed over. Many political promises — from better schools to improved infrastructure, from happy hours to longer-running public transit — are aimed at pleasing this constituency. Massachusetts doesn’t want to lose it.

But delivering on those promises takes money. Who foots the bill for better roads and T service? Taxpayers, of course. During the last budget debate, Beacon Hill concluded more tax revenue was necessary. Indeed, Patrick wanted more than he got; he vetoed the tax bill — which included the computer sales tax — because he said it didn’t raise enough revenue.

That’s the debate the new tech universe ducked.

It’s in it now for selfish reasons — but for how long?

Joan Vennochi can be reached at vennochi@globe.com. Follow her on Twitter @Joan_Vennochi.