Researcher Paul J. Mathison explains governor’s proposal to tax computer professionals

We couldn’t quite believe it when Paul J. Mathison, founder of research firm pjmathison, told us that the Governor was planning to begin taxing computer service professionals for their work.

We understood the reasoning; the budget shortfall statewide, like here in Philadelphia, has called for drastic measures. But what surprised us most was that we hadn’t heard a thing about it.

Included in the Governor’s fiscal year 2011 budget is a proposal to drop the state sales tax from 6 to 4 percent while broadening the tax base to include other professionals currently exempt. Like computer service professionals.

And while we’ve seen coverage of the issue, after the fact, in Pittsburgh, and according to Mathison, a growing interest from technology stakeholders across the state, little has been done here in Philadelphia.

After the jump, we ask Mathison for the details on the proposed tax hike and what technology groups can do to fight it.

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Down with Pennsylvania’s tech tax!

In an informal partnership with Philadelphia magazine‘s new Philly Post daily news blog, Technically Philly will be offering our insight on Philadelphia technology to a broader audience of tech-interested individuals every Tuesday. As is true of so much of our effort, this is yet another opportunity to voice the triumphs and concerns of the community to a broader audience in the city and beyond.

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.

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.

Read more at Philadelphia magazine’s Philly Post.

Are the Mayor’s technology firm tax incentives not enough?

It’s been a few weeks now since Mayor Michael Nutter announced a tax incentive pilot for technology firms aimed at decreasing sales tax for service-based tech companies and, ultimately, attracting more businesses to Philadelphia.

For as much as we’ve heard support for the decision to eliminate taxes on sales outside of Philadelphia, there’s been criticism from local entrepreneurs that maybe the tax pilot isn’t much of an incentive at all, but it will help retain companies that are already here, some say.

Damon Alberts, whom with the Videogame Growth Initiative has helped lobby city and state government officials for the last year to create more opportunities for small video game studios in the city, praised the decision but said more work needed to be done. It’s by no means an end result, but a “step in the right direction,” he says.

“I wouldn’t call it an incentive, because really they’re removing a barrier. Now I don’t have to pay a tax that I shouldn’t have to pay anyway,” he told Technically Philly in a telephone interview in early March. Alberts was gearing up for a trip to Game Developers Conference in San Francisco, a popular annual gathering for the industry.

“It’s a step in the right direction because video game firms are on the Mayor’s radar,” he says.

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Nutter proposes “unprecedented” $120 million IT budget, moves toward paperless

Mayor Nutter has announced plans to significantly invest in city information technology and pursue paperless government efficiencies in an attempt to improve tech infrastructure, cut costs and streamline city services.

“We may not be completely paperless, but we will use less paper,” Nutter said in his budget address to City Council this morning before a packed crowed that filled the historic Council chamber’s floor and balcony seating.

If City Council approves the budget, Nutter says that an “unprecedented” investment in city technology will provide $120 million to improve IT over the next five years, including $25 million in FY11.

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