In what is being called one of the “most far-reaching software services tax in the nation”, a new tax on computer design services will go into effect starting Wednesday July 31 in the Bay State. This tax will affect any business that uses a consulting company to implement pre-written software from a third party (see the full law here). This tax is a direct hit to small and mid-sized businesses in Massachusetts because those are typically the businesses using consulting services. Most small to mid-sized companies cannot afford to have a large technology department so they hire consulting firms to provide those services to them. This hurts all companies but small and mid-sized the worst.
According to Census Bureau data from 2010 there are almost 278,000 small to mid-sized businesses in Massachusetts (the data does not include the companies with 500+ employees which is almost 30,000 alone). At a time when companies are continuing to struggle under a sluggish economy; are still wary about Obamacare implementation and regulations that keep coming out of the White House, these businesses certainly cannot afford to be taxed more and have more administrative “red tape”.
Clearly Massachusetts State Legislators were only thinking about tax dollars coming into the state coffers rather than the potential ramifications this tax law will have on business, jobs and the economy in their state. This affects everyone across the board including consumers, employees and is across all industries; especially the IT Service Industry. Businesses already struggle to afford the necessary software programs they need to make their processes more efficient and effective. Increasing that cost via taxation will only add to that struggle.
Companies in the Bay State have some of the highest business costs in the country. Adding yet another burden to businesses, especially small and mid-sized companies who are the engines of the economy is an extremely bad decision on the part of the Legislature. Some facts:
Massachusetts has the highest healthcare costs in the country.
According to the Tax Foundation:
The corporate income tax in Massachusetts is listed as one of the top 15th highest.
Massachusetts’s corporate tax collections per person were $281 in 2010 which ranked 4th highest nationally.
According to Forbes:
Massachusetts’ business costs, including labor, energy and taxes, are the highest of the 48 contiguous states (only Hawaii is higher) at 22% above the national average.
As usual, when Legislators needs to fill any budget gap, it’s businesses and taxpayers who have to pay the price rather than making any real cuts to their expensive budget fraught with over bloated union salaries and pensions; while essentially ignoring the fraud happening throughout the welfare system. Massachusetts has to realize that eventually you “run out of other people’s money” and start acting with fiscal sanity rather than more burdensome taxes on the businesses and people who are driving the state’s economy.