House Speaker Robert A. DeLeo and Senate President Therese Murray said today that they will join Governor Deval Patrick in supporting the repeal of a controversial new tax on computer software services.
The backing of all three major players on Beacon Hill all but ensures that the tax, which was just enacted in July, will be wiped off the books within weeks, delivering a major victory to technology executives who lobbied hard against it, arguing it would be a stain on the state’s reputation as a haven of innovation.
DeLeo and Murray said they were reversing their position on the tax after meeting for 30 minutes in the speaker’s office with Paul Guzzi of the Greater Boston Chamber of Commerce, Daniel O’Connell of the Massachusetts Competitive Partnership, and John Regan of the Associated Industries of Massachusetts.
Patrick switched his position on the tax after meeting with business leaders last week.
“We’re going to repeal it, and move on, and make sure that we send a message to those folks out there that we hear you loudly and clearly,” DeLeo said. “We spent a lot of time with you folks. We heard your concerns and we want to make sure that Massachusetts is still looked at as the innovation capital of the world.”
DeLeo said the repeal would be brought to a vote at the House’s first formal session of the fall, which is expected before the end of the month. Murray said the Senate would act quickly after that.
“The business and tech communities of Massachusetts are our top priority,” she said.
The business leaders at the meeting accepted some of the blame for the blowback generated by the tax. Many of them supported its passage earlier this year.
“We underestimated the negative impact,” O’Connell said, adding that the business lobby failed to take into account that the tax dealt a “reputational hit” to Massachusetts.
Guzzi said the tax had “unintended consequences, which we hadn’t anticipated.”
DeLeo said the $150 million in revenue that will be lost when the tax is repealed will not be plugged with another new tax.
In fact, he said, the Legislature will not replace the lost revenue at all, because he said there will be surplus money at the end of the year that can be used to fill the $150 million hole in the budget. Tax collections are currently $140 million above projections.
That idea is somewhat controversial however.
Surplus money is usually deposited in the state’s reserves, known as the Rainy Day Fund. The fund currently has a balance of $1.6 billion, and was designed to be tapped only for emergency uses.
Liberal watchdog groups said diverting surplus money to plug the gap created by the repeal of the tax will only paper over the problem, without delivering the kind of sustainable revenue needed to meet Patrick’s goal of expanding transportation and education programs.
Noah Berger, president of the left-leaning Massachusetts Budget and Policy Center, called it “a temporary solution to a permanent problem.”
“We have long-term needs in transportation and education, and to try to patch over those needs with one-time solutions doesn’t solve the problem,” Berger said.
Berger said he would favor repealing corporate tax subsidies for companies like Raytheon and Fidelity.