As of July 31st the MA state government passed a poorly-conceived, overly broad, anti-growth software services tax. This tax will have painful consequences on businesses in the state, the competitive status of the state as a technology hub and more importantly job growth. This law received little to no open discussion from politicians and near no public media coverage before it was quietly tucked into a transportation bill. No public hearing was ever held.
As a political independent, I’m not opposed to taxation but I am opposed to them being unfairly levied against industries we should be trying to encourage to stay in the state. Why is it that this only applies to technology industries and not others? Singling out a growth sector for an unfair tax disadvantage is not a good plan. Is there any fairness in that? Are technologists the only ones using the roads? We could easily conceive of 1000 other ways to fairly and evenly tax the entire tax base without having these negative consequences on a single industry we want to foster, not eliminate from the state.
MA is Even Less Competitive
It should be clear to local and state politicians that we are not competitive when we place in the 20th in the nation vs. other states for business attractiveness. Our state government should want to attract new firms, foster startups, and kickstart job growth. We can guarantee none of these positive outcomes will come to with this law. It is important to note that only 3 other states in the nation that have such ill conceived tax and none at the onerous rate of 6.25%. And, go figure, none of them are tech giants. With this new tax we have just carved that same fate for Massachusetts.
This tax gives an unfair advantage to firms based outside of Massachusetts in that they don’t have to charge said tax to their consumers. Sadly, our legislature made us less competitive and unduly harmed a growing technology industry. Massachusetts technology firms (especially small businesses) will be unfairly disadvantaged by this law and face deeply negative consequences(intended or otherwise).
Small Businesses Lose Most
Small businesses are the economic engine of the Massachusetts economy. They create the lion-share of the job. It bears mention that these are not low quality, temporary service sector jobs but well paid jobs that benefit its citizenry. Unfairly levying a tax on technology firms will put them at a distinct disadvantage vs. their out of state competitors. Consumers given the chose of buying from a MA IT firm with its outrageous tax will purchase from firms out side of the state to save the 6.25% tax. In this day and age of global ecommerce it is silly to assume anything but this disastrous outcome.
How it Effects You as a Consumer
Anytime you purchase goods or services the total cost is what you compare. Economists, as well as consumers understand that taxes have an impact on our buying decisions. We all posses the arithmetic skills to see the difference. Sadly, those Massachusetts technology firms you may have worked with in the past will cost you more to work with and this hurts both you as a consumer and the firms themselves.
How You Can Help
Contact your legislators (MA State Representative and MA State Senator) directly and let them know you want them to sponsor a bill to repeal this onerous tax. I encourage you to call and ask for an appointment in person (if possible) or a direct call back. Always remember our direct physical presence in the political process makes a difference. Should the legislator not take proper action we can and will take this to a ballot.
Search For Your Legislator
Let them know this tax:
- Encourages firms to leave the state
- Discourages growth of a key growth technology industries
- Specifically burden small businesses vs. their larger out of state counterparts
- Dampen job growth
- Make the state less competitive
This tax hurts a key growth sector of the economy (technology firms), makes the state less competitive and will stifle job growth.
In closing, we don’t stand alone on this. Many local politicians have already joined our ranks after more deeply understanding our industry and the negative consequences of this law. To date one online petition as nearly 2000 supporters of which, nearly 100 firms have outlined a desire to move their businesses from the state (myself included) to one of many other business friendly alternatives. A quick Google search will show the resoundingly negative response this has had in the technology community. We the people can bring fairness back to our tax code but only through our positive political involvement. We want a Massachusetts that encourages the next Facebook, or Dropbox to startup here — not elsewhere. We want new technology firms to bring jobs and prosperity to the state but it will not happen if this law remains intact.
Update 09/27/13 IT Service Tax Repealed!
On September 27th after months of work by the technology community – this onerous tax law was repealed. We have learned from this experience as a community and will be much more politically active. My hope is we can bring balance and fairness into any future policy changes so they encourage the growth of industry, jobs and prosperity in Massachusetts.