Deval Patrick backtracks on tech tax
Gov. Deval Patrick abruptly changed course Tuesday and said he no longer supports a controversial new tax on computer software services that has triggered a fierce backlash from the state’s technology community and spawned numerous attempts to repeal it.
While mostly silent in the weeks since the tax was adopted by the state Legislature, Patrick said Tuesday that after hearing complaints about it directly from technology executives, he concluded the new tax had become “a serious blot.”
“It’s time for it to go,” he said in an interview with the Globe. “I’m persuaded that the impact to our reputation is too problematic. We’ve worked really, really hard to establish ourselves as innovation hub in the world, and we ought not do anything that compromises that.”
Patrick himself originally proposed the computer software tax back in January to help pay for major improvements to the state’s crumbling transportation systems. But it received little notice in the months of debate on Beacon Hill as he and legislative leaders instead wrangled over other issues, such as the gas tax and highway tolls.
One of the technology executives who met with Patrick last week to complain about the tax welcomed the governor’s new position.
“He’s taking the right position. He sees the reputational problem that Massachusetts faces by targeting the tech industry,” said Andy Singleton, president of Assembla Inc., a Needham software company. “Almost everyone who has looked closely at this law now realizes it’s a bad law. Everyone realizes the tax needs to be repealed. It can’t be replaced.
Singleton had among the most vocal members of the technology community over the tax. Within days of its passage, many executives said they had no idea lawmakers were even considering it and complained they felt blindsided by a political establishment that often touts their industry as a cornerstone of the Massachusetts economy.
The measure applies the state’s 6.25 percent sales tax to a variety of computer software related services, including such common business practices as modifying off-the-shelf software, configuring programs, and designing or developing websites.
People in technology companies complained that it was so broadly written that it would end up taxing many services that had become key to Massachusetts’ economic growth, and would cost businesses far more than the $160 million annually estimated by the state.
With employees at smaller tech startups deploying social media tools to broaden the opposition, a coalition of leaders from large companies, including the heads of Staples Inc. and Boston Scientific Corp., launched a ballot initiative to ask voters to repeal the tax in the 2014 statewide election. Several lawmakers had also filed bills to repeal it.
A turning point in the nascent revolt appeared to come last week, when Patrick and legislative leaders agreed to meet with several technology executives and other business leaders to hear their complaints about the tax. Before the meeting Patrick said he would be in listening mode; afterward he did not comment at all.
Until Tuesday. At an event in Worcester, Patrick said in separate remarks to reporters that “we had a really good meeting last week,” and that after concluding the tax has become too onerous, “the hard part now is to figure out what to replace it with,” according to a transcript provided by his office.
Aides said Patrick is not calling for a new broad-based tax to replace the computer software levy.
Seth Gitell, a DeLeo spokesman, declined to comment on Patrick’s shift on the tax and referred instead to a joint statement the speaker and Senate President Therese Murray released after Patrick met with business leaders last week.
“We engaged in a very thoughtful and informative discussion with a number of business leaders in today’s meeting with Governor Patrick,” the statement said. “We look forward to continuing these conversations and talking with our members in the House and Senate.”