Friday, May 24, 2013

Why Techies Love Tax Hell California

Because while they be smart in IT, they be dumber than all hell when it comes to economics.


PeppermintPanda said...

Tech companies often benefit from substantial tax credits and subsidies in big government jurisdictions, and many of their employees earn enough to compensate for their high taxes.

Big governments pick winners and losers, and tech companies are often winners because it looks good politically. Backing a Google makes the government look smart eve if they lost $10,000,000,000 backing bad tech companies that year.

Wayne Earl said...

As a current resident of Bat Shit Crazy, CA, and batting 3 successful, profitable liquidation events for 3 startups in a row, there are a couple of reasons why we are here:

A) if you don't play, you can't win

b) War bands in business are forged only on the battle field. The inner circle is very real, only in this particular playground, it is uniquely both who you know and what can you do. No one can or has ever done it alone - it is no coincidence that those 3 startups share a very similar core employee roster. I'm damn good, but the five of us are better then most in the world, and have proven that.

C) today, direct access to Capitol via angel founders and VC's that are willing to weather high risk stakes against a very very rare success rate is unique to this area. It is the social web of relationships between people, the gestalt of the entire Valley that makes the Valley possible. This does not exist anywhere else in the world today. It certainly can, but it does not today.

D) human capital, while the most important, is the least liquid. We aren't that mobile.

To win big, you must risk big. Most people are idiots who think they are amazing. Every business man thinks he's the master of the universe. Most people are full of shit.

By the way - I would love it if this environment could be recreated elsewhere. I've worked in every tech ghetto in America over my career - nowhere else is even close.

I'm here not for the weather, but for the joy of having my rather oversized ego match reality, if only for today. And it's a good thing people like me do this - do you have any idea how many 6 figure jobs that the successful execution of our ideas has created in the past decade alone? If the US runs on its own hubris. Then my tax dollars are what makes that shit possible.

fatkini eradication collective said...

california is down to two golden geese: hollywood and silicon valley. i don't care how much they payoff the politicians they both will be fleeced. 20+ billion in the red, a declining bond rating, and nowhere else to turn. math will not be denied.

the dude said...

I know the article's more about companies, but plenty of individuals fall for it too.

One of my last roommates in CA was a brilliant programmer- smartest one I've ever seen. And he wholeheartedly believes Obamacare is good and will pay for itself within a few years.

Dwight House said...

I live in California and have worked for a software company based here. I can't claim to know what the upper management's overall tax and business strategies are. However, the people who, like me, spend every day solving complex math and logical problems (making software) are actually quite good at addition, subtraction, multiplication, and division. As such, despite wildly different views on social issues, I've seen almost unanimous disapproval of current government economic policies (and usually legal and management policies as well). Except for a handful of exceptions, large software companies are not run by software engineers or even former software engineers, but rather business management types. We software engineers are just the ones in the trenches, building the actual product.

I suspect why so many successful tech companies are here has to do with a long-term history and culture of tech companies here (just like Detroit and cars). I'm not from California, I moved here for the job, in spite of my reservations about California's structures. It was a job and I fully intend to pay my debts. I'll be moving out of the state soon now that I have a better job.

Secondly, it's a very rich state (you'd have to be), so there's a lot of venture capital available. That's the best joke: Throw around some interesting ideas to venture capitalists. Get some backing which you use to hire a couple smart engineers to build a quick demo product that you market like crazy as the next big thing. Be sure to use words like "social" and "paradigm shift." Then it's just a matter of waiting for the right buyout offer.

Lastly, please stop calling people who make software "IT." It's like calling a rocket scientist a "mechanic," or calling an economist a "mathematician." IT is usually meant to refer to those who manage computer hardware and/or databases. While those people and skills are essential for a software company like Google to function, they are distinct from software engineers. IT folks maintain databases and keep networks online. Software engineers build software from scratch or combine existing pieces of software together to create new software. Software engineers USE information technology, but we are not defined by it.

randian said...

The author is wrong. Locating the company in Hong Kong would have made no difference, because the sale of Tumblr is not income to Tumblr, so HK's lower corporate taxes don't apply. The sale is income to Tumblr's stockholders. David Karp is a US citizen subject to the US worldwide income tax regime. It doesn't matter where the subject company is located or where he lives, he owes US tax on the sale of stock.

On the other hand, the US is a tax haven if you're a foreigner. If he were a non-resident foreigner he would owe no US tax at all on the buyout.

Andrew said...

Mr. Earl, thought about Austin, Tx lately?

Randian: There are ways around that, also if you don't take those ways, Texas is still a tax haven compared to California.

kurt9 said...

Earl is right. Duplicating the amalgamation of people and capital resources of the Bay Area elsewhere is quite difficult. Something like 1/3 to 1/2 of all U.S. angel investors and VCs are in the West Bay area, centered around Palo Alto and Menlo Park.

Duplicating this elsewhere will happen, most likely Singapore. But it will take 20-30 years. Asian investors are more risk averse than Bay Area ones.

It will likely be another industry as well. Some king of biotechnology or bioengineering. Biomedicine is highly regulated in the U.S., but not so much in Asia. Perhaps the first effective anti-aging therapies will be developed and commercialized in Asia.