Technology services tax snafu ensnares Democrats

What if Massachusetts levied a tax and no one wanted to pay it?  The business community is in full chuck-the-tea-in-Boston-Harbor mode over the new computer and software services tax.  

The 6.25 percent sales tax on “computer system design services” would bring in $161 million annually to help the ailing state transportation sector, according to legislative estimates.  Business leaders claim that the tax would actually have a $500 million annual impact.

Only four other states levy such a tax, and they do so at lower rates, according to the Massachusetts Taxpayers Foundation. The vagueness of the law, including the types of services that would be taxed, has confused just about everyone, including the state Department of Revenue.

The business community is biting back with a no-holds barred campaign to get the tax off the books. Few sectors can marshal a push-back like businesses can, complete with a ballot question drive and an old school telephone blitz. A Springfield lawyer has filed a lawsuit against the tax, while chambers of commerce from Metrowest to the Berkshires have lined up against it.

The folly of passing the country’s highest computer services tax without adequate debate and then quickly implementing it before final regulations were published or comments considered became all too clear when Florida Gov. Rick Scott tried to entice disgruntled businesses to the Sunshine State.

Some Massachusetts businesses have threatened to move to New Hampshire, while Granite State businesses have been warned that they will have higher taxes to pay if they contract software services south of the border.

It’s a stunning debacle for Gov. Deval Patrick and Democratic leaders in the Legislature. As the Boston Herald points out, they have “suddenly discovered the foolishness of eating the technology sector’s seed corn.”

House and Senate GOP lawmakers are energized about leading the charge against the tax, having finally found an issue they can get traction on. Rank and file Democrats failed to either understanding the full impact of the tax on businesses or to press for rounds of public hearings on this or other transportation revenue matters where all parties could air their views.

No one is backpeddling faster than Sen. Karen Spilka, chair of the — wait for it — Legislature’s Tech Hub Caucus and a candidate for US Sen. Ed Markey’s recently vacated 5th Congressional district seat. Spilka proclaimed in a Boston Business Journal op-ed  that she has filed legislation to repeal the tax. Red Mass Group isn’t having any of that; by their count, Spilka voted six times to levy the 6.25 percent tax.

Patrick, who has downplayed the outrage over the tax, meets Wednesday with business leaders to figure out how to reboot after conjuring up this blue screen of death.  The tax is unlikely to disappear as that move would solve some problems, but create others for the 2014 election cycle. But what shape possible modifications may take is equally unclear.

Politicians usually recover. The real losers in this war are the Bay State’s transit riders and drivers. While outrage surges over the injustice of it all for technology businesses and the state’s innovation economy, there has been little discussion about how to fill the gaping hole in transportation revenues should the software services tax be repealed or diluted.

The predictable chorus of instituting transportation user fees to pay for transportation assets will grow louder.  Next comes the discussion about which user fees to levy to plug the hole.  The debate over revenue promises bog down again in this delta. Despite electrical fires in subway tunnels, state lawmakers are unwilling to come to grips with how the nightmarish condition of the Bay State’s transportation assets also threatens its economic well-being.

                                                                                                                                                            –GABRIELLE GURLEY

BEACON HILL

Attorney General Martha Coakley decides today which of the 33 possible ballot questions are up to snuff and can go forward to the next stage, signature-gathering.

MUNICIPAL MATTERS

A spokeswoman for Boston Mayor Thomas Menino, who has been criticized by Detroit Mayor Dave Bing, apologizes for saying he’d “blow up” the Motor City and start over, the Associated Press reports (via Lowell Sun). Menino’s spokeswoman tells the Herald that Hizzoner “obviously meant no ill will towards Detroit,” though she adds that the mayor didn’t misspeak when he called Detroit a total wreck.

The Quincy City Council voted to dismiss a tax debt in exchange for a donation of a two-acre parcel of land along the city’s Adams Shore area.

Brockton officials say a water break similar to one that left some homes downtown without service for 10 hours on Labor Day “could pop up at any time” because of the city’s aging infrastructure, which in some places is more than a century old.

NATIONAL POLITICS/WASHINGTON

Washington is gripped by the debate over proposed military strikes on Syria.

ELECTIONS

Charlie Baker prepares for launch. Joe Battenfeld says Baker is already in a better position than he was three years ago, because he’s not on the same ballot as Gov. Deval Patrick. Patrick campaign strategist Doug Rubin tells the Herald that attempts to push Baker’s family to the forefront won’t work, because “people saw the real Charlie Baker in 2010, and they chose Deval Patrick.”

It’s Mike Ross day in the Globe’s series of profiles of Boston mayoral candidates. Here is CommonWealth’s earlier look at Ross and his campaign.

How crazy is Howie Carr for this Fall River mayoral candidate who wears Harley Davidson T-shirts to debates and talks up the EBT card in his wallet? Just as crazy as you’d expect him to be.

Bill de Blasio, the most popular Red Sox fan in New York, crosses the magic 40-percent threshold in the latest Democratic mayoral poll.

CASINOS

Penn National, shut down twice already in bids to open casinos, signs an option to buy the Plainridge harness racetrack in an effort to win a slots license, the Associated Press reports (via WBUR). Plainville will transfer the host community agreement it struck with the track’s old owners to Penn.

Suffolk Downs files its casino plan with the Boston Redevelopment Authority.

BUSINESS/ECONOMY

Rental prices south of Boston are surging because of low inventory and high demand.

Candle power: South Deerfield-based Yankee Candle Co. is sold for $1.75 billion.

Standard & Poor’s says in a court filing that it’s fighting off a federal lawsuit over its mortgage bond ratings as revenge for a recent downgrade in US debt.

EDUCATION

Newton parents meet with school officials concerning the arrest of a long-time math and gymnast teacher on child pornography charges, NECN reports.

A new study says graduates of two-year colleges often have higher starting salaries in their first year out of school than those starting out with a four-year degree.

A Herald editorial argues that the recent downward revision of the state’s charter school wait list — from 52,000 students to 40,000 — doesn’t alter the real friction point of long waiting lists in poorer-performing school districts. It also doesn’t alter the reason the wait lists exist: “Because the Democratic leadership on Beacon Hill has agreed to these artificial limits, under pressure from school superintendents and teachers’ unions who perpetuate the myth that the rest of the district will go broke if a charter school is competing for students.”

ENERGY/ENVIRONMENT

Governing magazine asks an interesting policy question: Is hydropower renewable or not?

CRIMINAL JUSTICE

Another sports world figure is arrested on domestic violence charges in Waltham — this time it’s Celtics forward Jared Sullinger, charged in connection with an alleged assault on his longtime girlfriend.

The Eagle-Tribune looks back a decade ago to the fatal automobile crash that led to the discovery of massive insurance fraud and reforms that have saved drivers in Lawrence and elsewhere across the state hundreds of dollars on their premiums.

Walter Shelley of Tewksbury goes on trial for the 44-year-old murder of a classmate who was “messing” with his girlfriend, the Lowell Sun reports.

Ariel Castro, sentenced to life in prison plus 1,000 years for kidnapping and raping three women in Cleveland, was found hanging in his cell Tuesday night.

Prosecutors in Pittsfield outline the sexual assault case against three Somerville teenagers who attended a pre-season camp in the Berkshires for high school athletes.

MEDIA

Fortress Investment Group, the majority owner of GateHouse Media, has purchased more than 30 newspapers that made up the former Ottoway newspaper chain from News Corp, including the Cape Cod Times, New Bedford Standard Times, and a number of weeklies in Massachusetts as well as other dailies around the country. GateHouse. which already owns more than 100 dailies and weeklies in Massachusetts, including the Patriot Ledger and Metrowest Daily News, will manage the papers but, given the company’s shaky financial footing, many observers are wondering how long it will last. The Cape Cod Times story is here.

Meet the Author

Gabrielle Gurley

Senior Associate Editor, CommonWealth

About Gabrielle Gurley

Gabrielle covers several beats, including mass transit, municipal government, child welfare, and energy and the environment. Her recent articles have explored municipal hiring practices in Pittsfield, public defender pay, and medical marijuana, and she has won several national journalism awards for her work. Prior to coming to CommonWealth in 2005, Gabrielle wrote for the State House News Service, The Boston Globe, and other publications. She launched her media career in broadcast journalism with C-SPAN in Washington, DC. The Philadelphia native holds degrees from Boston College and Georgetown University.

About Gabrielle Gurley

Gabrielle covers several beats, including mass transit, municipal government, child welfare, and energy and the environment. Her recent articles have explored municipal hiring practices in Pittsfield, public defender pay, and medical marijuana, and she has won several national journalism awards for her work. Prior to coming to CommonWealth in 2005, Gabrielle wrote for the State House News Service, The Boston Globe, and other publications. She launched her media career in broadcast journalism with C-SPAN in Washington, DC. The Philadelphia native holds degrees from Boston College and Georgetown University.

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