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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.
Well, the center of it is probably somewhere over the ocean, since the ass-end is in the White House.
Finding God in a Dog
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.
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.
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 .
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."
excuse me.. but that joke is supposed to use only 3 steps with the 2nd being unknown and the 3rd being profit. Please revise
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.