Last month, state Representative Angelo Scaccia took a very lonely stand.
He was the only lawmaker on Beacon Hill to vote against repealing the short-lived “tech tax” on computer software services.
The Senate voted unanimously in favor of repeal; the House of Representatives, where Scaccia serves, endorsed repeal, 156 to 1. The legislator from Readville said he voted “no” because the rationale and numbers simply don’t add up.
When Governor Deval Patrick first proposed the tax, he insisted he desperately needed more revenue to address what state officials described as a transportation funding crisis. There was a gap, the governor said, between the cost of repairing and upgrading roads, bridges, subways, and buses and the revenue available to pay for all of it. The $160 million that would be generated by a 6.25 percent sales tax on tech services was key to closing it.
However, once confronted by critical tweets, blogs, and, eventually, the unhappy tech executives who posted them, Patrick reversed himself. The tax should be repealed, he said. Taking their cue from the governor, House and Senate leaders quickly labeled the tax a mistake.
But Scaccia wondered what had changed about the state’s budget needs — and specifically, the alleged transportation crisis. He also wondered why one industry could swiftly pressure the governor and Legislature into repealing a tax it didn’t like — and why ordinary citizens who are just as unhappy about tax increases on gasoline or cigarettes could never get the same result.
According to numbers Scaccia said he received from the state Department of Revenue, Massachusetts collected $121 million in cigarette sales tax revenue from August 2012 to August 2013. Over the same time period, the state collected $98 million in tax revenue from all Massachusetts corporations.
“Isn’t that amazing? I guess we have a hell of a lot of cigarette smokers,” said Scaccia. “We’re not killing businesses in Massachusetts . . . The crocodile tears are too much for me.”
Scaccia, who has served on Beacon Hill since 1980, also remembers history. In Massachusetts, it’s a story of overspending in good times, and then raising taxes in bad ones. Explaining his “no” vote in a speech on the House floor, he told fellow lawmakers, “You’re going to rue the day you let this one get away.”
Virtually everyone else cheered the tech tax repeal; just a few lawmakers also questioned how the lost revenue will be replaced. “The transportation bill opened a hole in the general budget, and this tax plugged that hole. We are removing that plug,” said state Senator Patricia Jehlen of Somerville, who voted for repeal. “We are justified in that decision, but the hole is now open.”
Patrick, who initially called upon the Legislature to identify a new revenue source, signed the tax repeal without it. Pressed on the arithmetic, Secretary of Administration and Finance Glen Shor told the State House News Service that there is nothing to worry about. “The budget constantly moves,” he said. “There are developments over the course of the year. We monitor very carefully.”
The current plan is to use surplus revenue anticipated at year’s end to fill the $160 million hole. As of last month, tax collections were $140 million above projections. Of course, that gets Massachusetts back into a cycle of overspending in good times — one that brings back bad memories for Scaccia.
After the tech tax repeal, Noah Berger, president of the liberal-leaning Massachusetts Budget and Policy Center, issued a report warning about its long-term consequences. Without $160 million in new tax revenue, he and Kurt Wise wrote, “The revenue remaining is well below the amount needed to fund core investments in transportation and education . . . Funding a way to pay for those investments isn’t easy — but it is important.”
The report also points out that while increases in gas and cigarette taxes “may be good for public health and for the environment, they are also taxes that generally require lower-income people to pay a larger share of their income than higher-income people.” In other words, they hurt poor people more than rich people.
Berger’s group favors repealing corporate tax breaks as a way to increase revenue. In Massachusetts, those corporate tax breaks currently add up to nearly $1 billion a year.
Taking up that cause on Beacon Hill would be even lonelier.