Comment by darth_avocado
3 years ago
I still don’t understand why it has to be RnD? If I made a million dollars and spent a million in salaries, I made no profit. The government shouldn’t be taxing me on no money made. They already get taxes on the salaries I’m giving out.
Because it was a way to get the budget "balanced". They declared R&D expenses to be different from operating expenses -- if you have the money to spend on R&D then you have money to spend funding the country.
It's never supposed to be about what's "fair" or what they "should" do. It's about the fact that they want to spend $X, and need to raise $X one way or the other.
In this case, though, it was purely a trick. They were required to balance the budget over the long term, so they spent money now and identified a pot of money they could take from later. They just kicked the can down the road, and now we've arrived where the can landed. They actually don't think it's fair, or reasonable, or productive. But changing it does make somebody responsible for a huge increase in the deficit... and it's the people who spent the money 5 years ago.
There is no budget, for a long time. Only spending resolutions. And they’re not b balanced.
Spending resolutions are more important than budgets. So much more important that they're usually just called "budgets" because nobody cares about the thing that is actually a budget.
That’s literally the point of this entire thread.
This change taxes you on profit you never made, and specifically targets software companies.
It’s insane.
It comes down to whether these salaries were a sheer cost and not partly an investment.
If you made a million dollar and bought a million in patents, you still would have no money but wouldn't expect to be paying 0 tax, would you ? How RnD should be taxed is up for debate, but at least the logic is that it's not a simple cost (in comparison to paying a janitor to clean the office for instance)
For many small software companies, making software is more like making a custom table rather than an actual investment.
Fair enough. If you made a million dollars and bought land with it, sure you can tax it. But something as basic as employee salaries that are a cost to any business should definitely be deductible from the profits as cost of running the business. Especially when the company is supposed to pay payroll taxes and the employees themselves pay income tax on their salaries.
I'm with you in that it probably needs more nuance on what exaclty the developpers are doing (TBF I haven't read the details, so maybe there is already a lot of nuance in all of it.)
I kinda see many cases where a salary isn't as clear cut as a simple cost...for instance comparing two cases:
- we buy for a million dollar an exclusive right on an innovative system from a freelance guy that developed it on his own
- we contract for 10k a month the same guy to design and develop the same innovative system, he takes a year or two to develop it.
In one case it's a purchase of an asset, in the other case it's a salary. The resulting asset is the same though.
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Kinda like options - you get taxed on imaginary numbers on money you don't have access to. You received zero profits but owe taxes.