Well, it's now official. The Massachusetts tech taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. , which we wrote about a few weeks ago, has been repealed. The tax's revenue is not expected to be replaced by any new taxes, but it is instead estimated that the state will offset the lost revenue mostly with the budget surpluses from current and previous years.
After just one dissenting vote in the house, none in the Senate, and the prompt signature of Governor Patrick, the sales taxA sales tax is levied on retail sales of goods and services and, ideally, should apply to all final consumption with few exemptions. Many governments exempt goods like groceries; base broadening, such as including groceries, could keep rates lower. A sales tax should exempt business-to-business transactions which, when taxed, cause tax pyramiding. expansion to computer services met its demise almost as quickly as its arrival. This quick turnaround is not unexpected given the circumstances. The tax had only been in effect for less than two months, and in that short time an outcry from the state's technology industry prompted the approval of a ballot initiative to repeal the tax and the threat of a lawsuit. After the industry pushback, the same lawmaekers that didn't realize the full effect of such a policy prior to implementation reexamined the law and subsequently changed their positions (a practice that isn't all that uncommon). According to the Boston Globe,
Senate President Therese Murray said she was proud the Senate decided to undo the tax. ‘Through ongoing conversations with industry experts, it became clear that this sales tax was having an unanticipated negative effect on our technology industry.’
Singling out one industry and leaving ambiguous language in the legislation is not good tax policy. This is a good example of how misguided thinking in the beginning led to an ill-conceived policy later.
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