Down with the Tech Tax!

Pennsylvania lawmakers sounded a warning bell last week, predicting a $1 billion deficit if taxes aren’t increased or significant spending cuts executed. And for the first time in close to two decades, computer services professionals are being looked to to help bridge the gap. [SIGNUP]

Governor Rendell’s proposed 2011 budget includes plans to broaden the tax base to 74 goods and services not currently taxable under the state sales tax, including computing and information technology work.

Call it history repeating itself.

In 1991, with an expected hole in the budget, Governor Casey looked to extend the sales tax to additional professional services, including computer services. Paul J. Mathison, who has analyzed state budgets and their impact on technology for close to two decades, remembers it well.

“The natural players ran to the governor’s office and said, ‘Don’t impose this tax on us.’ As I recall it, only four groups got wacked with this tax, including computer service professionals who at the time, in the nascient stage of that industry, were not galvanized together,” he said. Without a lobbying effort to fight the decision, computer service professionals were added to the tax base.

In 1996, with the dot com boom on the horizon and Governor Tom Ridge at the helm, computer services were once again exempted.

“Pennsylvania was one of the first states to place this onerous tax on innovation and improvement,” Ridge said of the tax, according to a 1996 article published in TechNews, a Newsweek business news service focused on computing and information technology. “Let’s be one of the first states to eliminate it.”

Today, we could be one of the first states to reinstate it. The state estimates that about $300 million in state revenue could be generated by taxing the computer industry. But members of the Pittsburgh Tech Council remember the battle well, too, wary of losing $210 million in industry revenue. The group is currently campaigning to have the computer services tax removed from the budget.

“A lot of arms are being waved and noise is being made,” Mathison said. Except in Philadelphia. While Pittsburgh and Central Pennsylvania’s technology firms have advocated for the issue, here in Philly, little has been said, or done, about the tax, Mathison says. “An opportunity exists for us in the southeastern part of the state to try to speak with one voice on the issue and coordinate with these other groups.”

Lest history repeat itself again. — Brian James Kirk

TECHNICALLY PHILLY is a news site that covers technology in the region. The site covers startups, investment, government policy, Comcast, social media and all that is Philadelphia tech. Read more at technicallyphilly.com.