Slashdot Mirror
Washington State Debates Taxing Software Creation
zzyzx writes: "An article in the Seattle PI discusses the existing tax on software creation in Seattle. The law was clarified recently to allow the taxing of the software that was created in Seattle, even if the manufacture of the discs occurred elsewhere. Some Washington state lawmakers are working to overturn these changes. The issue at the heart of the matter:
Should an intellectual activity such as programming be taxed in the same way as manufacturing is?"
Research and Development time is tax deductable.
Does this apply to non profit stuff like open source?
Hacker Media
Making the assumption that programming is any more intellectual than manufacturing is absurd. Both require a tremendous amount of planning at first and then become grunt labor. Don't try to move programming above any other labor that exists.
Software creation requires mainly man-hours, and since employees already pay state income taxes I'd think the state already recieves their share and doesn't have the right to double-tax for intellectual work.
I loved this quote...
"Taxing the intellectual property of software companies makes about as much sense as taxing the thought process of a university professor, said Rep. Jeff Morris, D-Anacortes".
So, all teachers, writers, musicians and similar should be tax-exempt?
At least nobody would think of taxing the thought process of a representative. It just wouldn't be worth it.
Next, using my HIGHLY encrypted network, I ship it to DupIt Corporation in Taiwan. Boom. Product. But how do they determine I did it?
Sounds like a law that can't be enforced to me!
IANAL, but I've seen actors play them on TV
Quote 1:Microsoft says Commercial software pays taxes
Quote 2:...Microsoft Corp., are pushing for an amendment to a municipal tax-reform bill to block the taxation of such intellectual property.
Microsoft's talking out of both sides of their mouth again.
Nothing new!!!!
How would in-house software be classified? Would this apply to only software made for public sale?
The city's business and occupation tax is 0.215 percent of gross receipts, minus credit for money spent on research and development, he said
This seems contradictory doesn't it? I mean I would consider software development R&D too... I don't really think that is going to be effective at all. But governments have a wierd way of making the most hair-brained schemes appear to work.
So, if all your software development costs are actually R&D, this is worthless... they'd have to tax something else, like publishing software. But that can all be done out of state.
--
Some weasel took the cork out of my lunch.
This is just reductio ad absurdum of the concept of taxing labor at all.
Writing software or digging ditches or making Beanie Babies with your own labor and the people you employ is a right, not a privilege. You shouldn't have to pay the government for exercising your natural rights.
Obviously, when you tax something people will do less of it. Does Seattle really want less software to be written there? Fewer widgets built? Fewer ditches dug or Beanie Babies made?
We should be taxing pollution, use of resources, taking up space, and all other forms of Privilege.
Tax bads, not goods.
A software company makes use of community services - Fire Departments, Public Transportation and so forth. It should pay to support them, just like any other business should support the infrastructure of the economy in which it operates.
Software companies may be more or less subject to the various pressures imposed by such taxation on other forms of manufacturing activity - including the tendency to move their operations overseas. However, software shouldn't be any-more-exempt for these reasons than any other business.
The good and new comes from no quarter where it is looked for, and is always something different from what is expected.
Micro$oft is based in Redmond, WA -- which is not, I repeat, not, Seattle, WA
(Thank god...)
Who's in Seattle?
umm..
I think Real (Audio..) is, and Adobe is still...
t_t_b
I'm on PJ's "enemies" list! Are you?
What's that old saying - what's good enough for the goose is good enough for the gander? (That's gander - male goose - not gandolf, you goof!)
If they want to claim Intellectual Property is the equal of Real Property in terms of legal protections, etc., then they should carry the same tax burdens. Property tax, creation tax, whatever. It's time for that corporate free ride to end.
My only concern is that a poorly-written law that targets predatory monopolies could also affect sites that just provide Linux or BSD mirrors (if there's a tax fee per download), or worse would cover the "lone wolf programmer" who just wants to write a better widget for some OSS application.
More generally, there's the issue of whether other services are also taxed. I know some states charge sales tax on *everything* - including the hourly charge for the car mechanic and plumber, for the lawyer, etc. Again, this law should be fair - only tax programmer time if lawyers and accountants are also taxed. Only tax volunteer services if other volunteer services are taxed.
But on this particular issue, if the producer gets as pissed off at you sharing a copy of their software as they would if you set up a family picnic on their campus headquarters, then the IP and RP should either both be taxed or neither be taxed.
For every complex problem there is an answer that is clear, simple, and wrong. -- H L Mencken
The city did provide a decent location for the company to have it's offices. It had to provide schools police, etc.
You may argue that these costs are covered some other way, and I might even agree with you, but the city does provide many things for the company.
Companies (and the rest of us) want it both ways. Provide me a great place to live - no pollution, friendly people, good schools, open space, parks, recreation, low crime, chicks in thongs (oops I digress) and I don't want to pay.
These things cost money. Someone has to pay. If you live there, or have a business there, you should have to pay too.
I think this idea, though it may not be a good one is a way to help allocate costs to those that are there, even if they find a way to shift the monetary activity elsewhere.
Cheers!
So, the $6.50 in tax for a $100 trip to buy clothes hurts the mother of 3 earning $5.75/hr a lot more than the well-off geek earning $35/hr.
Now do you understand? Sales tax only makes sense for bloated local governments, and not the people who are taxed.
Why get taxed twice (or more) on everything you purchase? Ever look at a utility bill? Consumers are routinely screwed by taxes for utilities.
Method of processing duck feet
Well, Microsoft sure tries!
True, as do a lot of other companies. I remember Sun getting into a lot of stick because they claimed that Kevin Mitnick cost them "billions" (or maybe it was lots of millions). IIRC The IRS came sniffing around, basically saying "Oh really? Why haven't you reported these 'billions'?" I think Sun quickly retracted their statements.
As for taxes, property taxes are a really squishy area. It depends all on how the gov't decides to assess your "property." Of course, they're the ones assessing and collecting, so it always smacks of a conflict of interest. I say stick to taxing the things that require no guesswork. Tax monitary transactions (sales taxes) and income if you have to tax. Maybe property in terms of real estate. But that's about it. IP is a very, very, very vague thing that would lead to a lot of abuse (both by the gov't and large corperations trying to dodge it).
The gov't here in VA is already values my car more than the market would should I sell it now (and taxes me accordingly), I don't want some gov't accountant telling me that the software my company creates is worth $X (for very large values of X) and tax me annually on it (above and beyond the sales taxes, income taxes, SS taxes, etc that we already pay)
That's a great move for Seattle! That will curb and eventually inspire negative growth in a huge sector of your local economy. A classic case of biting the hand that feeds you. OK, so that was sarcastic... but maybe that means that tech jobs will get spread around a little. Software development is one industry where the only resource you truly need is smart people. Unlike the chemical industry where you need things like cheap water and power, or auto industry with good transportation infrastructure. A good software company can equally exist in towns like Chattanooga, TN as it can in Seattle. Tax the software developers... they may not move right away due to large capital investments. However, they won't ever build a new investment in that community.
This is as repugnant as the 'bit tax' proposed in the early nineties. If you don't remember, legislators were considering taxing every digital transmission that related to business. That's right, every fax transmission, every X-Y-ZModem upload and download, every corporate communication on CompuServe or Delphi. It never made it into law because everyone realized how insidious it was.
Or, if you prefer, consider the continuing debates about whether or not to tax commerce via the internet. If we allow this, we open the door to taxing everyone who purveys the internet, in order to assure the state that they will recieve the required money not provided by rogue internet brokerages.
From a human rights point of view, this law is about as nasty as you can get. What's next, taxing mathematics! Remember, software is just controlled mathematics.
Okay, okay, end rant
Well, as a Washingtonian, I'm glad to see that they're at least actually delving into other options than those already on the table.
With Washington having the second highest unemployment rate in the country, 7.5%, with oregon being the highest, 8.0%(Current Data Jan 2002, Bureau of Labor Statistics), the situation here is beginning to get downright nasty.
Coupled with all the layoffs in the hard hit sectors(Boeing, etc) and the anti-tax inititiatives by Tim Eyman that have been passed, such as the ones that limited car tabs to $30, or the one last year limiting property tax increases to 1%, the state legislators have been forced to seek other sources of revenue. Granted, they always find loopholes to nullify the anti-tax initiatives, or to get at least a portion of the tax from the areas.
Anyway, to get back to the point, many of the people of Washington really enjoy the services the government provides, yet due to the way taxes have been handled in the past few years (Especially in King County, the largest country) people are rather stoicly opposed to any new taxes. So, the government is forced to try and find additional sources of revenue. Right now, they're working on cutting any extras from the budget, borrowing against Tobacco settlements, and implementing a gas tax. These won't be enough to cover the projected deficit should it actually turn out as projected, so at least legislators are looking somewhere(instead of the infamous bickering they're known for), though I don't believe Software is the best solution.
I find it amusing that the companies that argue intellectual property is the same as physical property for control issues (eg. copying is theft), are the same companies that now say IP and physical property are completely different when the issue is taxes.
Obviously, Washington lawmakers have their heads up their asses. Most governments try to encourage these kinds of businesses, rather than tax them. [more blather] All Washington will accomplish with this is to hasten Microsoft's migration to India.
This is Seattle. We have Adobe. We make Utilikilts.
The dark land of Redmond is home to Microsoft. There, across the many miles of lake, the dark lord Bill G reigns over all his minions.
And here we have had our State, which is suing us over this, force us to build two stadiums we the city voted down, and force us to pay taxes for them. One for the dark prince Paul Allen who lives partway across the lake in his tower on Mercer Island.
Cry no tears for the dark minions of these two masters - they reside not here in our fair emerald city of Seattle.
--- Will in Seattle - What are you doing to fight the War?
Corporations the size of Boeing and MS don't really pay enough taxes to make or break a budget when compared to the thousands of people they employ. They need to consider changing their tax policy in Washington in relation to private citizens. The government officials may have to take a bullet and do something unpopular to balance things out. Until then I'm just saying that no new software business will ever move into that community and some developing businesses may leave. That's a side effect of being a hot spot for a certain industry... You have to cater to them or they will leave and take your job with them. Then who are you going to count on to pay taxes? The thousands of people now without jobs?
Tennessee is 350 million short this year on its budget. They're not about to tax industry to keep up the pace. They're targeting consumers and raising the sales tax if a new bill passes. No one is going to pick up and move over it... Its too hard for a family to move considering no one is going to give them millions in incentives and tax breaks to move to Chicago and do their jobs.
I'm not free-loading, I take great pride and responsibility in where I live. That is why I'm trying to encourage development which ultimately with smarter taxing and smarter spending will lead to prosperity.
I mean, where does it stop? If I create a shell script to add users to my e-mail system, does that get taxed as software? What about web scripts that talk to databases like PHP; do you tax someone for that? Do you tax it if it's for business use but not for home use? I don't know software development is too much like writing to me. We don't tax authors for books written we tax them on the profit they may from the books, seems like it should be the same. I mean, talk about an innovation killer (well, I could write you a shell script to do that, but I can't afford the taxes on it...) This is just nuts (and the only Seattle company that could afford it....Microsoft....oh joy
My short version I:
- A high sales tax can kill your economy
- A high income tax can only slow it down
My short version II:
- A high sales tax kills all high-volume low-margin bussiness
- A high income tax can only cut profits
My short version III:
- Look at Argentina's economy, which is collapsed due to 21% VAT + 3% gross sales tax (income tax doesn't matter when you don't have profits).
unfinished: (adj.)
Does anybody really still not understand this? Companies do not PAY taxes, they COLLECT taxes. Business tax of any kind is just another expense that has to be built into the price of the product. Any legislator whose version of tax relief for us peasants is to tax those big old evil corporations is lying, plain and simple.
If we completely did away with all corporate taxation and replaced it with a national sales tax, properly calculated, the net cost of living would be the same. The differende would be that we would KNOW how much tax we were paying. Congress wouldn't like that at all. Educated citizens (oops, sorry, I meant "consumers") are the last thing they want.