Earlier this year, Governor Tom Wolf proposed a new $330 million Tech Tax to balance Pennsylvania’s budget. If adopted, this business tax would be aimed squarely at jobs, focusing on the very positions that are fueling southwestern Pennsylvania’s growth. By adding a unique seven percent tax to the costs of major software, website or web-hosting projects, the Tech Tax all but asks businesses to move jobs and investment outside of the Commonwealth. From software developers and information security professionals to creatives and network administrators alike, this tax will jeopardize jobs on day one. (See the full list of services that will become taxable.)
The Tech Tax is the largest new revenue source in the Governor’s budget, generating far more monies than his proposed new tax on Marcellus Shale. If adopted, it would immediately become the nation’s highest tax on technology services and would leave Pennsylvania among only three other states (South Dakota, Hawaii and Connecticut) that levy a similar tax. None of those states seriously compete with Pennsylvania for technology jobs.
Why should you care?
Today, 35 percent of the region’s payroll is attributed to employees working within the technology sector. These employees are increasingly making Pittsburgh their home, investing in their communities and creating a market for much needed urban amenities.
To be clear, not all businesses will experience the Tech Tax as a seven percent tax. As larger consumers of custom software services begin to move work to other states, our small businesses, who play a key role in developing this software, may not survive or may need to relocate their key team members in pursuit of the fleeing consumers. That will mean the end of their work in Pennsylvania.
For example, when I first approached a CIO from a large Pittsburgh business (one of the top consumers of technology services in Pittsburgh), he didn’t seem very concerned about the Tech Tax at all. In his mind, if the tax were adopted, he would simply move the work to another technology team located far outside of southwestern Pennsylvania. This is the real issue. The Tech Tax is a 100 percent tax on jobs.
How do we know this?
The Tech Tax isn’t a new idea. It’s certainly not some innovative way to close a corporate loophole as the Governor suggests. It was originally imposed in 1991 in Pennsylvania, and for six years, served to slow our ability to participate in the fastest growing part of the national economy. In recognition of this fact, and after years of advocacy from the Pittsburgh Technology Council, then-Governor Tom Ridge signed legislation (co-sponsored by two western Pennsylvania Democratic senators) to repeal this tax.
Companies that operated during that six-year period will recall well the detrimental impact it had on business and job creation.
Is this tax going pass?
Since February, our government affairs team (the Council has three registered lobbyists on staff) has been on the ground in Harrisburg working hard to educate our senators and representatives. We have organized a statewide coalition that includes our counterpart associations in Harrisburg and Philadelphia. Our member companies have sent more than 1,700 letters to Governor Wolf and their elected members in the General Assembly.
On June 6, our members traveled to Harrisburg to meet with key members of the legislature. Importantly, this issue transcends party. Even though the two prime sponsors of the Senate legislation were western PA Democrats, both Republicans and Democrats joined forces in 1997 to repeal the Tech Tax.
If the General Assembly and Governor Wolf adopt a budget on time, as the Constitution requires, the outcome of this issue will be decided by the end of this month.
The stakes on this issue could not be higher. It will determine whether we are committed to good policy, or are comfortable with the failed policies of the past. Please join our fight by using this tool to contact your legislator today.