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Tennessee to Tax Software as Property?

Posted by ScuttleMonkey on from the pad-the-bottom-line dept.

thatkidkel writes "The Chattanooga Times Free Press is reporting that 'a state board is proposing a sweeping change to make computer software used in business subject to property taxes, a move that some business leaders contend could drive up costs and hurt job growth in Tennessee.'"

13 of 312 comments (clear)

  1. chunk o' change! by yagu · · Score: 3, Interesting

    From The Fine Article:

    "This would be a significant chunk of change," said Hayes Ledford, the Chattanooga Area Chamber of Commerces director of public affairs.

    That pretty much seems to say it all when public officials view taxation as "significant chunks of change", rather than the basis for sustaining government and infrastructure.

    Interestingly part of the motivation for the proposed taxation is to allow for, and quoting from the article again:

    The new rule would provide a uniform standard across the state

    So, in the interest of a uniform standard, they want to ratchet up the taxation, sounds pretty much like taxation without representation (I know, I know, home rule).

    When governments start unilaterally considering these kinds of move, they may end up understanding "significant chunk of change" in a whole new context, as in significant chunk of change in the constituents' tolerance for government.

    1. Re:chunk o' change! by DarkVader · · Score: 2, Interesting

      Sundquist wasn't voted out, he had reached the two-term limit, and couldn't run again.

      TennCare has been cut to the bone. It was a great concept - provide health care for everyone in Tennessee who couln't afford it otherwise - and it requires money to do that. These days, people are dying because their TennCare has been stopped, and the fallback resources are inadequate.

      I support an income tax here - ideally a heavily progressive one that will not hurt the poor, and will only slightly affect the middle-income Tennessee residents.

      I support cutting the TDOT budget. We spend insane amounts of money on road construction projects that are not needed and not wanted. Knoxville does not need I-475. Knoxville does not need the South Knoxville bypass. The only necessary project here is the I-40@Broadway expansion - and that should have been done 20 years ago, or I-40 through town should have been routed to I-640, and the through town link should have been cut to allow the historic downtown neighborhoods to rebuild.

      I also support spending as much on TennCare as it takes to cover everyone who can't afford traditional health insurance.

  2. Define 'software application' by YrWrstNtmr · · Score: 2, Interesting
    make computer software used in business subject to property taxes

    Is that merely a commercial product that you paid someone for? Or is it also something as simple as a perl script (that you paid someone for), that runs some essential function on your server.
    Software written in-house? Excel macros?

    What about some code that resides on a server in Denver, used by a user in Chatanooga?

  3. Re:Do we own it by thogard · · Score: 5, Interesting

    When Microsoft owned software attacked my news server, they were claiming it wasn't their problem because it wasn't their software. I think they are going to have to take a stand on this issue at sometime.

  4. Re:Do we own it by keithmo · · Score: 5, Interesting

    I leased a truck for 5 years. I had to pay property taxes on it. I tried the same "why should I pay property taxes on something I don't own" argument, but it fell on deaf ears.

  5. he may be smarter than you think by Quadraginta · · Score: 5, Interesting

    Politicians are smarter than you think. For example, this absurdity might just be stalking horse for a more normal tax increase. Think it through this way:

    Let's suppose the TN tax board says, uh oh, the state needs more money. But citizens are going to resist an ordinary tax increase on, say, property or cars. Well, not all citizens. Only the citizens who actually own property and cars -- e.g. middle-class and above, entrepreneurs, business-owners. How can we recruit them to support such a tax?

    Idea! Let's float some outrageous proposal about taxing some asset they use to generate their wealth. It needn't be a big tax, but just the idea that we're going to be poking our fingers into an area that has been blessedly free of Big Brother will make them freak. They'll think of all the new fees they'll have to pay accountants and lawyers and secretaries to figure out the right way to buy software and keep the records...

    Then, in about 6 weeks, we can drop the other shoe. Or, gentlemen, we could just have an ordinary tax increase, a small one -- what say you to that? Chorus of assent, along with sighs of relief...and the tax board smiles privately. Mission accomplished!

  6. this is lawyerspeak by Quadraginta · · Score: 2, Interesting

    You're talking like a lawyer, where the question of who is "paying" is some kind of subtle theological question.

    Me, I think like an economist. I define the person paying as the guy who is out the cash when the dust settles, period, end of story, Khattam Shud. Doesn't matter to me who gets the tax bill or who writes the check to the government.

    From that point of view, all taxes are paid by consumers and the final users of property. Doesn't matter to me who "legally" pays for them. That's just a shell game designed to fool the rubes.

    1. Re:this is lawyerspeak by Quadraginta · · Score: 2, Interesting

      I don't agree. I think the legal issues are unimportant, compared to the economic and social issues. The question of whether the Tennessee Legislature can write a law that achieves whatever taxing effect they want, and whether the gnomes in Redmond can write a new EULA that achieves whatever quasi-sorta-kinda ownership reality they want, are both uninteresting to me. I'm sure they can. They've got able lawyers on the payroll.

      The only interesting questions here are what the effect would be on the Tennessee economy, and on people's perception of the social contract.

      For example, people will generally agree to a tax that they can connect, however, vaguely, with a government service they find necessary. No one would agree to a tax for no other purpose than to give Christmas bonuses to IRS auditors. But they will agree to a tax increase that funds research into crib death. From an economist's point of view, this distinction is meaningless. But it matters to society, and to its harmonious function. So it's interesting how these social arguments of the "justice" of a given form of taxation work themselves out.

  7. Valuation by jefu · · Score: 3, Interesting
    Should this nonsense actually go through, it is quite likely that vendors of software will lobby seriously (that is, bribe generously) (does anyone else think we need a new word for that - "lobbribe" perhaps?) for open source software to be valued at the same kind of valuation as their proprietary software.

    Of course, there are other likely side effects as well.

    Companies will hire companies in other states (without software taxation) to host their websites - imagine the tax on a big Oracle setup.

    Companies will buy only one copy of (say MS Office) instead of one for each computer (this is probably enough in itself to motivate software vendors to lobby (bribe) the notion out of existence). Unless, "operational" software (OSes etc) are taxed less than "applicational" software (Office, Databases and the like.) In which case, MS will make sure that Office is considered operational software, Oracle will move most of its functionality into its own operating system and charge only a pittance for the "applicational" part, and so on.

    Personally, I'd like to trace the lobbying (bribes) if this actually becomes serious.

  8. Re:Silver lining? by Yartrebo · · Score: 2, Interesting

    So would a business that deploys The GIMP on every computer because it's free and might be remotely useful have to pay tax on a full business copy of Photoshop? If every piece of software in a full Linux install were counted, the tax bill would be gargantuan.

  9. Re:Silver lining? by bladernr · · Score: 2, Interesting
    And a few decades ago someone tried to bann the Law of Supply and Demand

    Hate to tell you, but this "law" is already banned, or at least curbed, in most countries:

    1) Import Tarriffs

    2) Labour Union Legal Protections

    3) Government support of State Sponsored Enterprises

    4) Business license schemes

    Maybe not explicit, but all of these mute market forces and generally hurt the local population's long-term interests (though often giving short-term gains)

    --
    Sarcasm and hyperbole are the final refuges for weak minds
  10. An evil plot by Sleuth · · Score: 2, Interesting

    I heard it was all just a plot by a group of political lobbyists hired by the enlightenment project. The future of enlightenment needed a good funding base, and while Tennessee isn't the richest state, they figured it might not be found out there...

    Of course, it also has a clause for Linux installation on all the government owned desktop installations. It's going to be quite a windfall, I hear.

  11. Re:quite right by iibagod · · Score: 2, Interesting

    Or see how the IQ 130+ ers will try to control the 'lower' classes of people by flaunting a number based on a flawed testing scheme biased towards assumed and outdated cultural norms. Speaking as a 152'er (now who's got the bigger IQ, eh?), I know better than to rely on something as simple as a number to measure any sort of worth. Everything makes sense when you pull your head out of the sand and realize human interaction isn't about logic.