Tech sector had the tools to fight new tax
The Massachusetts technology community just achieved a political feat that many thought was impossible: getting the governor to abandon his own tax increase before a dime was ever collected.
Governor Deval Patrick’s decision Tuesday to call for a repeal of the new tax on software services confers a newfound political power on the state’s technology community, particularly the younger generation of executives and software whizzes who had all but ignored Massachusetts political life.
“They’ve taken advantage of their skills to mount this effort in a new way,” said Michael Widmer, president of the Massachusetts Taxpayers Foundation. “The response from the tech community was absolutely critical to building this tidal wave against the tax.”
Using a combination of modern tools such as Twitter as a virtual bullhorn to speak out against the tax and online forums to organize meetups, these young technology executives joined with veteran business leaders to turn the political tide against a tax that had received scant attention in the months before it became law.
“It’s the power of social media and getting the word out to a community of people who are paying more attention to the next cool thing,” said Angela O’Connor, executive director of the New England chapter of TechNet, a trade association.
But that new power will be put to the test, as the technology lobby must now persuade House Speaker Robert DeLeo and Senate President Therese Murray to go along with Patrick’s request to repeal the tax.
The two legislative leaders had fought bitterly with the governor over the original legislation, and already the initial reaction from Beacon Hill suggests lawmakers are unhappy about the position Patrick has put them in: finding a replacement for the software tax that doesn’t include another broad-based tax increase.
“Some people feel like they’ve been thrown under the bus,” said Senator Stephen M. Brewer, the chamber’s budget chief. Brewer also said he was mystified how Patrick could now oppose a tax that he originally proposed in January.
“I’m having a hard time connecting the dots,” Brewer said.
Indeed, neither Murray nor DeLeo gave an indication Wednesday whether they would go along with Patrick’s request, as both legislative leaders declined to comment.
Patrick himself said Wednesday that he did not have a specific proposal for replacing the money the software tax is supposed to raise.
“There are a lot of options that folks have considered,” Patrick said. “There are some good ones and some not so good ones, and there is no perfect one. If there were, I think it would have been done by now.”
The software tax was but one of several funding sources included in a larger bill the Legislature passed in July to finance transportation and education projects. The measure applies the state’s 6.25 percent sales tax to a variety of computer software-related services, including such common practices as modifying off-the-shelf software, configuring programs, and developing websites.
State officials had projected the tax would raise some $160 million annually, but technology executives complained that it was so broadly written it would end up taxing many more services and cost businesses as much as $500 million a year.
While Patrick’s abrupt reversal on the tax is a stunning achievement for a tech community that just a few months ago didn’t even know about the measure, business executives said there is no time to bask in their success or devise a broad agenda for the future.
“We are pushing even harder for repeal than before,” said Andrew Faria, chief executive of iMedia Solutions LLC, a small Dartmouth software development firm, and vice president of the Spark Coalition, which represented small tech firms in the tax debate.
Faria and others have not yet floated proposals for replacing the tech tax money. But on Beacon Hill several possibilities have emerged: using surplus funds from last year’s spending accounts, which are slated to be salted away in the state’s Rainy Day fund; or, as one liberal policy group suggested, repealing tax breaks for large corporations.
Should the tax debate hit a stalemate, business executives said they have another powerful weapon ready to use: a ballot initiative asking voters to repeal it during the 2014 statewide elections. Unlike the revolt that originated over social media, the ballot campaign is being led by executives of several of the state’s major corporations, including Staples Inc. and Boston Scientific Corp., and will be run by veteran operatives of Massachusetts politics.
In the meantime, the tech community is acknowledging several lessons from the tax debate: that it can’t afford to ignore state politics anymore, and the echo chamber of social media can take them only so far. Indeed, Patrick himself said the turning point came when he sat down last week for a face-to-face meeting with several technology and business executives to hear their complaints. On Tuesday Patrick said that meeting persuaded him the tax had become a “blot” on the state’s reputation as a haven for innovation.
But one young tech executive worries that members of his community will bury themselves back in work life if and when they get the Legislature to repeal the software tax.
“I fear that our engagement will go back to what it was prior to late July and we will once again be in a position to be taken advantage of,” said Brian Cardarella, a principal at DockYard, a Boston software firm, and organizer of the tax protest.
“We need to learn from this and be part of the conversation from now on,” he said. “Exactly what form that takes is not clear, but we can no longer afford to live in our bubble.”