Basecamp used to take two common business deductions called the domestic manufacturing credit (§199) and the Research & Development credit. Both of these tax credits were substantial, both were recommended by esteemed accounting firms with entire departments dedicated to their exploitation, and both were total fucking bullshit.
So we stopped taking them. (You should have seen the faces of our new accountants as we told them this 😂).
Supposedly these credits are there to encourage American companies to spend on R&D and to keep manufacturing jobs in the country, but give me a break. I’d wager that the vast majority of companies that accept these tax handouts do not base their decisions about how much to spend on R&D or whether to hire domestically on these credits in the least. It’s just free money.
Now the conventional wisdom goes that companies have a fiduciary duty to squeeze, pull, and bend the tax code until it submits to the minimal possible effective rate. That executives and accountants simply must exploit every loophole and take every handout. Then celebrate when they score undue deduction after undue deduction with ever more lavish bonuses and payouts.
Fuck that.
Now, I’m not saying that you should voluntarily just send a bigger check to the IRS than your nominal rate requires. Or that there aren’t reasonable deductions that perhaps make sense and encourage good behavior in circumstances. But I am saying you’re allowed to read the intent of the law, not just the letter of it. That beating the system with the IRS as your opponent is a dismal and dark assessment of a companies role in the larger society.
You can absolutely chose not to partake in these schemes. But first you have to break out of the paradigm that has most executives and accountants treat loophole exploitation as the default strategy.
The scandal isn’t what’s illegal but what’s legal. Don’t be so scandalous.
It’s time to reimagine capitalism. It doesn’t have to be at war with doing what’s good for society. To pay workers better, to pay its fair share of taxes, to be contend with enough. You can do all this and still take a profit.
