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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."
Most open source software comes with a built-in tax break. No income, no income tax.
Sie ist tunbar!
http://public.resource.org/main.html
Notice Al Gore was VP when this proposal was made.
Center for American Progress
Where is the center of American progress? The president says the front of it is in Baghdad.
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...
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
Why wait for a proposal to pass when you can get HUGE tax credits for writing closed source software NOW? For example, Ohio gave a closed source company $82,386 to keep it's 11 employees in the state! (http://www.odod.state.oh.us/newsroom/releases/135 7.asp Third example, tax break + grants) Thats $7489 per employee now, not in some proposed future.
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) !
Wait, give the congress money to convince them to give you money? Maybe both 3 and 4 should be "???" and profit gets bumped to step 5. Or maybe 3 should be 'WTFHAX?!1, ???' instead.
How are sites slashdotted when nobody reads TFAs?
Instead of supporting the further degeneration of a broken tax system, how about supporting a better one altogether? http://fairtax.org/ http://fairtaxgroups.com/
As an OSS developer, I can say that working on Open Source code/projects has already paid for itself in tax deductions many times over in the last decade.
Those donations you get from the "Paypal" button on your project homepage? Deductable as gifts, not income.
Those hard drives you upgraded to house your OSS code through RCS on a RAID system? Deductable as a business expense.
The space in your house used to develop/work on that OSS code? Deductable as your "workspace".
In my case, I also host and house dozens of projects for the OSS community, mailing lists, web space, torrent trackers, and lots of other things.
That broadband bill? Deductable. Power to keep servers running 24x7? Deductable.
I also have a "regular day job", and I work at the home office, so that too, is deductable, since it is a dedicated section of the house specifically for that.
Being a long-time OSS developer and supporter has definitely paid for itself many times over in deductions alone, not to mention the Google ad revenue that helps fund the websites I maintain and support, out-of-pocket upgrades to storage, servers, etc.
Having a clueful CPA? Priceless .
How about letting market forces (you know, that little supply and demand thing) determine how/when/why a product is adopted instead of using community resources to pad it? Successful OpenSource projects are successful because they are forced to COMPETE, often much harder than their proprietary counterparts. Weighing the game in favor of OS does as much damage as IP does for proprietary software.
Furthermore, just because software is OS doesn't mean it's good. Why give tax credits to those who don't deserve them? Better instead to force them to compete by being good, and, therefore, deserving of profit.
This proposal makes an incredible amount of sense. The open source model is an excellent way to develop high quality software on the cheap. Large scale open source development would help the economy in a number of ways.
Therefore it will never be approved.
Have you ever wondered How to Take Over
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."
If I already paid for programmer's time with my taxes, I should be able to use the source in any way I want - without giving away my own work, acceditation or any other trouble whatsoever. By the way, the same goes for patents received by university stuff/students, software written for a government contract etc.
If you want to impose GPL on me, do it on your own time/dime.
because no one ever earns the money in the first place. That is the tragedy of the dead weight loss, where a win-win exchange is averted because the government tries to take a bigger cut than the net gain between the two traders.
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
excuse me.. but that joke is supposed to use only 3 steps with the 2nd being unknown and the 3rd being profit. Please revise
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.
But, legally you have just donated the code, a thing of worth, to the FSF, a nonprofit organization.
Not necessarily, accounting is strange. If you do R&D and develop something patentable you can not list that patent as an asset that has value. However if you buy a patent then you can list that patent as an asset that has value. The rational is that in the former case the developer can just make up a number and say that is the value of the patent, however in the later case we have a historical market transaction that defined the cost of the patent. "Historical Cost" is something very important to an accountant, and your donation doesn't have one, your R&D expense doesn't count, R&D is merely considered a current expense.
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.
Just an initial word: You make good points.
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.
Granted, folks who are no longer working in retirement consume scarce resources even when living off personal savings. However, I submit that the positive economic impact of the effort such people put into the system to accrue such resources as to be able to enjoy a reasonable standard of living in retirement outweighs the later drag. Economics is, after all, not a zero-sum game.
Admittedly, this is an unsupported assertion. Admittedly, some study is needed to determine the truth of the matter. Admittedly, similar reasoning has been used to justify less paletable conclusions (ie. the retroactive effects of the DMCA), and analysis is thus valuable in such cases.
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.
I don't see centralization as being an improvement on the patchwork. Yes, it allows for more effective regulation and limitation should such be implemented -- but it also allows more room for abuse, and it's been recently demonstrated that a substantial subset of the American populace is willing to give up privacy rights and permit more expansive government powers in return for percieved security.
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.
Whether something is moral or otherwise obviously depends on the perspective of the viewer -- members of the religious right have one perspective; you have another; and I have yet another. Raw assertions regarding moral principals aren't necessarily useful in a discussion along these lines, simply because in many cases they can't be effectively or objectively argued to an individual working from different base principals. Practicality, on the other hand -- that's a different and more reasonable approach, and I'll admit that some of the policies I argue for are not in practice implementable within the US as it stands.
Just an initial word: You make good points.
Thanks. You do, too.
However, I submit that the positive economic impact of the effort such people put into the system to accrue such resources as to be able to enjoy a reasonable standard of living in retirement outweighs the later drag.
Sure, that's the way the system ought to be working. But we're soncerned with a more subtle question, namely whether the particular handling of the $10k of social security tax is overall beneficial. That is, does giving everybody the extra $10k of social security tax for private investment in retirement funds encourage enough extra productivity in order to make up for the costs arising from millions of people who weren't smart enough to make proper private investments?
I don't see centralization as being an improvement on the patchwork.
I don't see why a national ID system needs to result in centralization. In fact, quite to the contrary, a good national ID system could be used to enforce de-centralization, for example through the use of smartcards.
I'm sure there are many designs for national ID systems to which I would object on the same grounds as you, but a properly designed national ID system could greatly enhance both privacy and security compared to the current system.
Whether something is moral or otherwise obviously depends on the perspective of the viewer
Well, I think Republicans would have a field day with that statement ("moral relativism" and all that). However, let's assume that it's true; we can then still ask what most people think about an issue. And when it comes to Social Darwinism, this discussion was raging roughly a century ago and people generally found it to be incompatible with their views of just and moral behavior. I don't think that belief has fundamentally changed; when people favor policies that amount to Social Darwinism, it's usually because the policy has been carefully dressed up to hide its consequences.
Let me put it differently: would you really want to have a 75 year old little old lady starve on the street because she couldn't figure out how to privately invest her retirement funds when she was younger? Or would you want to keep her alive using non-social security funds? Because that's the choice you are faced with when you get rid of social security.
How about if they quit freakin taxing me so much to begin with. A nice start would be SSI
i ncome/
From the rest of your post, I get the impression that you are talking about Social Security. You should know that the term SSI is commonly used to refer to Supplemental Security Income, which is different and completely separate from social security.
http://www.ssa.gov/notices/supplemental-security-