Friday, April 13, 2007

The pernicious affects of taxes and accounting rules: crummy software and cubicle farms

Accounting rules for software capitalization are one of the reasons there's so much crummy software around. The rules favor "waterfall development", an expensive way to produce poor quality software. Incidentally, since waterfall development is very compatible with outsourcing, US tax law and accounting standards facilitate outsourcing software development.

It turns out tax laws also facilitate cubicle farms instead of pleasant work evironments:
Moveable walls - Joel on Software

... We're going to need a much bigger space now: on the order of 15,000 square feet. To build that much office space could cost a couple of million dollars. With the lack of deductability, your bank account goes down by three million dollars. The landlord will pay a fraction of that, but not enough to make it affordable.

There's a loophole. Office furniture can be depreciated much faster than leasehold improvements, over 7 years. So for $20 of office furniture you can deduct about $3 a year: better than nothing. Even better, office furniture is a real asset, so you can lease it. Now you're not out any cash, just a convenient monthly payment, which is 100% deductable.

This is why companies build cubicle farms instead of walls, even though the dollar cost is comparable...
Tax laws subsidize trailer parks in some states, and make them unaffordable in other states. Tax laws are why Tokyo once had rice paddies. The more convoluted the tax code becomes, the more unwanted side-effects occur ...

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