Software Tax will be Repealed

Legislative leaders announced today that they support the repeal of the software tax. The Governor made the same announcement yesterday.

I am relieved by this announcement — it means a mistake will be fixed and we will avoid much future controversy. I had become convinced last month that the tax (a) was simply not computable in many instances; (b) sent a very negative message.

It will take a couple of weeks for a repeal to be presented to and passed by both branches, but it now seems clear that the repeal will be in place by the end of the month. My sense of my colleagues is that the repeal will not encounter major difficulties on the Senate floor. Because it involves a change in taxation — even though it is a reduction in taxation — it must be addressed first by the House. That is most likely to occur next week (the week of 9/16), with the Senate addressing it in the following week.

Although the tax was part of the transportation funding package, repeal will not actually reduce the amount of revenues committed to transportation. The transportation package added some revenues for transportation, but also rededicated some existing general revenues for transportation. The software tax back-filled the hole in the general budget left by the rededication of existing revenues. So, the hole left by repeal is that hole in the general state budget. A strong finish to the last fiscal year (FY2013) will allow us to plug that hole using reserves in the current fiscal year (FY2014). In Fiscal 2015 and beyond, the budget will be tighter by the amount of the lost revenues, which had been estimated at $161 million. This is about 0.5% of the state budget and if revenues continue to grow well — as they appear to be doing — the loss may not materially diminish future service levels.

The decision sends a good message that Beacon Hill can hear feedback and admit error. The initial error was really a collective error in that many in the business community initially missed the problem too and therefore were supportive of the tax package. The real outcry from businesses didn’t emerge until the announcement of the passage of the new tax caused businesses to really start thinking about how it would be computed by their organizations — that’s when I began to hear in high volume from my constituents about the issue.

The whole story should be history by the end of the month.

Published by Will Brownsberger

Will Brownsberger is State Senator from the Second Suffolk and Middlesex District.

7 replies on “Software Tax will be Repealed”

  1. Yes, this is good news. Thanks for realizing the problems with this bill should not be relegated to the old “my way or highway” style of Government taxation.
    (In this case,however, the Highway still needs repair).

    I support raising (“temporarily” which hardly means anything in Massachusetts) the Gas tax to cover the road/bridge infrastructure changes – the MBTA and commuter Rail, in my opinion, needs to be addressed differently and although tied into this transportation bill – really needs additional fund targeting. What a mess that is.

    but this bill addresses – at least initially – a good start at closing the gaps that keep us from operating in the black. That is a road that needs repair as well.

    Thanks again for your support in this. Regards
    -benjamin lowengard

  2. This is great news, Will. I am with a growing software services firm and we are still scratching our heads on how to implement this tax and when / if it applied to our work.

    Question – will the repeal go retroactively back to the inception of the law or will there be a period of time that will actually be subject to the tax between 7/31 and the date of repeal?

  3. It is nice to hear that all of a sudden we do not need the tax levies from the tech tax, or that is what I hear from “Mista Speaka”. But is it?

    I am not sure the system is now suddenly fully funded; but here is some corrective action preventative actions we should take:

    Create a state road pavement bank freezing the total square footage of all state roads & highways to what it is today. (like a carbon bank?)

    Create a moratorium for 10 years on all new highway construction.

    All highway work be confined to maintaining existing road systems like patching/ resurfacing/ bridge work replacements bike lanes, geometric design corrections ect.

    Where a new road or interchange is needed, an equivalent amount of area is removed from another less used road. (3 lanes to 2 lanes ect.)as a land bank swap.

    When a limited access highway is reduced, the inner most lanes to the medium strip removed. When in an urban street, a dedicated (not shared) bike lane(s) be created The land would be banked into a light rail right of way trust for future use.

    This will satisfy the job creation aspects.
    Road deconstruction generates jobs like construction.

    The more roads we build the more fossil fuels will get used using them (I thought we wanted to decrease fossil fuel use not increase it?) Also 10 years will buy us time. Once climate change is solved we can lift this if there is no impact on restoring. If not, we have land resource available to replace car travel with transit travel.

  4. Oh Great! So the funds will come out of the general budget rather than the transportation sector. So how many people will be laid off, or how many other services negatively impacted? Or will we raid pensions or the stabilization fund again, kicking the can down the road? That amount of money makes a big hole someplace – who considered where? And why was there no negotiation with the tech people, only cave in? Now they are impregnable, even though people get laid off after tech corporations get tax breaks. Come on legislators, no wonder you get no respect.

  5. Naomi. Yes. The funds will come from stabilization — last year ended well ahead of projections. In effect, the end-of-year deposit of surplus into stabilization will be reduced.

    This wasn’t about negotiation, much less, a “cave in”. This was a badly designed tax — it just wasn’t computable. No one could say, in many instances, whether their activities were taxable. It was a mistake that had to be fixed.

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