I don’t mind paying higher taxes if the Commonwealth needs more money to fund public services. I support more tax dollars for public transportation.

However; I believe that taxes should be levied in a way that is fair. I also believe that the collection of taxes should be as efficient as possible, and that the collection of taxes should not cause undue burden on the people and companies of the Commonwealth.

The Tax is not a fair tax – why are ‘Computer system design services’ singled out for sales/use tax?

The Tax wil be complicated and expensive to comply with. It is administratively very complicated because the definition is complex and vaguely worded, and has a number of exceptions. It is complicated to collect because it is a state sales tax.

The Tax makes doing business more complicated for all IT businesses in the Commonwealth. The Tax will particularly harm the small businesses in our Commonwealth. That includes startups and aspiring entrepreneurs – the Tax will reduce our competitiveness. As such, the Tax will cause our Commonwealth long-term harm.

The Tax was passed under the radar, in the middle of the summer, and goes into effect 7 days (!) after the Transportation Act was passed. This is unreasonable.

The Tax needs to be repealed.

If you live or work in Massachusetts, please contact your State Representative and State Senator. The Department of Revenue is also inviting comments or suggestions at rulesandregs@dor.state.ma.us.

1. The Tax is not fair.

Apart from telecommunication services, no other services are subject to sales/use tax in Massachusetts. Why are “Computer system design services” singled out?

2. The wording of the Tax is vague and unclear.

From TIR 13-10:

“Pursuant to newly-enacted legislation, An Act Relative to Transportation
Finance, St. 2013, c. 46 (“the Act”), which became law on July 24, 2013,
Chapters 64H and 64I of the General Laws have been amended to apply
the sales and use tax to certain services relating to computer system
design and to modification, integration, enhancement, installation, or
configuration of standardized or prewritten software.”

This wording makes no sense. Almost all software is ‘prewritten’. It is industry best practice to use existing software where it exists, and modify it to suit where necessary.

Taken literally, the Tax applies to practically every action of every IT professional. We are always modifying, integrating, enhancing, installing or configuring software – be it software we wrote ourselves or something that was acquired.

The Tax would require us to keep detailed accounting records of how much time was spent on software that was ‘prewritten’ vs. software that was written from scratch. Of course, almost no software is written entirely from scratch, most software builds on ‘prewritten’ components and libraries.

Doing this kind of accounting is absurd – it would be a ridiculous waste of time.

In real life – particularly so for free and open source software – there is no clear line between software that was ‘prewritten’ and software that was not. It does not make sense to create that artificial distinction in the Tax – it makes everything very complicated.

TIR 13-10 further defines:

“’Computer system design services’, the planning, consulting or designing of computer systems that integrate computer hardware, software or communication technologies and are provided by a vendor or a third party.”

This definition does not help.

What does this mean? What is included? What is not? What is a ‘communication technology’? Does there always need to be a hardware sale involved?

How does it apply to cloud computing services?

How does it apply to consulting services on free and open source software?

3. the Tax is complicated and unworkable.

The Tax suddenly subjects a whole class of small companies – startups and freelancers – to a vague and complicated tax rule. Now every IT freelancer will likely need to register with the Commonwealth to collect state sales tax.

We’ll need to hire lawyers and accountants to make sure we comply with this complicated, vaguely worded and unclear rule. This will suck up resources that
would be better spent growing our businesses and innovating.

This is an unreasonable burden that will hinder entrepreneurs and put a brake on innovation in the Commonwealth.

4. the Tax is unreasonable

The Tax was passed under the radar, in the middle of the summer, as part of the Transportation Act. It goes into effect tomorrow, July 31st 2013, 7 days after the Transportation Act was passed. This is unreasonable.

The Tax needs to be repealed.

If you live or work in Massachusetts, please contact your State Representative and State Senator. The Department of Revenue is also inviting comments or suggestions at rulesandregs@dor.state.ma.us.

The two people appointed are Susan Crawford and Kevin Werbach.

They ‘get it’ – they understand that the US is a broadband backwater, that the current telecom policies only work to fatten the bank accounts of the big telecom players, and that high speed internet access is just like water, sewage, and electricity: it’s a utility, and should be treated as such.

I have high hopes for the FCC under the new administration. If they are going to set up rules that will actually advance broadband penetration and foster competition, the US could finally see some real innovation in telecom land. Who knows – we might get cheap, fast and unencumbered broadband after all. This will of course take years, but things in the US can change quickly if there is (political) will…

Some concrete steps I would take (not in any particular order):

* Set up policies to encourage customer-owned last mile

* Split up the big telcos and cable companies in an infrastructure and a services company each. The infrastructure companies will roll out and maintain the physical local access networks, and charge ISPs for access to them – but there will be no preferential treatment for any of them, and pricing and service levels will be heavily regulated and monitored to avoid abuse. Basically, this is a return to the unbundling of the local loops as it used to exist in the US for copper telephone wire, before Verizon and co pushed the CLECs out of business by lobbying for bad laws and pricing them out of the market. Of course the same rules need to apply to the cable networks, and to the fiber networks that are being rolled out. Unbundling is very much alive in large parts of Europe, and it works well there.

* Make it easier to roll out infrastructure. There needs to be a much more uniform legal framework for access to utility poles and digging up road to install new networks. Right now most of these rules are set at the municipality level, and the legal patchwork that results is very difficult and expensive to navigate.

* Encourage the installation of utility pipes or tunnels which can have new wiring blown through them much more cheaply, without digging up the roads every time. Germany has been doing this for decades – why can’t we?

* Get back those $200 billion in subsidies and tax breaks that were handed out to the big telcos for rolling out a next generation network – which they never did. That money needs to come back, with interest. The federal government can certainly use it right now.

* Enforce network neutrality. It’s very simple – the network needs to be stupid, the endpoints smart. That’s how you foster innovation. And as to the “the pipes will clog – people won’t be able to watch tv on the internet – the sky will fall!” fallacy: there is a very simple solution to that problem. Fatter pipes. If we had real broadband here (100Mbit+ to the home) and properly designed networks (bring down overcommits to a more reasonable level), this would not be a problem. Would it cost money to roll these networks out and keep upgrading them? Sure. But equipment cost would come down quickly as purchase volume goes up and mass production kicks in, that’s basic market economics… And sane government policies can help here, too.

The above screenshot was taken at a colocation facility.

… unfortunately this kind of speed is totally unaffordable at home, at least in this country. Thanks so much, dear politicians and FCC – your deregulation policies and over $200 billion worth of subsidies to the big telcos have brought us… ‘broadband’ that is slow and overpriced. I say we demand the money back, use some of it to buy one of the big telcos – Verizon’s market capitalization is only $112 billion, hmmm – and build out some *real* broadband infrastructure with the rest of the money.

However, Mr. Patrick has made his first bad decision. He’s basically put a wolf in charge of guarding the sheep. The sheep, in this case, is MA’s progression towards the Open Document Format (ODF). Adopting this format will break Microsofts near-monopoly on office software by levelling the playing field for competing products. This will drive prices down and software quality and innovation up. This can only be good for the people and the state.

So what did Mr. Patrick do? He appointed Brian Burke to the technology transition team. Mr Burke is a Microsoft lobbyist who has been fighting tooth and nail against ODF because it will hurt Microsoft’s near-monopoly on office software. The technology transition team is going to advise the state in matters to do with technology. Including, of course, the transition to ODF.

Sound fishy to you? It sure does to me. Can you say ‘conflict of interest’? Right. I suggest you let Mr. Patrick know at his Patrick-Murray transition website, like I did. Thanks!

In other news, the Post reports on how the greedy management at Verizon thinks that they are entitled to get paid twice for the use of their network. The people pay them for broadband access, but they think that content providers should pay too, or risk having their traffic treated as second-rank data flowing across the Verizon network. The more I hear from Verizon and SBC these days, the more they sound like the arrogant evil empire that AT&T was before the breakup. I really, really hope that Congress understands the importance of network neutrality, and acts accordingly. If not the innovative, open standards based internet as we know it is doomed.

Update 2006-02-12: Larry Lessig’s testimony [PDF] before the same committee is now also online, and an equally good read.

Update 2006-02-13: The BBC’s Bill Thompson weighs in as well, with a more European perspective on the issue.

This means that information about the e-mails you send and receive will be kept, as well as the time you log on and off from your ISP, for at least 6 months, and up to two years. The same for your telephone records. Of course, this proposal originated with the European Commission, and it was rushed through Parliament in 1 reading. Nevermind the shaky ‘evidence’ for the necessity of this data retention: the whole thing was based on just one study, of which the results were misrepresented. Never mind the 58000+ signatures against the proposal.

All of this, of course, because proponents say it will help ‘anti-terrorism’ efforts. In practice, terrorists will circumvent the logging, and only ordinary people’s data will be stored. Of course, the cost for the retention will be passed on to the people – either through more expensive telecommunication services or through taxes. The EU actually has good data protection laws – but this Directive does not mention data protection at all. So, while the data is supposedly only for government use, expect the IFPI and other private organisations to get their claws on it too, over time.

Be very, very afraid.

Suw Charman explains the issues clearly, from a UK perspective. More background here.

One last thing:

The voting records from the EP will be out soon. I will update this post at that point. If you live in the European Union, please consider what these people have done at the next election. Politicians that pass bad laws need to be removed from power.

Update: the roll-call votes are now available:

Original (word file) : Original (word file)
Analyzed as per the FFII vote recommendations:
HTML
OpenOffice
Excel

Anyone who shows up in red in the FFII files voted bad. Refer to this list when considering who to vote for in the next European election, please. We need to show those MEPs that their actions have consequences.

Welcome to a Brave New World where the government knows about every e-mail you send, every phone call you make, and every website you visit… I’m sorry, but if you’re from the EU, reading this blog will probably put you on your Government’s blacklist. Thanks, European Union!