Editorial Two

‘Tech Tax’ Imperils State’s Growth

The prevailing opinion is that Florida Gov. Rick Scott didn’t do Massachusetts any favors recently when he sent out letters to 100 Bay State companies essentially inviting them to explore the Sunshine State and discover why it makes sense to move operations there.

Actually, however, he did the state a huge favor.

He reminded everyone on Beacon Hill of something they probably knew — although they don’t act like it: that business owners have options when it comes to choosing where to locate or launch, and Massachusetts is increasingly looking like a less-attractive option.

The timing of Scott’s letter coincides with implementation of the Bay State’s so-called ‘tech tax,’ or software tax, a levy on ‘computer software design services,’ a controversial measure that is being fought by business owners, economic-development groups, legislators, and other constituencies that understand that it is arbitrary, confusing, and threatens to stifle one of the strongest pillars of the state economy.

But the tech tax is just part of the story. The larger piece is that this state continues to believe that it can tax and spend without consequence. The truth is that it can’t, and Rick Scott’s aggressive actions simply provide more proof of that.

But let’s back up a minute.

Massachusetts is still an attractive state in which to live, work, and do business. There is an enviable quality of life here, dozens of fine colleges and universities, a host of cities and towns that could — and often do — make those ‘best places to live’ lists, and a strong, educated workforce.

Maintaining all this takes resources, and for the past several decades, elected officials have essentially said that the only way they want to amass these resources is through new and different ways to tax individuals and businesses.

Indeed, in addition to the tech tax, the state recently implemented higher levies on cigarettes and gasoline. You can go to those wells only so often (although, in this state, we do so frequently), so to fund needed infrastructure and transportation programs, the state looked in a different direction — its burgeoning tech sector and the services it provides.

This new levy might truly be a lucrative source of tax revenue (that’s might; no one really seems to know how much it will generate), but its implementation shows — again — that legislative leaders are shortsighted and unable to grasp the big picture.

Forty-six states don’t have tech taxes, and for one big reason: they’re trying to grow that sector, which is one of a few with vast potential for creating new jobs in the years and decades to come. Massachusetts leaders know this well — they’ve seen it first-hand — but they’re acting as if they’re taking this sector for granted and that they don’t take people like Rick Scott seriously.

They should.

And they can show that they mean business — in both a literal and figurative sense — by taking steps to indicate that they know and care about the fact that business owners really do have options. The place to start is with a move to repeal the tech tax, which threatens everything from the growth of existing companies to the prospects for new tech startups.

And from there, the legislature can take additional steps to counter what is perhaps the strongest line in Scott’s letter: “it’s bound to get worse in Massachusetts.”

Like we said, Scott did the state a favor. Let’s see if Massachusetts is smart enough to take advantage of that.