A Governor's Tech Crusade
Monday, January 03, 2000 03:00 AM ET
by  Galen Gruman

Pennsylvania's Tom Ridge is trying to put his state in the forefront of tech.

Pennsylvania's Gov. Tom Ridge, a Republican from the steel-producing area near Erie, is working hard to remake his state's image from economically depressed rust-belt has-been to high-tech center. In some Republican circles, he's cited as a model governor: pragmatic, pro-business, pro-education, inclusive and a bit activist.

There is even talk he could be a running mate to Texas Gov. George W. Bush in this year's presidential campaign, something Ridge is coy about but has not denied.

Oh, and very much pro-technology. Since being elected to the governorship in 1994, the 54-year-old Ridge has created a partnership with Microsoft (MSFT) to outfit state employees with networked desktop systems and modern software; created a VC fund partly financed by the state's retirement system; brought together the state's major universities to create the Digital Greenhouse, to commercialize ideas collecting dust on campus; created programs to train teachers to use computers in the schools and to bring computers into day-care centers; launched trade missions largely focused on high tech in Ireland, the United Kingdom and Japan; visited Silicon Valley executives regularly; and developed a digital marketplace called Lightning Manufacturing that lets the state's small manufacturers of goods such as powdered metals create on-the-fly consortia to get business from large customers in Pennsylvania and across the globe. In short, Ridge's focus is on getting both his government employees and his state's citizens to embrace technology at work and school, thus providing the workforce needed to thrive in a networked, entrepreneurial, knowledge-oriented world--from manufacturing to software development.

In a state where the majority of voters are Democrats (by almost 500,000 people), Ridge served first as a Republican representative to Congress--from a Democratic district. In 1998, running for a second term as governor, he received 57 percent of the vote, a margin of 780,000 votes. In short, Ridge is trying to be a New Republican for the new century. There is even talk he could be a running mate to Texas Gov. George W. Bush in this year's presidential campaign, something Ridge is coy about but has not denied.

Ridge discussed his goals and thoughts on high-tech issues during a 90-minute conversation with Upside in late November, at the Republican Governors Association annual meeting, in Carlsbad, Calif., north of San Diego.

The Net Tax Quandary
Upside: As you know, the states are very concerned about the lack of sales tax for interstate goods bought from the Internet. For you, sales taxes are a third of your budget. Theoretically, those are moneys you're losing because those used to be brick-and-mortar sales that are shifting to other places. Is that a short-term issue that will resolve itself as the economy grows?

Ridge: It was an issue that came up during the past couple of days here, clearly.

Well, I'm sure it came up in your decision on the $80 million in consulting services taxes you eliminated. Oh yeah!

What's the effect on your budget? Different states rely more heavily than others on sales tax. But the first thing I think we're pretty much all in agreement on is that we shouldn't be setting up tollbooths along the Internet. I'm not trying to dodge the issue; I'm going to wait. I need to learn more about it. My inclination is--since this matter is not going to be put at rest, certainly not next year during a presidential election year, or the one after--to better understand all the implications, good and bad, because it's ultimately a trade-off.

There's a part of me--there's the Republican--that says one of the things we should tax is consumption, not income. So how do you tax consumption? You impose a sales tax. But there's another part of me that says that in the 21st century the marketplace is global. So if I can't get it locally or if I can get it cheaper across town or across the country, as a consumer, I want those options. So we're going to work it out in Pennsylvania, and I just can't tell you the direction we're going to go yet. I can't do it myself, but I have tried to reduce or eliminate taxes wherever I can. But really states can only get money from a few sources: Normally you'd have income taxes and sales taxes.

Now, the commerce that you've got to be real careful about is the B-to-B stuff. If I'm buying material from you and you're getting it from someone else--it's all just kind of like value added along the line. You can easily get a tollbooth function that in every transaction along the way adds to the cost.

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