Mass. Gov. Patrick open to repeal of 'tech tax'

BOSTON (AP) - Gov. Deval Patrick said Wednesday that he was open to repealing an unpopular new tax on computer and software services, but declined to say how he would replace any lost revenue from the tax in the state budget.

The 6.25 percent tax, which took effect July 31 as part of a massive transportation financing law, has been criticized by technology firms that contend it will hurt one of the state's premier industries and cost jobs.

Patrick met privately with business leaders last week to discuss the tax and said his position on the issue has been evolving. In an interview with The Boston Globe on Tuesday, Patrick said he had become convinced the tax was a "serious blot" on Massachusetts' reputation as a leader in technological innovation.

Pressed by reporters on Wednesday to elaborate on his position, Patrick insisted that the next move was up to the Legislature.

"I'm open to making this change," he said.

"It's a fact that the Legislature relied on this revenue to balance the budget and I think there is a consensus that it ought to be replaced," he added.

State officials estimate the tax will generate $161 million in the current fiscal year. Patrick said he had some ideas for replacing the revenue if the tax was repealed, but was not ready to share them because he did not want it to appear he was negotiating with lawmakers through the media.

The governor did suggest he was opposed to any new broad-based tax on state residents. The transportation law also included higher taxes on gasoline and cigarettes.

"I think folks are going to be trying to look for a solution that doesn't require asking for more from the public," he said.

The governor would not say whether he would veto a bill if it repealed the tax without replacing the revenue.

House Speaker Robert DeLeo and Senate President Therese Murray had no immediate comment Wednesday. Aides referred reporters to a joint statement issued by the Democratic legislative leaders last week in which they promised to have further conversations with members about the future of the tax.

Christopher Anderson, president of the Massachusetts High Technology Council, said he was encouraged by Patrick's shift in position.

"I think the folly of this tax has been exposed on a number of fronts," said Anderson, whose group has been among those pushing for repeal.

Anderson suggested several possible options for replacing the revenue from the tax, including tapping a portion of a surplus the state recorded in the last fiscal year, or applying corporate tax settlements that generally go into the state's reserve, or 'rainy day' fund.

Tax collections also ran higher than forecast during the first two months of the current fiscal year, but Patrick said Wednesday it was too early to determine whether that trend would continue.

Noah Berger, president of the independent Massachusetts Budget and Policy Center, said the state could consider abolishing some of the hundreds of millions in annual tax breaks offered to private companies as one means for recouping any lost revenue.

Cox Media Group