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D.C. – “We want it both ways”
This is a minor matter that rubbed me the wrong way. What do you think?
Last week, the Patent Office granted Chainbridge Software Inc. a patent
on a method for identifying companies that are avoiding state income
taxes by shifting income to low tax states or foreign subs in non-arm's
length transactions, and estimating the amount of state tax
underpayments.
I guess it is hard to argue with this. Every state is starved for
revenue these days. A software program that would help maximize that
income seems like a good idea, right?
But while the good old Patent Office is hard at work on behalf of Chainbridge and those state tax revenue folks the House and Senate are pushing hard on new legislation. They are pushing for passage of a new law, H.R. 1249, S.23.
So what is the intent of the new law?
It would prohibit patents on strategies to avoid, reduce or defer federal, state, local or other taxes.
The word "ludicrous" comes to mind. Software to collect taxes get patent
protection while software that would minimize taxes is made illegal.
The folks in Washington are trying to have it both ways. And they will succeed.
I can’t think of a better example as to why we should rip up the tax code and do something dramatically different. The system is a joke.
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What's next from the Rocky Horror Congress Show? Official State sanctioned sex manuals authored by TSA-verified virgins...
Tax sheltering is a black art. The best practitioners get huge signing bonuses with employers, because once the knowledge is dispensed, it will flow like water through a sieve. There simply is no intellectual property protection in the real world for this knowledge.
The only practical consequence of such legislation is preventing Turbo Tax from offering good tax software to the masses.
No expert in tax planning would ever knock on the Patent Office's door and ask for an application. The patent application itself would provide the enemy the exact viral DNA sequence needed in the effort to develop the next round of legislative antibiotics.
If the goal is to increase tax collections, then progressives and inventors alike should demand that the following individuals get in the express line to the gas chambers (as they sponsored this 134-page monstrosity which inherently must trample the broader intellectual property protections already in place in the US, for the benefit of special interests most likely to be found amongst their campaign donors)-
Sen. Leahy (D-VT)
Sen. Coons (D-DE)
Sen. Grassley (R-IA)
Sen. Hatch (R-UT)
Sen. Klobuchar (D-MN)
Sen. Kyl (R-AZ)
Sen. Lieberman (I-CT)
Sen. Sessions (R-AL)
Rep. Lamar Smith [R-TX21]
Rep. Steven Chabot [R-OH1]
Rep. Elton Gallegly [R-CA24]
Rep. Robert Goodlatte [R-VA6]
Rep. Darrell Issa [R-CA49]
All smoke, no fire.
Hate to say it, but this legislation does, in fact, address a real issue in the business of tax management. Firms, through the patent system, have tried to prevent others from using their tax stategies. This is unique to the tax world because it's merely a matter of where you send your income/what vehicle you use, so firms have an interest in not letting their competitors -who could provide the exact same product, since the underlying raw materials are identical- copy a successful strategy.
Why not, then, transfer the licensing to copyright practice? It seems logical that the company that developed a strategery could use it for seven years until it come into the public domain.
So, if this legislation passes does it mean that half the activity in the OTC derivatives market, which is for tax evasion purposes only, will be illegal? And, of course, the IRS and SEC and Justice Department will investigate and prosecute everyone who violates that new law and sentence them to the maximum, right?
Yeah. Can't wait.
A person or company owner may move to Texas to avoid income tax. No way to stop that. A company moves off shore to avoid tax. No way to avoid that with present law. A system that rewards USA based companies and beats up foreign based companies is the only solution to US tax and jobs.
As long as investors chase growth in other countries, we will not have any in the US. There are no jobs and they are shrinking.
We can look at our next door neighbor to the South, Mexico to see the fall out from concentration of wealth and high unemployment and tax avoiding. Mexico has police and an army that are no longer in control of the government. The Marines and Navy are not an adequate last resort. Mexico drug corruption and US Wall Street corruption, maybe in collusion with each other, are a beat down for the citizens of each country.
We are not at game over, but the clock is running in the last quarter.
'States starved for revenue'... it is a spending and expansion of regulatory gov. jobs problem.
Are they looking for a right balance of gov/private sector jobs, because at some point, you are in a completely different revenue system.
Overlapping bureaucratic waste. Where is the revenue in that.
Somebody explain how it works when the private sector gets forced out.
As if the government can do manufacturing, progressive wet dream.! LOL
'Rip up tax code' Oh hell yes, what a nightmare.
Software patent is an oxymoron.
So, what about software like TurboTax, or the software that my tax accountant and anyone working doing personal/corporate taxes uses?
WTF people .
Patent, schmatent. Now that the invention is fully taught in the claims, it is child's play for one skilled in the art (eg., a CPA or tax attorney) to find a way around it. That this patent would be awarded by Uncle Scam is no surprise. It's an emblem of late-Empire fascism.
Tax farming was how empires operated. This is about one step removed from that.
Apparently most in DC prefer to go both ways.
Hey, leave Barney out of this.
Oh shit here we go folks!
http://preview.bloomberg.com/news/2011-05-18/senate-bill-would-limit-savers-using-401-k-s-as-rainy-day-funds.html
What a wonderful new product for the export market . Certainly it is the answer to our trade imbalance and will enhance our image overseas as an innovator of nonsense
....when i was a kid it was all about local community, my dad was a truck driver & proud of it, proud of himself, respected as a hard-working & honest person. .. Wall St. & Washington (policy) has denegrated the American Citizen......... we are nothing to them, yet they lie to our faces & feed off our wallets. It has happened now, the FEDERAL GOVERNMENT has grown FAR TOO LARGE ! The Federal Goverment must be reduced in size, either voluntarily or revoltionary.
It will be reduced in size involuntarily, but might be replaced by a global government. Seems like we will get what we deserve. I wish pocket Constitutions helped, but we are dealing with zombies here.
not directly related, but aggravating
http://www.mikechurch.com/Today-s-Lead-Story/in-sheriff-if-we-need-to-co...
there are no jobs in this country anymore, remember ? the lucky ones are those who still have those shitty $8.50 / hr. jobs. Wall St. & Washington policy outsourced over 8million good paying jobs overseas to those who could do it for less.
We all have to remember that the citizenry plays their part by buying these cheap imports. The manufacturers had to keep competitive. We let our teens play so more immigrants were needed to fill seasonal jobs. And now they have no money saved for their futures. We filled our bodies with crappy cheap food and drove up healthcare needs. We allow our government to play Rambo and tuck the bill in the glovebox. Time to face the consequences.
Hey Bruce...remember a few weeks back when you said all the unemployed were lazy, uninspired, near shiftless bums and should get off the sofa and find a decent job? Remember?, say how are those great jobs going there in NY near that Nuclear power plant down the road from you?
Have any advice on getting a job in the rest of America? You know, so these folks can stop avoiding paying state income taxes.
Most unfair. I never used the words "lazy", "shiftless", "uninspired" or "bums".
I would never use words like that. Give me a break.
What I said that was objectionable to you and may others was that I thought that in 2008 there were were no JOBS and there was no WORK either. In 2011 there is still no JOBS, but there is now WORK.
I never said that was a good thing. I was making an observation. I was right in that observation. There is work today. Yes, that work sucks and is at McDs. And yes, there is still a huge shortage of "good Jobs".
I may have made a big mistake with the language that I used. It pissed off you and a number of others. That was not my intention.
I said that workers who were near to maxing out on benefits were taking this Work because there was still no Jobs. I think this is what is happening.
blindfaith - Best advice one can give to you on getting a job is to vote for a candidate that will LOWER taxes. Then you see, an individual or corporation, will be more prepared to take further risk, with their own money, to hire more employees.
Get it? Or is it a case of "Can't Find My Way Home"?
They laugh at me, too, when I bring up these ideas. They say Reagan was a buffoon and snicker about supply-side, trickle-down economics.
The fact of the matter is that if you allow small businesses to flourish through a low taxation burden, wonderful things happen. For one, they can afford to hire two more taxpayers.
I don't understand why people don't get this concept.
:D
P.S. I get the feeling that the GBP is getting stepped on pretty hard by Them. I would appreciate your thoughts on why this is because these past couple of days have seen really unnatural trading patterns in GBP crosses.
How low and for whom? If the premise is correct then zero taxes would be optimum. As with the broken window fallacy, total destruction of the housing stock would be wonderful for the economy. Even the Laffer Curve has a deleterious effect at some point on the curve. What does your curve look like?
The state is, and always has been,the only natural enemy of the individual..
Your analogy can be expanded Bruce - "Humanity - we want it both ways" Sorry fucknuts, you can not have you cake and eat it too. The moral hazard was unleashed long ago.
Don't worry Bruce it all becomes mute when there are no taxes (in any form) left to collect.
Crash the system, crash it now. The sooner we do, the sooner compensation will return to those folks that actually add REAL value (not paper) to the economy.
I have heard that the later Roman Empire had to pass laws in some provinces to prevent citizens (the "middle class" taxpayers) from selling themselves into slavery to escape onerous government debt and other unfair government burdens.
Computer burp
Computer burp
As a matter of fact, "free" Romans of modest means cheered the "barbarian" (aka Ostrogothic, etc.) invasions, as it meant that they would finally be left alone. Crazy as it sounds, but Gothic feudalism was a step up from late Roman conditions for many.
Until they stop taxing productivity, we will continue to see productive entities and individuals attempting to conceal income and avoid taxation. Fair tax please. Repeal the slave tax. BITCHEZ!
Yeah.....
And THEY will get it both ways.....
taxes to the corrupt kleptocrats..it is only patriotic to avoid paying them..after all the co's that pay the pols graft get exemptions and let the idiot john q co's pay the max until BK.
Justice weeps while this corrupt government continues..no economic recovery without JUSTICE for those that have been criminal manipulators of our system.
The first patent appears to be a software designed to identify commercial tax avoidance by means of identifying potential "sham transactions" which are not arms length, i.e., designed to transfer the tax situs to a less costly jurisdiction.
The rules defining whether or not the software is a unique patentable interest should apply irrespective of the desirability or purpose of the software.
As for the second, I can think of a number of reasons why tax planning schemes should not be patentable as a matter of public policy.
Why should Wall Street banks be allowed to get a patent on a security or investment strategy structured as a tax planning/avoidance product? Does that mean no one else can use the same planning strategy unless they pay a royalty to Goldman Sachs or JP Morgan? I know there are rocket scientists spending all their time coming up with derivative like methods for accomplishing this. Without doing further research, I am pretty certain that is what this is about.
I am not aware of other securities or investment strategies which are subject to patent law.
I would also point out that the proposal does not say "software that would minimize taxes is made illegal." It apparently says it is not patentable.
I can think of much better examples of why we should rip up the tax code. ;-)
I'm not sure if anyone has ever implimented SAP components (that's what it looks like the companies does) but it's easier getting toothpaste back into the tube than trying to change the shape of a "running" SAP implimentation, as well as incredibly costly, cheapest SAP guy I've ever met is $1400 a day, most i know bill $1800 a day. Even if the state gets the software theya re going to have to look at the requirements for it. Which looking at the white paper is going to be in the range of around $10-12 million per implimentation...this doesn't include the cost of administration and the operating costs of the systems.
Right now name a state or municipality ready to absorb that kind of cost? There are none, most IT organizations in companies/government are on a massive cut back mode. they keep a couple of people to service desktops, servers and networking gear. If something breaks, it gets replaced.
The idea that municipalities starting multi-million dollar IT projects. That isn't going to happen. They would be more likely to Switch their server infrastructure to Windows 2008 or buy something keep it alive. Adding an SAP widget...no, I don't think so.
So let them have the patent, let them have three, I've seen how poorly GS and JPM uses technology in the past twenty years. All I see is a license to fail horribly and whoever is invested into the company selling the widget is going to get screwed. While we're not hearing terms like "burn rate" and "headcount", I'm pretty sure a theasaurus has been used to find new and more interesting words to cover a run of the mill VAR scam.
"it's easier getting toothpaste back into the tube than trying to change the shape of a "running" SAP implimentation"
Familiar with SAP and love that line.....prolly gonna steal it from you :-)
WB, having fought battles on intellectually property in the past, I can tell you that none of it matters once the moral hazard has been unleashed. Patents will be honored in a system that has respect and honor. Once fraud is the status quo, as has been the case for some time now (Wall street and the banks just made their fraud "legal" by purchasing the politicians - which has not fooled anyone) things rapidly resort to a free-for-all. It is always in the best interest of any profession (especially money professions) to police their own and insure that integrity stays intact and greed stays in check. Inventors will simply no longer disclose inventions until they are already in business (legally or by necessity) and have secured the means to protect their invention. Progress will come to a crawl, perhaps a good thing?
Hmm ... ask yourself - Do you really want strategies to reduce taxes locked up in a patent monopoly? Software is still protected by copyright, and this is just a business method. It's an interesting question.
(FYI, here's the PTO's guidance on whether business methods are patentable. It's an ongoing debate, with various factors, such as requiring them to be tied to a "machine-or-transformation" http://www.uspto.gov/patents/announce/bilski_guidance.jsp)
Perhaps the more disturbing concern is the attitude. Will legislation start chipping away at tax avoidance and declaring it wrong? - despite that it's completely legal, and smart business. If things get bad, how far will government go to take away wealth? There are a lot of tools in that box. Americans have had their gold confiscated before. Retirement funds seem high on the chopping block. Strange days indeed.
GM uses an army of lawyers to accomplish tax avoidance... since most idividuals are not privy to this type of help, I guess this is just another way that the government will continue to rape the little guy while giving all the breaks to the multinationals and banks.