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Between the Lines: A Smart Flip-Flop

Patrick wants to repeal the service tax he pushed.

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Tuesday, September 17, 2013

I wondered how Deval Patrick would deal with mounting criticism for his surprising and unpopular move to tax computer services in Massachusetts. I have to admit, I never thought he’d just admit it was a mistake and join the chorus demanding repeal.

But that’s exactly what the governor did last week, telling reporters that the tech tax is “a serious blot on our reputation as an innovation center.” He called for repeal after meeting with angry business leaders who for months have been saying that the 6.25 percent tax on computer software services is not only bad economic policy, but badly written and confusing law that leaves one of the state’s most important industries uncertain how to comply.

“The solution,” Patrick said, “is not just to repeal, but to repeal and replace and that’s the part we’re all working on together.”

The service tax was a dubious idea that survived the wrangling this summer between Patrick and lawmakers over tax hikes to fund transportation improvements. By pushing for it, the governor showed a lack of knowledge or concern for the history of his own party.

In 1990, a similar service tax helped break the Democrats’ lock on the governorship in Massachusetts, ushering in the era of Bill Weld and a Republican reign in the executive office that lasted nearly two decades. Proposed by Michael Dukakis and passed at the end of his final term, the tax was aimed at hundreds of business services, including advertising, public relations and graphic design. The furor from the business community animated Weld’s winning campaign against John Silber, the Democratic candidate in 1990, and gave Weld a major win before he was even inaugurated. This is how a Dec. 2, 1990 Christian Science Monitor storyput it: “Mr. Weld, a Republican, won his first legislative victory last week when the Democrat-dominated state General Court (legislature), meeting in a lame-duck session, voted to delay implementation of a sales tax on business services until March 1. The tax had been scheduled to take effect Dec. 1.” The tax was repealed in his first 100 days, marking only the beginning of Weld’s anti-tax crusade. From 1991 to 1997, he passed 19 tax cuts and six balanced budgets without raising taxes.

Whatever one thinks about his policies, Weld saw the service tax of his day for what it was: a powerful tool to rally the business community against Democrat policies that many thought would drive companies out of state.

That Patrick tried to revive such a tax makes him now appear as out of touch as Dukakis did then—something that won’t exactly help his party when it tries to hold on to the office in next year’s battle against, among others, former Weld cabinet secretary Charlie Baker.•

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