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Open Source R&D Tax Credit?
Dan writes "The Center for American Progress is proposing an R&D tax credit for open source development." From the article: "Subsidizing open source software development can also be justified on grounds of economic efficiency. Open source software development enhances the ability of other developers to create new products. It also enhances the development and dissemination of knowledge and ideas more broadly. Since the benefits to the broader software development community and the economy as a whole go well beyond the users of an individual software product, a policy that subsidizes open source development would increase economic efficiency."
I thought there were glorious financial advantages to open-source development? Seems odd that we need taxpayers to subsidize what is so obviously in people's economic self-interest in the first place.
What I'm listening to now on Pandora...
A tax cut ("credit" in this case) is not a subsidy.
I also don't think we need the IRS to define whether a project is "open" or not.
I'm wrapping up my school education, my house will be paid off soon enough, and the interest on my student loans is not going to be enough to off set my income. Yup, I'm going to need to find a new tax shelter in another year or two.
"we are proposing a 20 percent tax credit for qualified out-of-pocket expenses for open source software developers."
Well let's see what "out-of-pocket" expenses are defined as. Because my 'Home-Office' is paid for out of pocket. So that roughly 100 square foot room represents about 1/10th of my house's square footage. Figure the cost of the house minus the land, that's like $140k, which means I should be able to claim 20% of $14k for that expence. And then their are the numerous PCs, the custom built desks, the wiring, the internet connection... I bet I could pull enough expences out of that room to fully clear my taxes for a year, and enough residuals to help cut down from there on.
I wonder what limitations there are on this, if I could put a dent in my income tax by switching some game mods and tools to open source, I would switch them in a heart beat. 8 hours a week on a pet project to cut down on taxable income, a deal too sweet to pass up.
-Rick
"Most people in the U.S. wouldn't know they live in a tyrannical state if it walked up and grabbed their junk." - MyFirs
There is always one glaring flaw with this plan, even if there is a real market failure that could be addressed by the subsidy - taxes are economically inefficient. Typical estimates of the inefficiency of our standard taxes (income, payroll, sales, and property) run between 10 and 60 cents on the dollar collected, with 20 cents being a conservative average. In other words, the government has to remove $1.20 from the economy to collect a dollar. Or, you could say the government pays for everything at a 20% premium.
Even if there is some sort of market failure with respect to open source (it is probably the same one that is cited for R&D in general), trying to cure it with another market failure is not the answer unless the R&D failure is much larger. I once saw a presentation by someone from NSF on this very topic (The Economic Case for Basic Research), and when I pointed this problem out to him, he actually didn't have an answer. I was surprised, given that most of us learned about the inefficiency of taxes in Econ 101.
Any tax break of government subsidy is a bad thing. It gives the government control over the direction of any FLOSS that takes the money (just like schools that take federal money). It also puts you in a strange position if the software that you are developing violates one or more of your countries laws. I'm not willing to change the direction of my projects just for a subsidy.
BBH
You know how many pages of tax code would have to be added to define open source? Assuming that lawmakers don't mangle it into something that supports the industry even more. And it's not like all open-source is actually useful, either.
This would probably be for developers who work other jobs on the side (like college students who have high-paying campus jobs), people who develop OSS for a living (e.g. people working at the Mozilla foundation), OSS authors who accept donations, or companies who develop or contribute to OSS (e.g. Redhat, IBM, and now Sun).
That having been said, there are a lot of issues with such a tax break. For example, what are the qualification criteria? Significant contribution? Lead developer? Credited developer? Also, what are the criteria for something to constitute as OSS? Non-viral licensing? Compiled/interpreted language? What about markup languages? Or things that are not code but are released under a creative commons license? What about patented methods where the patent holder is also the lead developer? Finally, while slightly easier to define than the above since there are already precedents set, what constitutes development costs?
"If a nation expects to be ignorant and free in a state of civilization, it expects what never was and never will be."
The truth is that all too often the government taxes people too much, and then they find themselves needing to give "tax credits" back to spurr innovation, retirement savings, house savings, college savings, and medical savings. Well bullshit. All that does is give the government more controll in my life to decide what is a priority and what is not.
How about if they quit freakin taxing me so much to begin with. A nice start would be SSI, anyone under 40 must surely know that they'll never see a peny of it anyhow (unless the dollar is hyperinflated out of existence). Not only that, but we pay for it twice: once before you get your paycheck, and then it's deducted again after you get your paycheck. I especially resent using that number that dog tags me and makes it a cakewalk to steal my ID, I resent being forced into a ponzi scheme, and especially resent coercing my kids to pay for my retirement.
Taxpayers subsidize work precisely because it benefits them. Patents are granted because we all gain from the disclosure of inventions. Copyrights are granted because we want to encourage the creation of art and knowledge. Research is funded because it leads to economic growth.
If open source software is an economic benefit for the nation, then it could be a good investment to encourage its production. The wisdom of the investment remains even if some writers are profiting already.
Note that the proposal allows deductions only for expenses (hardware, services) and not for the writer's time and effort. In my open source work, my contribution in time is far more valuable than my expenses so there would be little impact. My motivations are altruism and the improvement of my tools from the attention of many eyes.
AlpineR
But be careful !
I am a coder long enough now to know good programming is a form of modern art and thus should be appreciated accordingly.
But... If they just hand over the money, I see some problems on the horizon.
I mean, as long if it is OSS most people just code for fun and fame, but if money gets involved people get greedy (don't we all?) + every Billy-Joe-Bob would become an 'OSS-developer' all of a sudden.
Instead they'd better sponsor resources such as PC's, servers, hosting, free fat pipes for developers etc. and monitor that.
Damnit Jim, I'm [root@localhost w00t]#, not an AD-Adminstrator(tm) !
I'm quite sure it is. No one talks about it, but I'm pretty sure that IBM is writing off the cost of developing products like Cloudscape when they donate them to the Apache Group. Suddenly your millions of dollars of wasted revenue becomes a tax writeoff. It's brilliant. Corporate benevolance is almost always related to decreasing tax liability. See also Employee Stock Options.
Just ask anyone who's tried to organize a 501 (c)(3) corporation. We do NOT need IRS involved in deciding what is or isn't open-source software.
Lobbying for little tax breaks here and there simply perpetuates the problems of the tax system being used as an instrument of policy.
There's a better way.
-jcr
The only title of honor that a tyrant can grant is "Enemy of the State."
Insightful? Off-topic! and incorrect.
We don't have a Social Security crisis. It's all crap propaganda. It definitely needs to be tweaked, but the politicians are just trying to rile people up and divert attention from real issues. And they're succeeding.
We have a surplus of SS money for at least until 2040. The projections go out for 75 years and sometime before then, we start having a debt regarding SS taxes coming in and money going out. Congressional Budge Office (CBO) studies show that if we don't extend Bush's tax cuts after 2009, we'll have SS surplus until 2050. So at worst, we'd have to reduce SSI handout out if we don't increase the retirement age or increase the budget towards SS. But a temporary debt is okay because population levels fluctuates. After the baby boomers die, our SS situation will be fine again.
Including health care costs for wounded soldiers, Iraq war and occupation could top $2 trilion. How about those tax cuts? I saw a NY Times article stating CBO projections estimated a difference in revenues of $1.7 trillion over the 10 years. A San Francisco Chronicle article mentions a difference of $737 billion. The difference could be due to when the projections started and ended. This doesn't include reports of the economy improving slower then from any previous recession and being short on the administration's projections of jobs by millions (just think of the revenue difference there).
If even a portion of those funds went to social security, we would have not debt for social security for 75 years! The fact remains, the US government takes out enough money from taxpayers to pay for Social Security for the forseeable future.
The problem isn't the social security system. It's the men and women of the Executive and Legislative branch that balloon the deficit with pork barrel spending. Even if we remove the SS blanket, there's no gaurantee that these people wouldn't spend the money elsewhere. Before we talk about changing social security, we need to have people that would be fiscally responsible.
In times like these, it is helpful to remember that there have always been times like these. - Paul Harvey
Stuffing money under a mattress keeps it out of the economy and deprives others of its use
Sure, investing money is generally better for the economy than stuffing money under a mattress, but that's a second-order effect. The primary effect that is relevant here is that, as a retiree, you will consume scarce resources without being productive, and the more money you saved during your working years, the more scarce resources you will consume for your leisure activities. That means that the notion of "saving for your retirement" is an illusion. In fact, arguably, the more money you save during your working years, the more you deprive the next generation of their fair share during their working years.
Privacy is a pretty darned effectively-entrenched American value -- as is having a firmly limited government.
I fully support privacy and a firmly limited government. That is precisely why I think a good national ID card system is needed: it improves privacy and lets us limit what government can do with our data. Contrast that with the current system, with its patchwork of regulations and insecure identifiers and tokens.
However, when the government starts paying back those who are cashing out from income supposedly going into the private accounts of those coming in, it is indeed nothing more than a legalized and legislated Ponzi scheme -- and those always fall over, sooner or later.
The notion that social security works like a bank account or investment is just wrong; such plans often fund current payments with current revenue. Of course, the current social security system is actually generating a surplus that could be invested and probably should be out of simple economic considerations, but the US government is wasting money left and right.
Personally, I'd rather take the risk of starving.
Yeah, people like you always say that. But it's simply not going to happen. People without health insurance don't just die, they get expensive emergency healthcare. People without retirement income don't just starve, someone pays for their housing and food. That's the reality.
Isn't making such optimal decisions precisely what the free market is best at?
Perhaps surprisingly to people with one-track minds, there are multiple criteria and goals that we pursue as a society. Your single minded approach amounts to little more than "social Darwinism", and it was popular in the early 20th century, along with lots of other ineffective and amoral political theories.
For example, what are the qualification criteria?
I think you just described the question which is the whole reason for copyright. Nobody knows how useful any creative work is. It can only be measured by demand. And demand is hard to measure without artificially limitng the supply. F/OSS software does not artificially limit the supply at all, so it's very hard to tell the difference between a novel program, and a worthless pile of code that was just developed to get the tax credit.
You can see similar problems with the NEA (National Endowment for the Arts, not National Education Association). Sometimes people get paid money to do crazy sculptures that make most people recoil in disgust.
Social scientists are inspired by theories; scientists are humbled by facts.
I haven't heard a statement as absurd as this on slashdot for at least 5 minutes! The very idea of calling a subsidy "ecomonically efficient" is an oxymoron. If something needs to be subsidized, then its very clear that there isn't enough demand for the product or service at said price in the free market. If the demand is not great enough, then the product or service must improve, die, or be absorbed by a more successful seller (or programmer). Not one single dime of my tax money should go to pay for open source software. If I find value in open source software, I'll VOLUNTARILY donate money to it. Once you take away the voluntary payments, and force people with a gun to pay something (ie, tax them), then the software can no longer be considred "open" source. In fact, its even worse than closed source...because at least you have the option of not buying closed source software.
I think, therefore I doh.
class HelloWord{
public static void main(String[]args){
System.out.pritnln("My contribution to OSS");
}
}
I'releasing this code under GPL. Can I have my tax break?