Modernization Chairman asks Legislators to avoid failed Massachusetts tax hike mistake

OKLAHOMA CITY – House Government Modernization Chairman Jason Murphey today expressed his strongest opposition to the impending introduction of a legislative plan to put a new tax on the use of information technology services.

“Earlier today, Governor Fallin released an article entitled ‘Computer Science, Coding Skills in High Demand by Businesses across Our State’ in which she acknowledges the importance of the emerging technology sector in our state,” said Murphey, R-Guthrie. “It’s important to celebrate this fact, and I appreciate the governor’s recognition of the potential of Oklahoma’s IT industry, but even more importantly, we must realize the great harm that the pending services tax on technology is about to create.”

Murphey said the tax plan has failed in other states where it has been tried.

In 2013, the Massachusetts Legislature passed a tax only to have to backtrack and repeal the tax just a few weeks later after it became clear that the new tax would potentially apply to many industries and put that state at a great disadvantage.

In 2007, Maryland also approved the new tax only to repeal it just a year later.

“The failed Massachusetts experiment shows that trying to put a services tax on information services is a Pandora’s Box of unanticipated outcomes that cause absolute havoc on many areas of the private sector,” Murphey said. “Because so many industries now use computer-based processes, this new law will be very confusing, and it will be difficult for businesses to know if they will be required to collect the tax or not. Those who mistakenly fail to collect the tax will open themselves up to liability.”

Murphey explained that the Oklahoma proposal appears to be even more aggressive than the Massachusetts tax plan.

“In addition to the information technology tax, the proposed Oklahoma tax would also levy a new tax on the entering of data into a computer. This will potentially affect everyone from the freelance writer who provides an article to the local newspaper, to an accountant who processes taxes, to the analyst who uses computational formulas to produce business intelligence.”

Murphey said because so many services now utilize computer-based processes the implications of the new Oklahoma tax could reach far beyond the expected audience.

“This punitive plan shows a shocking lack of foresight,” he said. “Its advocates do not appear to realize the information technology economy is the economy of the future. Their new tax plan will place Oklahoma at a great disadvantage in enticing location independent entrepreneurs who will create and start the IT mega-startups of the future.

“This plan goes against everything we have sought to emphasize as part of the government modernization process over the past years.

“I can only hope that advocates of the plan will learn from the mistakes of other states and quickly abandon this punitive attack on Oklahoma’s economy,” Murphey concluded. “Should legislators continue in the effort to tax IT services, I hope the governor will stand by her support for the industry and the state’s economy and veto the bill.”