Massachusetts business groups are warning a new provision in the transportation bill passed Wednesday could hobble Bay State businesses.
The state's business community is in an uproar. And it's over a little noticed provision in the new transportation funding bill. The bill would require the Department of Revenue to tax a sweeping range of computer services. On the House floor, Ways and Means Chairman Brian Dempsey said 35 states have a similar tax.
“There have been concerns raised recently which we’ll continue to monitor, but this whole plan which we released weeks ago has come about after careful conversation with the business community, and understanding the economic climate that we continue to face,” Dempsey said.
Michael Widmer of the business-backed government watchdog group The Massachusetts Taxpayers Foundation says the provision will result in dire consequences.
“I’m enormously concerned about this," Widmer said. "In my 20-plus years as the head of the Mass Tax Payers foundation this is perhaps the worst tax initiative that has real possibility of being implemented.”
Widmer says the tax strikes at the heart of the state’s economy and will stifle job creation for years to come.
“It’s touch enough to create jobs in a weak economy with global competition," he said. "This is like shooting yourself in the heart. And I think other states will be amazed that Massachusetts is doing this.”
Widmer says every industry in the state will be affected by this tax ranging from retail to life sciences to health care to finance. The foundation estimates the new tax would amount to a 30 percent increase in the sales taxes Massachusetts businesses pay.
For example, the provision would tax computer systems developed or upgraded to manage inventory and sales. It would tax banks' investments in improved online and mobile banking. And it would tax the new web portals health plans are required to develop under last year's health care cost-containment bill, perhaps making it harder to rein in premiums.
The bill has not yet become law. Gov. Deval Patrick is planning to send the bill back to the legislature with an amendment.
Widmer says if the governor and the legislature don’t change the software tax it could become a flashpoint in the final part of Patrick’s governorship and in the next gubernatorial election.
