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How Game Makers Like EA Mine for Tax Breaks

timothy posted about 3 years ago | from the gold-farming-in-real-life dept.

Businesses 123

Sometimes it seems like the U.S. government's relationship to commercial video games is mostly adversarial, as when public officials vilify or move to censor games (even when the results are mixed). An anonymous reader writes with a reminder that the business side of the games business has a much cozier government link, as reflected in this excerpt from the New York Times: "Because video game makers straddle the lines between software development, the entertainment industry and online retailing, they can combine tax breaks in ways that companies like Netflix and Adobe cannot. Video game developers receive such a rich assortment of incentives that even oil companies have questioned why the government should subsidize such a mature and profitable industry whose main contribution is to create amusing and sometimes antisocial entertainment." Since filling out even a simple return can be rather game-like, maybe they're just doing what they do best.

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Why the government should subsidize? (5, Insightful)

Anonymous Coward | about 3 years ago | (#37368484)

"why the government should subsidize such a mature and profitable industry whose main contribution is to create amusing and sometimes antisocial entertainment"

Gotta have circuses with your bread.

Re:Why the government should subsidize? (1)

LifesABeach (234436) | about 3 years ago | (#37368662)

I'm not renting a room from my mom. And I'm getting the feeling from the "love" letters from the I.R.S. that if i don't pay my taxes, that the Capitol will be boarded up. Hay IRS, where's the love? Am I the only person that's asking, "what are the Tax Breaks?" How about a reference to those tax codes that folks like EA [ea.com] get? Maybe something good could come out of this "openness" stuff. Wait, I think I just considered a task that WATSON [ibm.com] could be used for...

Re:Why the government should subsidize? (1, Insightful)

Moryath (553296) | about 3 years ago | (#37368832)

Why is it that corporations get tax breaks at all?

Why is it that the ultra-rich, mostly Republicans, get to shuffle their income through loopholes like calling it "capital gains" (taxed at a mere 15%) while the middle class get robbed blind by the tax code?

We should fix the tax code, that's no question. But the "fixes" supported by the Republicans are more Robber Baron style "crony capitalism", nothing more.

Re:Why the government should subsidize? (0)

Anonymous Coward | about 3 years ago | (#37368970)

"Why is it that corporations get tax breaks at all?"

It's justified if it makes the difference between a business setting up shop in your district (jobs + corporate taxes) versus some other district. It *may* pay off in the sense that it may not be a net tax loss. Also it may make sense to support industries for strategic reasons, such as if want to maintain a domestic supply of something important (e.g., tax breaks for oil companies exploring in-country being a controversial example).

But in all instances you have to accept that you are distorting the plain economics of the situation, and sometimes at great cost while the ordinary taxpayer foots the bill for it. It *may* be justified, but it is something that should be done sparingly and only when it is critically evaluated before and after it is implemented (e.g., providing this tax break will cost X in lost revenue, but benefit Y, and X << Y). Tax breaks are essentially government spending, because they are cutting back on revenue with the same effect as if they had collected and spent the taxes. I also think it should be done with a keen eye on corporate profits: i.e. if a company makes a profit, they have to start paying back the tax breaks. They shouldn't be able to make a profit and give it to their shareholders without acknowledging in a financial sense that one of their shareholders is the taxpayer and deserves to be paid back first. If they make a profit after that, *then* they've made a real profit they can keep. Otherwise it's not real (it exists only because of the subsidy).

Re:Why the government should subsidize? (0)

black mariah (654971) | about 3 years ago | (#37369524)

Anyone that pays more than about 6% income tax doesn't know how to do their fucking taxes. Your own idiocy isn't the government's fault. Claim your deductions properly like everyone that isn't a dipshit.

Re:Why the government should subsidize? (-1, Flamebait)

Anonymous Coward | about 3 years ago | (#37369686)

Why is it that corporations get tax breaks at all?

Why is it that the ultra-rich, mostly Republicans, get to shuffle their income through loopholes like calling it "capital gains" (taxed at a mere 15%) while the middle class get robbed blind by the tax code?

We should fix the tax code, that's no question. But the "fixes" supported by the Republicans are more Robber Baron style "crony capitalism", nothing more.

Oooh brother, you are CLUE-LESS.

Ultra-rich like George Soros, Warren Buffet, Steven Spielberg?

In fact, there's a pattern to supporting DEMOCRATS - those with nothing to lose from poor decisions. The really poor - who live by handout, and the really rich, who have so much money they live on another planet.

Republican support is strongest among those that have enough money that the government tries to take it from them, but not so much they can afford poor decisions.

It'd be really nice to elminate all tax withholding and all corporate taxes - make INDIVIDUALS have to perform the act of actually giving their money that they've already earned to the government.

Then we'd see how much support "big government" REALLY has. Instead of never seeing how much government costs, you'd have to actually PAY for it.

And if you're against that? Riddle me this, Batman: WHY DO YOU WANT TO HIDE THE COST OF GOVERNMENT?

Re:Why the government should subsidize? (0)

tsotha (720379) | about 3 years ago | (#37369768)

Why is it that corporations get tax breaks at all?

Because corporate taxes in the US are stupidly high. If they didn't get tax breaks they'd go somewhere else, and who could blame them?

Re:Why the government should subsidize? (0)

Anonymous Coward | about 3 years ago | (#37370710)

Care to cite a source for you're assertion that the ultra-rich are mostly republicans? I have not been able to find any source on the political leanings of the "ultra-rich". What is the threshold for "ultra-rich" anyway? Since you are into random labeling, my take is you are just another liberal Slashdot troll who like to spout off without having an fscking clue.

Re:Why the government should subsidize? (1)

JonySuede (1908576) | about 3 years ago | (#37370736)

In an ideal world, you would not have to tax the corporation but each share holder directly for capital gain and dividends. There would have no exception to the tax code except health related condition, no deduction for children, no deduction for old people, ... The tax should be a fix percentage, like 25%, of your incomes minus the minimal income to be considered poor in your state. That ceiling should not be determined by a political process but by the application of a formula that would look likes this:

Variables:
Ha = average of the 5% lowest cost Housing available in the state for a year.
Fa= average for a minimum but healthy grocery for a week for a person (the composition of the cart would be determined by a committee of doctors and nutritionist selected randomly at a 5 years interval)
Ea= average of the 5% lowest energy bill in the state for a year for 1 car and 1 household.
Oa=the number of non disabled adult occupant.
Od=the number of children or disabled resident.
Pc=Poverty celling for taxation purpose
Formula: Pc =Ha/O+(Fa*Od+Ea)/Oa

And there should be a luxury taxe around 25% that applies on all alcohol and tobacco, on object worth more that 2000$, on non commercial vehicles worth more that 25000$ (you also require a log book that can vvalidate that the vehicle was use for business purpose only else you fine and tax the car buyer) and on houses worth more that (state average*1,5), tools and other production equipment would evidently be exempt of this luxury tax.

This proposition would be a loophole free fair tax code

Re:Why the government should subsidize? (1)

JonySuede (1908576) | about 3 years ago | (#37370752)

replace Ha/O by Ha/Oa

Re:Why the government should subsidize? (3, Insightful)

Wildclaw (15718) | about 3 years ago | (#37371674)

The tax should be a fix percentage, like 25%

A fixed percentage could only ever be ideal if it was a wealth/capital tax and not an income or sales tax.

Fixed percentage income (and sales) taxes lead to positive feedback loops in wealth concentration, which at the very best hamper the economy severely and at worst causes a total economic collapse.

Re:Why the government should subsidize? (1)

JonySuede (1908576) | about 3 years ago | (#37371838)

I specified capital gains at the beginning of my post and I did not said sales tax I talked about a luxury goods tax. if you include those in the income, why would it leads itself to a positive feedback loops in wealth concentration ?

Re:Why the government should subsidize? (0)

Anonymous Coward | about 3 years ago | (#37372414)

Now remember .. the government views 'taxes' as 'revenue'. "Where can we get the easiest and most revenue"? That's how the tax code works. Not 'what's fair'.

Re:Why the government should subsidize? (0)

Anonymous Coward | about 3 years ago | (#37373038)

There are three parts to the tax code.

One is revenue. As far as maximizing revenue, there is a large contingent of people that would prefer a 60% tax on a $100,000 salary vs a 30% tax on a $500,000 salary, so revenue takes a back seat to "fairness".

The deuce is social engineering. Things like deductions for mortgage interest, charitable contributions. Pretty much every 1040 deduction and credit beyond the standard deduction.

The third is granting favors, i.e., business tax credits and deductions. A lower, simpler business taxes marginalizes congress's influence and power.

Re:Why the government should subsidize? (1)

superdave80 (1226592) | about 3 years ago | (#37373210)

In an ideal world, you would not have to tax the corporation but each share holder directly for capital gain and dividends.

I've had the same thought myself. Why tax a corporation, since you can just tax the owners of that corporation?

There would have no exception to the tax code except health related condition...

Your system has already failed. Once you make any 'exception', you must now quantify and police this exception. Can I deduct my asprin? Birth control pills? My artificial leg? Then you will have others start complaining that THEY have an important thing that needs to be deducted.

And there should be a luxury taxe around 25% that applies on all alcohol and tobacco, on object worth more that 2000$,...

You are once again opening the door to more taxes. Guess what will be the next 'luxury item'? Guns? Fast food? TVs? You don't 'need' any of those, so they must be a luxury.

This proposition would be a loophole free fair tax code

You have already built in a few loopholes that will be expanded over time. You either keep any exemptions and special taxes out of the plan, or they will expand and corrode the tax system.

Re:Why the government should subsidize? (1)

LibRT (1966204) | about 3 years ago | (#37370854)

The better question is, "why do corporations pay tax at all?", since every cent of that tax is ultimately paid by consumers - it's simply built into the price you pay. So it's just effectively a VAT in different clothing.

Re:Why the government should subsidize? (3, Interesting)

Wildclaw (15718) | about 3 years ago | (#37371728)

The better question is, "why do corporations pay tax at all?"

To encourage corporations to actually invest back into their products instead of stockpiling money that then is used to buy up competition.

it's simply built into the price you pay. So it's just effectively a VAT in different clothing.

Corporate taxes are on net profits, not turnover.

Re:Why the government should subsidize? (0)

superdave80 (1226592) | about 3 years ago | (#37373136)

Why is it that the ultra-rich, mostly Republicans...

Yeah, because all of those Democrats in DC are all dirt poor...

Re:Why the government should subsidize? (1)

ThePhilips (752041) | about 3 years ago | (#37368716)

Gotta have circuses with your bread.

+1. [wikipedia.org]

Sad but true.

Tax breaks = Subsidize? (1, Insightful)

Rayonic (462789) | about 3 years ago | (#37368950)

"why the government should subsidize such a mature and profitable industry whose main contribution is to create amusing and sometimes antisocial entertainment"

Subsidy [reference.com] : a direct pecuniary aid furnished by a government to a private industrial undertaking, a charity organization, or the like.

So the article writer assumes that not taking money is the same as giving money. That is some screwed up logic right there. It makes me wonder why we're subsidizing this writer (by not taxing his income at a higher rate).

Sure, you can complain about the tax system and about all the tax breaks so-and-so qualifies for, but it's dishonest to say that the government is subsidizing EA. I'd even say it's pandering, since by the second paragraph they mention (and have a screenshot of) Dead Space 2. The implication being that "YOUR TAX DOLLARS" are funding "EVIL VIOLENT MURDER GAMES".

At least it's marked as an editorial, right? Wait, no it's not.

Re:Tax breaks = Subsidize? (2)

Zironic (1112127) | about 3 years ago | (#37369154)

What is the difference exactly between giving you $100 and lowering your tax by $100? Of course they're the same and that's why the governments favourite way to partially subsidize projects is tax breaks.

Even the politicians are honest about it, when they lower the tax on say food or books they actually say they're subsidising food or books.

Re:Tax breaks = Subsidize? (1)

Rayonic (462789) | about 3 years ago | (#37369320)

What is the difference exactly between giving you $100 and lowering your tax by $100? Of course they're the same and that's why the governments favourite way to partially subsidize projects is tax breaks.

Even the politicians are honest about it, when they lower the tax on say food or books they actually say they're subsidising food or books.

I understand where you're coming from, but there are some practical and philosophical distinctions between the two:

  • With an actual subsidy they're directly redistributing money from one group to another.
  • With a tax break it's a lot less clear cut. For all we know it's a net tax gain from the extra payroll taxes, etc.
  • A subsidy can actually prop up a failing business, whereas tax breaks (while helpful) can't help if your expenses are still greater than your income.
  • It's cheaper to give a tax break of $100 than a subsidy of $100, since money tends to evaporate as it passes through a bureaucracy.
  • Ideologically, you don't want to encourage the idea that all income is the government's until they let you keep it.
  • Politicians aren't being honest when they spin tax credits as subsidies or reductions in budget growth as budget cuts (for another example).

Re:Tax breaks = Subsidize? (0)

Anonymous Coward | about 3 years ago | (#37370596)

If they collect the tax dollars from you and me, and then hand them over to EA or some other company, it is a subsidy. Our tax revenue getting spent for the company's benefit. Then there is less money for the government to spend on services.

If they don't collect tax from the company (tax break), the government revenue is less and the services that still need funding will get their funding from you and me and/or by foisting debt on the next generation.

I really don't see the difference except in the implementation details: you and I pay, EA and other companies get rich.

Re:Why the government should subsidize? (2)

mabhatter654 (561290) | about 3 years ago | (#37369704)

but remember, all those programmers with an education burn out and go work for insurance companies writing boring accounting programs when they're done with games. But they wouldn't have gotten the education without the carrot of making video games. Most game companies start as small businesses, it's one of the last industries where you can start a business by yourself and grow it into multi-millions of dollars in a reasonable time. So many game houses get small-business credits for years until they get bought by the big farm companies. As games get more advanced they require more real acting talent for voice overs, motion capture, and other art needs. How many graphic arts and budget acting majors are they hiring now? Lastly, gaming is one of the big EXPORTS of the USA. Just like states tax smokes but the feds turn around and subsidize growing tobacco because it's a huge export... that means PROFITS come back to US companies.

So game companies provide jobs for beginning techies and artists, they provide startup investments for budding businessmen, they provide a huge source of export income... all for VERY low startup costs to get the ball rolling. Lots of reasons the government would have credits for them.

Sure, if you're a rules lawyer or have some OCD (1)

frooddude (148993) | about 3 years ago | (#37368494)

"Since filling out even a simple return can be rather game-like, maybe they're just doing what they do best."

So is this the new real-time strategy game you want to sell to our future accountants? Personally I tend toward games with the fewest rules, they're more entertaining.

here's a (non)novel idea for a game... (1)

Lead Butthead (321013) | about 3 years ago | (#37368876)

"evading the IRS and taxes"

econ 101 for slashdot (5, Funny)

BigHungryJoe (737554) | about 3 years ago | (#37368496)

But EA is a "job creator", so those tax breaks "trickle down" to the hoi polloi in the form of jobs.

Re:econ 101 for slashdot (3, Insightful)

FooAtWFU (699187) | about 3 years ago | (#37368520)

I think it works more like this.

1. Have somewhat obnoxious business taxes.
2. Hand out tax breaks to select businesses.
3. Power!!!

Re:econ 101 for slashdot (1)

North Korea (2457866) | about 3 years ago | (#37368566)

Not only that, but entertainment is US most profitable industry, and it's huge export to other countries too. So not only gaming industry (and movies and music industry for that matter) create jobs, they bring in lots of money to US. All immaterial too. If someone deserves tax breaks, it's those industries as they bring so much value to the US (even if you disagree with some of their business practices)

Re:econ 101 for slashdot (1)

Anonymous Coward | about 3 years ago | (#37368630)

Not only that, but entertainment is US most profitable industry,

Really? According to this, it's #51 (2008)
http://money.cnn.com/magazines/fortune/fortune500/2009/performers/industries/profits/

Re:econ 101 for slashdot (1)

KaInDaWg (115890) | about 3 years ago | (#37370922)

Is that before or after Hollywood's accounting?

Re:econ 101 for slashdot (0)

Anonymous Coward | about 3 years ago | (#37368580)

But EA is a "job creator", so those tax breaks "trickle down" to the hoi polloi in the form of jobs.

I'll take that as satire.

The way I see it is that tax breaks go into the pockets of the well connected rich and they do all the hiring overseas That's why corporate profits are at record levels and the US' unemployment is still over 9%.

Re:econ 101 for slashdot (1)

roman_mir (125474) | about 3 years ago | (#37369188)

No, corporate profits for well connected monopolies is way up due to the fiscal policy [slashdot.org] that creates this imbalance, which is basically currency destruction [slashdot.org] and thus prevention of any sort of investment opportunity, and the confused masses are searching for the solutions in all the wrong places [slashdot.org] , while government comes out with bogus ideas [slashdot.org] on job creation.

Troll alert (0)

Anonymous Coward | about 3 years ago | (#37369388)

Above post comes from a troll who is just interested in hyping his own positions. Every link he provides goes to a comment or JE that he wrote.

Re:Troll alert (0)

Anonymous Coward | about 3 years ago | (#37369454)

the above post comes from a troll who is just interested in following other's, because he himself has no ideas worthy any discussion [slashdot.org] .

Re:Troll alert (0)

Anonymous Coward | about 3 years ago | (#37369946)

Yes, obviously, damn_registrars is solely responsible for the long list of comments by roman_mir that have been moderated troll. Nobody else in the history of slashdot has ever disagreed with anything that roman_mir has written or would have ever considered moderating down any of his comments in any way, shape, or form.

Re:Troll alert (0)

Anonymous Coward | about 3 years ago | (#37370030)

muahahaha, anonymous cowards fight.

fight
fight
fight
fight
fight

(beats himself senseless)

Re:Troll alert (0)

Anonymous Coward | about 3 years ago | (#37370134)

looks more like roman_mir posting AC to reply to someone calling him out on trolling
 
in other words, one AC and one cowardly troll

Re:Troll alert (0)

Anonymous Coward | about 3 years ago | (#37370458)

looks like more AC trolls are trolling, all AC trolls are trolling, troll troll troll trolololololololololo

Re:econ 101 for slashdot (0)

Anonymous Coward | about 3 years ago | (#37369400)

You have some very interesting ideas there ....

Entertainment is a domestic and export industry (1)

westlake (615356) | about 3 years ago | (#37369246)

The way I see it is that tax breaks go into the pockets of the well connected rich and they do all the hiring overseas.

Entertainment is deeply rooted in language, geography and culture. The Avengers. James Bond. Harry Potter. Dr. Who. Unmistakably British. In script, story, setting and performance.

While wage scales and other incentives may make it somewhat cheaper to build your principal sets in Vancouver or record your musical score in London, the results are often quite mixed.

Re:econ 101 for slashdot (0)

Anonymous Coward | about 3 years ago | (#37369092)

But EA is a "job creator", so those tax breaks "trickle down" to the hoi polloi in the form of jobs.

So what your sarcasm is saying is that high taxes have never driven businesses to move elsewhere.

Oh please (2)

Dyinobal (1427207) | about 3 years ago | (#37368530)

I find it amusing that other corporations would be bitching. Just about every corporation out there uses some form of voodoo accounting to show a loss regardless of their actual profits. This article doesn't show what's wrong with the video game industry in terms of tax breaks and federal funding it shows what's wrong with our country and tax system as a whole.

Show losses get yourself lower taxes and some pork and who cares what sort of sleazy accounting methods you use.

Re:Oh please (5, Insightful)

Anonymous Coward | about 3 years ago | (#37368650)

From TFA, EA conforms to generally accepted account principles, or GAAP as we call it in the biz. So hop off me jet pack and don't assume because a company shows a loss they are sleazy, chadwhick. I find it quite amusing that the common folk just assumes every corporation has some evil voodoo master accountant, probably wearing a green visor with a bean counter too, sitting in the back room scheming how to make the common tax payer subsidize his/her (to be pc) business. The amount of rigamarole that a corporation such as a EA has to go through to even file its taxes costs more than what most of us make in the past 4 years combined. Yeah, the tax code has all these fancy dancy write offs, deductions and what not, but it also has something called phase outs. Yeah, phase outs. That means the nice little deduction that congress gave you, gets phased out over certain income levels. Take the article with a grain of salt. Its a complicated subject that takes years to master and it was written by somebody with a liberal arts degree who asked 2 questions to 2 people.

Re:Oh please (-1)

Anonymous Coward | about 3 years ago | (#37368760)

Yes it truly is amusing that the common folk see large corporations paying effective taxes rates in the single-digit percents and automatically assume there is some shady tax dodging going on, where as in reality it is all perfectly legal! Taxes being solely for the poor of course.

Now if you'll excuse me Ive got some politicians to take to dinner.

Re:Oh please (4, Funny)

tomhudson (43916) | about 3 years ago | (#37369072)

Now if you'll excuse me Ive got some politicians to take to dinner.

Constructive Cannibalism +1.

Just don't do it too often - they tend to be high in fat.

Re:Oh please (1)

blahplusplus (757119) | about 3 years ago | (#37369384)

"I find it quite amusing that the common folk just assumes every corporation has some evil voodoo master accountant,"

Does the financial crisis wring a bell? Maybe, just maybe you missed this...

Video (trillions in secret special give-aways)
http://www.youtube.com/watch?v=cJqM2tFOxLQ [youtube.com]

http://dailybail.com/ [dailybail.com]

Re:Oh please (1)

Mr. Underbridge (666784) | about 3 years ago | (#37369420)

I find it quite amusing that the common folk just assumes every corporation has some evil voodoo master accountant, probably wearing a green visor with a bean counter too, sitting in the back room scheming how to make the common tax payer subsidize his/her (to be pc) business.

You mean there's a company out there who's accounting department isn't trying to minimize their tax burden? Isn't that their job? Accountants don't come up with new laws for tax breaks, of course. Big companies have lobbyists for that. And if there's a large-ish company that doesn't lobby the feds or local governments for tax breaks, again, I'd be absolutely shocked.

And to heck with tax breaks. These days the real money is in grants from the government. Saving your own money is great - being given money is even better.

No need to invoke smoke filled rooms, green visors, beans, or evil henchmen. Just how the game is played.

Re:Oh please (3, Interesting)

mabhatter654 (561290) | about 3 years ago | (#37369794)

Well the problem is that when we here record profits what they REALLY mean is record EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) which is a fancy way of saying we made sales, and cut costs.. before then the accountants will start their magic JuJu to whittle the taxable portion down as far as they can so they don't have to pay dividends to shareholders. That's where executive salaries come in because companies would rather pay for ridiculous properties in New York City, multi-million dollar salaries, hoard huge sums of lucre, and racing teams than pay out the dividends or taxes. When the CEO wants X million dollars that's where it comes from... In normal business accounting you WANT to be paid out of the non-EBTDA money... because that's what investors and efficiency guys don't question.

Re:Oh please (0)

Anonymous Coward | about 3 years ago | (#37372454)

To follow up with my previous post, here is the federal tax code for R&D, doesn't sound like they are doing much gaming, rather just applying the tax code - as in intended. http://www.irs.gov/businesses/small/industries/article/0,,id=97640,00.html

With a fair amount of certainty I can say that each new product qualifies deducted R&D expenses. As you may (or may not know) the tax code is not used to simply bring in money, but also shape behavior - hence the "sin" tax on certain products that have been deemed unhealthy/dangerous (ie. cigs, alcohol). In this case, R&D expenses are deducted (in the first year, and only the first year, unless amortized over a period no less than 60 months) to encourage to products to be developed. Its easy to see a company as well off as EA just 'writing off, deducting, gaming the tax system etc' but this tax deduction breathes life into startups that are in the business of designing a new product. If the tax structure wasn't shaped like this, new companies wouldn't be able to compete. They rely on this deduction on their business plans to help ease the 'burn' rate - that they will most likely experience for the first year if not the first three years.

I'm sure there are more provision buried in the tax code on R&D, but clear and cut it applies to everyone, not the evil conglomerate tax gaming Game Companies such as EA.

Re:Oh please (2)

St.Creed (853824) | about 3 years ago | (#37369708)

I guess most people have learnt from Enron and Arthur Anderson Accountants that even the accountants can't be trusted once they get the benefits from closing their eyes. So while you are in all likelihood correct, the damage that has been done to the reputation of accountants the world over is pretty hard to repair.

Making jobs (in crime) (2)

Spodi (2259976) | about 3 years ago | (#37368656)

People should be happy. Tax breaks are almost always justified with "to create more jobs because jobs == good". Well, finding loopholes in taxes and cheating the system sure creates a hell of a lot of jobs! If we fixed all these issues, think of all the precious lawyers and shifty accountants we would lose! :(

Re:Making jobs (in crime) (0)

Anonymous Coward | about 3 years ago | (#37368696)

Those same shifty accountants find the loop holes in the personal tax code that you so much enjoy.

Re:Making jobs (in crime) (1)

Pinky's Brain (1158667) | about 3 years ago | (#37368816)

The fact you assume he uses an accountant to find tax dodges as a given says something about you.

Re:Oh please (0)

Anonymous Coward | about 3 years ago | (#37368784)

It would be nice if corporations got tax breaks based on how many Americans they hire. And also how many suppliers they use that hire Americans.

But that doesn't serve the interests of the rich as well as just giving the tax breaks and letting them continue to charge American prices while paying for cheap foreign labor.

Re:Oh please (1)

Trepidity (597) | about 3 years ago | (#37368918)

The game industry is not too bad in that regard; they outsource much less of their development than someone like IBM.

Oil companies complaining (2)

Mike Mentalist (544984) | about 3 years ago | (#37368540)

Anyone else find the bit about oil companies complaining slightly amusing? I guess the industry must be mature if it gets even their attention.

Re:Oil companies complaining (1)

MimeticLie (1866406) | about 3 years ago | (#37373332)

Yeah, that kind of threw me for a loop. Companies like Exxon "no honestly, we do pay income taxes, I swear" [forbes.com] Mobil complaining about weird accounting? Go figure.

Obvious fix: (3, Interesting)

Anonymous Coward | about 3 years ago | (#37368632)

Simplify the US tax code, so that it does not manipulate the market by rewarding/penalizing different industries, based on what legislator wants to curry favor with a particular company.

Of course, that leaves a lot less opportunity for graft and corruption, so the odds of it getting done in DC are slim to none.

Re:Obvious fix: (1)

blahplusplus (757119) | about 3 years ago | (#37369406)

"Simplify the US tax code, so that it does not manipulate the market by rewarding/penalizing different industries"

You're under the delusion that any system can't be gamed, all tax systems are gamed by corporations and lobbyists - just who do you think is electing your president and writing your laws? Until Americans start becoming well informed and involved seriously in understanding how the relationships between business and government works you will all forever be lost.

Re:Obvious fix: (0)

Anonymous Coward | about 3 years ago | (#37370016)

There is a system that would be much harder to game. It's very simple:

Pay X% on any income, where X is some constant and not subject to change.

complexity = shenanigans (1)

alexander_686 (957440) | about 3 years ago | (#37370800)

The following are both true statements.

The US has one of the highest corporate tax rates in the world.
The US has one of the lowest corporate tax burdens in the world.

There is a lot of scope for simplifying. For example, the US is one of the few companies that tax income no matter where it is produced. Most countries only tax corporate income on the income produced within that company. So US multinational companies are at a disadvantage because they have to pay corporarte tax twice [both US and foreign]. Instead of doing the rational thing – harmonizing our tax code with the world - – we give special tax credits / loopholes back to multinational. So we have more complexity and thus more rum for shenanigans.

As compared to "child services"... lol (-1)

Anonymous Coward | about 3 years ago | (#37368722)

Breaks up families, destroys lives, dismisses all responsibility, not accountable, not liable, etc... following a feminist agenda and a government that seems to be seeking the demise of it's own Constituents.

"...these people represent a pathology, one that is recognizeable and treatable in grade school"

Even in Canada they do it (3, Interesting)

MagikSlinger (259969) | about 3 years ago | (#37368734)

I worked at a video game company here in Vancouver, and I remember tax time being interviewed by a consultant about my "R&D" innovations. Anything, I mean ANYTHING, even remotely like R&D. "Uh, you mean even the work I spent optimizing the code?" "Yes."

I was told at one point in the company's history, our biggest source of income were tax credits from the Government of Canada.

Re:Even in Canada they do it (2)

tfigment (2425764) | about 3 years ago | (#37368804)

While I did not work in video games, I had similar experiences while working in Canada. Those tax breaks were huge for our company even though I would not call what we did R&D.

One coworker got headhunted into a much better position just due to the fact that he had hands on experience in getting these tax breaks for our company and a sizable bonus based on a percentage of the money he could get for the new company.

Re:Even in Canada they do it (0)

Anonymous Coward | about 3 years ago | (#37370038)

Speaking of Vancouver, the EA office there is technically a non-profit corporation, I believe. They can do this because they don't sell to consumers directly; their "customer" is EA-proper, which actually sells the games. Pretty fun.

Re:Even in Canada they do it (1)

thetoadwarrior (1268702) | about 3 years ago | (#37371652)

Stuff like that shouldn't even be an option. It's disgusting to think such profit driven companies can do that.

Re:Even in Canada they do it (1)

CaptainLard (1902452) | about 3 years ago | (#37370394)

I was told at one point in the company's history, our biggest source of income were tax credits from the Government of Canada.

Was that time the first year or so? Many tech companies go the first couple years on government grants alone. What private investor with reasonable funds would risk their money on something that's not guaranteed to return 11% in Q3? I actually think its one of the best things the government does. Sure there is favoritism and corruption but we should try (however impossible it may sound) to fix that, not cut R&D spending.

Re:Even in Canada they do it (1)

MagikSlinger (259969) | about 3 years ago | (#37371200)

Was that time the first year or so?

I was told it was the first five years. In those first five years, they released profit making games.

Yeah (0)

Ryanrule (1657199) | about 3 years ago | (#37368744)

Just say texas. We know you are talking about texas. Shitty texas.

Re:Yeah (1)

obarel (670863) | about 3 years ago | (#37368814)

Texas is an anagram of taxes.
You can find more interesting trivia at www.wikipedia.org.

Can't read (0)

Anonymous Coward | about 3 years ago | (#37368812)

You can't see the NYT article without logging in (not sure if a NYT account cost money).

It is in the government's best interest. (0)

Anonymous Coward | about 3 years ago | (#37368836)

They've already subsidized the bread, why wouldn't they subsidize the circus? A citizen glued to a video game is a complacent citizen.

Accountant and lawyers are misunderstood gamers... (4, Funny)

SebZero (1051264) | about 3 years ago | (#37368838)

...they are crap with a controller, but give them a calculator, paper on which to write and a system to exploit and BAM - high score everytime!

Re:Accountant and lawyers are misunderstood gamers (2)

xhrit (915936) | about 3 years ago | (#37369760)

For real! I play oldschool tabletop wargames with a group that includes several accountants and lawyers. The accountants play with a calculator in one hand and a pencil in the other, and will never move any of their units unless the math first shows the outcome is statistically in their favor. The lawyers bring a pile of rulebooks filled with stickynotes, paragraphs highlighted in various colors and underlined in pen.... well let's just say they give new meaning to the phrase "rules lawyers".

Funnily enough, as a computer programmer I only do well if first devise an intricate battleplan detailing the precise actions of all of my units for the entire duration of the battle, including flow charts with contingency matrices. Then I rigidly adhere to my premade decisions, tracking unit locations and performance statistics during the battle, along with taking notes for the next revision...

Re:Accountant and lawyers are misunderstood gamers (0)

Anonymous Coward | about 3 years ago | (#37371602)

An accountant *is* a Controller [accountingtools.com] :)

Big Deal (0)

Anonymous Coward | about 3 years ago | (#37368852)

I support this as long as we get great games.

Poor oil companies (0)

PPH (736903) | about 3 years ago | (#37368890)

Hey! The video display on their pump plays crap while I'm filling up. Maybe they could get the entertainment credit for that.

Oil companies? (0)

Beelzebud (1361137) | about 3 years ago | (#37368976)

What are the oil companies jealous because they can't get their paws on 100% of government welfare?

entertainment? (1)

phantomfive (622387) | about 3 years ago | (#37369000)

"Because video game makers straddle the lines between software development, the entertainment industry and online retailing, they can combine tax breaks in ways that ... Adobe cannot.

Entertainment is what it takes, eh? Sounds like Adobe needs to put this [p01.org] into their website! Or maybe they can make a trailer for CS6, and add nuclear strikes or even a BFG 10000. They can add a mode where software developers break the hearts of artists by suggesting they change their design. Suddenly work becomes more fun and Adobe gets tax breaks. Win-win.

Really no surprise (1)

LynnwoodRooster (966895) | about 3 years ago | (#37369030)

This is what happens when you have a tax code that is over 3.5 million words - and growing constantly. It's 72,000 pages and adding nearly every day. And it's because our leaders in Congress love to give special little breaks here and there to curry favor with a constituency or donor and thus ensure their position and power.

.
Toss it out, start over, and if it grows longer than the Hong Kong tax code (about 200 pages) - Congress is fired and a new group of people start the task. Flat rate, single deduction (a standard exemption of a base of income for any person), and that's it.

Re:Really no surprise (1)

sjames (1099) | about 3 years ago | (#37370094)

Really, a tax like that should be progressive and have a cutoff on the low end pinned to real income.

In the beginning, the vast majority of wage earners were not even required to file a tax return, much less actually pay income tax. Anyone who made enough money to be required to file most likely already employed an accountant.

While in perfect proportion, losing 20% of 30,000 a year hurts a lot more than losing 20% of a million a year. However, all of that can be expressed in just a page or 2.

Re:Really no surprise (1)

LynnwoodRooster (966895) | about 3 years ago | (#37370272)

I mentioned a standard exemption of base income; set it to $20,000. Everything above that is taxed at some flat rate (say 17%). So that person making $30,000 pays $1700 in tax - 17% on $10,000 ($30,000 - $20,000). The person earning $160,000 (in the top 5%) would pay $26,500 in tax - 17% on $150,000. A person earning less than $20,000 would pay nothing.

.
Start with an exemption that is 200% of the poverty line (poverty line for a single person is $10,890), and then index it for inflation. One deduction, nothing else. All other income is taxed at the fixed rate. Taxes become incredibly simple to define, to calculate and to deal with.

And this single tax rate covers income AND Social Security AND Medicare; all together, those 3 taxes bring in about $2 trillion to the Federal treasury annually; setting a 17% single tax rate would yield about the same total dollars when applied against gross (not adjusted gross) income. Revenue neutral, simple, flat and fair.

Re:Really no surprise (0)

Anonymous Coward | about 3 years ago | (#37370784)

Except politicians can't help but mess with things. Like raise the rate 1% - 2% each year, "It is only a penny or two ...." Next thing you know the rate is 50%.

Re:Really no surprise (1)

Arancaytar (966377) | about 3 years ago | (#37371990)

But that would mean rich people actually have to pay taxes. We can't have that!

(Seriously, though, politicians' campaigns are sponsored by corporations and people with money, so a tax code that doesn't outrageously benefit them is pretty much out of the question.)

Re:Really no surprise (1)

LynnwoodRooster (966895) | about 3 years ago | (#37372474)

The facts show that the "rich people" pay a disproportionate amount of the income taxes [taxfoundation.org] . For example, the top 1% earn 20% of the AGI, but pay 38% of the income taxes, while the bottom 50% earn 12.8% of the AGI and pay 2.7% of the income taxes. We actually have a very progressive tax structure in the US, but it is much too complex.

Indie developers? (1)

Chemisor (97276) | about 3 years ago | (#37369114)

So tell me, if EA can deduct all developer salaries as R&D expenses, why can't an indie developer likewise deduct his entire paycheck and pay no income tax?

Re:Indie developers? (1)

FooAtWFU (699187) | about 3 years ago | (#37369292)

The indie game developer, with the right business structure, could probably deduct his paycheck from his business, so he doesn't have to pay as much tax on his business profits, but then it turns into personal income, and he has to pay payroll taxes from the business, as well as payroll taxes as an individual, plus Social Security, Medicare, unemployment insurance...

On a related note, billionares like Warren Buffet famously only pay ~15% on his long-term capital gains and dividends, but the government has already taxed the corporate income that has made those capital gains or dividends at - what, 38%ish?

Point is, the tax code has layers.

Re:Indie developers? (1)

sjames (1099) | about 3 years ago | (#37370108)

However, Buffet himself has said flat out that he pays a smaller percentage on his overall income than his staff do. He argues that the fix for the current economic problems requires that people at his income level be taxed MORE.

Re:Indie developers? (1)

ADRA (37398) | about 3 years ago | (#37369416)

At least here in Canada, salaries/wages are taken off the revenues before they calculate the tax. If you've formed a corporation as an indie developer you can (as the corporation) write off the salary as a cost of doing business, but don't get ahead of yourself. You as the individual working for your own company still pays personal taxes on all gains, so in the end do you really win more than just being a sole proprietorship? That depends on a ton of variables.

"But largely because of deferred revenue, deductions for
executive stock options and a variety of accounting requirements, the company officially reports a net loss for the period. And the company reports that it paid out $98 million in cash for taxes worldwide in those years. "

These are all standard tax aversion (not evasion) ways of knocking back revenues that any company can exercise. Deferred revenue is especially beneficial to corporations who's revenues are cyclical.

"Several tax experts noted that one of the companyâ(TM)s biggest tax advantages is a tool available to all companies, a deduction related to the stock gains on options exercised by its executives. (Tax practitioners also said that the companyâ(TM)s losses, under generally accepted accounting principles, provided the most meaningful picture and reflected the standard approach used by other companies.)"

This basically means I am issued say 100k options by my company. Those shares are valued at $1 today. When the I actually converts that option into a real share, the price will always be $1. Lets say after 5 years I decide to convert my shares into real ones. I pay my employer $100k for the conversion. Lets assume that in those 5 years, the shares have gone from $1 to $5. In that case, the value of those shares are worth $500k street value. The corporation is in essence eating the $400k difference and declaring it as a loss on their books because if they sold that same option today, they'd make 5x the money on the open market. Now why corporations issues options to begin with and when they're allowed to declare them as losses (for tax purposes) can be considered as something that people may want to look into, but the basic concept of how it works really is sane.

One last side note, they specifically listed this tax dodge as an executive thing, but any employee in the company (or not even employees) can be issued options for various reasons. Its pretty much the life blood of a lot of start-ups who can't actually support paying their staff what they're worth. I've known friends who worked at EA in the past (poor them), and they'd issue options to developers, heck maybe everyone in the company if they wanted.

Huge Tax Irony (1)

Anonymous Coward | about 3 years ago | (#37369150)

Here is a huge tax irony. A business that must repair its equipment to do business gets to write off its cost of repairs. However, a salaried wageslave person who has to go to the doctor to get fixed up, cannot write off the cost of their repair, i.e. medical cost, except through a complicated series of tax actions. The reality is, and has been, the wage slave middle class are the slow moving, easy tax targets -- the sheep to be fleeced. If the politicians wanted to be fair, they would allow individuals to write off their own repairs (medical) as costs of doing business.

what should happen (1)

RobertLTux (260313) | about 3 years ago | (#37370718)

Companies should be encouraged to provide Medical Insurance for their workers. On a yearly basis this could of course be partly written off as a "cost of business" (this will get companies to actually do it). Then we get the insurance companies to provide "wellness" coverage and things roll forward to the point where if somebody falls off a ladder or just gets sick then that cost is still covered.

BTW a company should cover any kind of injury that happened WHILE ON THE CLOCK. (personally i think somebody keeling over because of stress/long hours should also be covered)

Re:what should happen (0)

Anonymous Coward | about 3 years ago | (#37370814)

What if you are not employed? What if you are living on your 'savings' or interest income and you pay medical expenses?The bottom line is, it is hugely hypocritical that if you have to pay $110 to visit your doctor for your cold that is keeping you from showing up at work, you should be able to write that off in the same way that a business would write off a $110 repair visit for their defective ice cream machine. The bottom line is wage slaves are sheep and do not even realize how much they pay in taxes.

Correction (0)

Anonymous Coward | about 3 years ago | (#37369574)

Game COMPANIES. Game makers ( = developers) receive no tax breaks.

EA makes games? (1)

sgt scrub (869860) | about 3 years ago | (#37369590)

I thought they just got paid for other peoples games.

Oil companies complaining (1)

HalAtWork (926717) | about 3 years ago | (#37369658)

FTFA:

Video game developers receive such a rich assortment of incentives that even oil companies have questioned why the government should subsidize such a mature and profitable industry whose main contribution is to create amusing and sometimes antisocial entertainment.

Maybe the oil companies should clean up their messes before they start casting stones...

Is it up to the pres? (2)

sgt scrub (869860) | about 3 years ago | (#37369936)

Wow. I didn't see the connection at first. Dawning my tinfoil hat:

Pres Clinton
Chicken ranchers.

Pres W
Mohair ranchers (Mohair is vital to the economy of the Texas Hill Country) Mohair Production [wikipedia.org]
NASCAR Track owners
Oil Companies
Hedge fund managers

Pres Obama
Automakers

Re:Is it up to the pres? (0)

Anonymous Coward | about 3 years ago | (#37371386)

And Pres W's connection is the only one with a link. Nice bigotry, troll.

Why? (1)

belgo (72693) | about 3 years ago | (#37372218)

Meh. I own property in Orange County, Florida (although I no longer live there, I can't exactly get out of it unless it burns down or I get foreclosed), which means I subsidize EA. I worked there once. You're probably aware that they hire college/highschool greenhorns who either burn out or decide an asexual life is the life for them. While I do not exactly begrudge them that, I do question the need to subsidize it. End the tax breaks for these people, please. Thanks, from a guy in the Florida Keys whose life no longer even remotely includes software development or the mainland or gunfire. My first name is Christopher.

Coming in 2012...TAX FORM HERO (1)

liquiddark (719647) | about 3 years ago | (#37372984)

Deduction! Deduction! NERD POWER! Sounds like a winner to me...
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