Skip to comments.How a Tax Law Helps Insure a Scarcity of Programmers [corrupt govt drove Joe Stack]
Posted on 02/21/2010 8:20:44 AM PST by Clint Williams
The Senate holds hearings this week on complaints of taxpayer abuse by the Internal Revenue Service, but the agenda does not include the role of Congress itself in creating taxpayer woes, particularly for tens of thousands of computer programmers.
But just ask Midge Johnson, a would-be programming entrepreneur, about a long-standing tax law that is pointed specifically at software professionals and prevents many of them from setting up freelance businesses. Lately, the I.R.S. has been aggressively enforcing that law -- even as computer programmers are in such short supply that the Clinton Administration is pouring millions of dollars into Federal initiatives to train more of them.
It appears to be public policy in conflict with itself and it is making work life difficult for a category of citizens crucial to the digital economy.
Mrs. Johnson and thousands of other computer programmers who want to work for themselves instead of being employees have run afoul of a 1986 law in which Congress decreed that most individual programmers cannot be entrepreneurs.
The law generally excludes programmers from statutes giving employers some flexibility to use independent contractors.
The law, which was introduced by Senator Daniel Patrick Moynihan, Democrat of New York, was estimated to raise $60 million over five years...
A year after the law regarding contractors was enacted, the Senator tried to repeal it, but his bill died. In 1994, Senator William V. Roth, Republican of Delaware, the sponsor of this week's hearings, wrote Mr. Moynihan saying the programmers should get relief. More than 60 other senators have written similar letters since 1994, but they have not voted to change the law.
(Excerpt) Read more at nytimes.com ...
A flat tax. Plain and simple.
But of course, our highly intellectual leaders can't see past that because they know that keeping a complex tax code is an easy way to control the populace.
Apparently the Democrats couldn't stand the thought that job shoppers could deduct pretty much anything: the cost of going to work, their home offices, etc; and the fact that they weren't in any unions or whatever.
So they went after shoppers and made them into serfs again: most shoppers now work for temp agencies as employees, not contractors.
What a stupid law! Shame on congress for not changing this. Both sides.
The Times points out “shortcomings” of one of its favorite organizations?
I wouldn't say flat tax is a "joke". It is one method of taxation that you may not agree with, but it is dead serious.
I certainly don't want a "single lump tax" situation. It would totally disregard your ability to pay.
A true flat tax at least taxes everyone at the same rate, which does take into account the ability to pay AND does not penalize for earning more because it is taxed at the same rate...period. The only people who would get away with less tax are those who work under the table. But that would happen anyway.
There are ways around this. Many guys have a sub-S corp, and contract through one of the big contract houses.
The company hires the programmer, and pays the big contract house. The contract house deducts 10%, and pays the sub-S. The programmer than pays himself on a W-2.
Of course, this is ridiculous. Congress should create a category of temporary professional worker. Companies would be able to hire programmers and other professionals directly, provided they paid at least 5 times the minimum wage and gave at least 35 hours per week. Companies would pay their share of FICA, FUI, and SUI, but nothing else. Temporary workers could not deduct anything, and would not have to file a sched C or set up a corporation. Everybody would win, except the contract houses.
Gotta keep all those Indian, Chinese, Pakistani and Malaysian programmers busy so their countries can catch up with the US before the coming merger into the global Utopia the UN has planned for us.
Bottom line is that government collects a lot more taxes in this scheme than if the guy could be regarded as an independent contractor.
I am not sure of that. There is a lot of scope for expensing personal expenses with a sub-S. Many of these guys are fanatic receipt collectors.
I sure hope Congress fixes this injustice, and that it IS, before we run out of airplanes! Hehe.
No no. I mean the big business gets taxed. Then the little guy gets taxed again. The corporation gets taxed once then the guy gets taxed again, on the same money.
Only the big contract house would be a sub-C, although this is not necessarily the case. They are also big on going out to lunch to discuss business too. So each bit of money paid out by the original customer would be taxed at most once, since a sub-C is a pass-through. Some guys cheat and take sub-C distributions as profits, so they don’t have to pay Medicare tax.
A sour note in an otherwise straightforward article. The overwhelming majority of "individual programmers like Mrs. Johnson" don't dream of "getting rich", they just want to be able to make a decent living outside of the 9-to-5 (excuse me, we're talking about software engineers, make that 11-to-10 some days) treadmill.
The bit about "up to several hundred dollars per hour" is similarly misleading. Kinda like saying people can make up to several hundred thousand dollars per year playing poker.
Don’t want to have a free market for labor services now do we. Must have the Unions represent workers.
A real problem for programmers is that a good programmer is exponentially more productive than his/her peers. I know a few good programmers and they all seem to hate working as employee cause of knowing their worth and getting paid the same as the mediocre. Private contracting would be explosive in productivity but would endanger the holders of patents and large software companies profits.
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