more on open source tax credit

[David Farber <dave () farber net>]

Begin forwarded message:

From: Carl Malamud <carl () media org>
Date: March 18, 2006 4:13:56 PM EST
To: dave () farber net
Cc: ip () v2 listbox com
Subject: Re: [IP] more on open source tax credit

Hi Dave -

Two quick in-line comments:

> From: Dana Blankenhorn <dana () a-clue com>
> Date: March 18, 2006 3:13:22 PM EST
> To: dave () farber net
> Subject: Re: [IP] open source tax credit

<snip>

> While I hate to look a gift horse in the mouth, I think this thing is
> mis-named. Corporations developing open source tools can already get
> the write-offs. The problem Irons and Malamud are addressing is that
> individuals can't write-off their research time, regardless of
> whether they are writing open source or proprietary code.

Our credit proposal only allows writing off of out-of-pocket expenses.
That's the way charitable contributions work in the tax code: you can
delete your expenses, but your time is "worthless" (to paraphrase the
Mastercard commercial ;).

> But is that really a problem? Doesn't the open source business model
> work for everyone? After all, if you get some consulting income or
> freelance work because of your open source development efforts,
> having a corporation would let you shield that money from taxes,
> making your time a cost of doing business.

If you are a consultant, you can [almost always] write off your open
source development expenses, assuming they are arguably business
related.

Our proposal is aimed directly at the person who has a day job
on salary but doesn't do outside consulting.  In other words, the
young programmer with a W-2 Form.  That person doesn't have
the ability to deduct expenses because they have no self-employed
income to offset it on their Schedule C.

The reason we've crafted this as a credit instead of a deduction
is because credits are more progressive: they benefit those with
lower incomes more than those with higher incomes.

Regards,

Carl


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