Mimsy Were the Borogoves

Mimsy Were the Technocrats: As long as we keep talking about it, it’s technology.

Progressive taxation static analysis

Jerry Stratton, February 22, 2015

1920 tax filers

App store developers in the progressive regime.

Static analysis is the hallmark of progressives. They suggest massive changes, usually involving multiple rules, and then assume that nothing else will change. The big example, of course, is taxation, where there are so many rules targeting big companies and high-earners that it makes financial sense for big companies and high earners to hire experts—tax lawyers—to help them navigate those complex rules. The end result is that it’s the small companies and moderate-earners who have to pay for compliance.

Jeff Hunter is suggesting that Apple do the same for app store developers:

Therefore, please consider changing the App Store 70% / 30% revenue split to a tiered rate, where Apple takes less of the developer’s first revenues. For example, perhaps Apple could take nothing from the first $100K in annual revenue for a developer, and 30% after that. Or maybe Apple could take 10% from the first $100K, 20% from the next $100K, and 30% after that.

The cost to Apple should be relatively low, I believe. The tier thresholds can be set low enough that all of the top grossing apps in the App Store are still effectively at a 70% / 30% split.

But the cost to Apple isn’t going to be in the loss of that 30%. It’s going to be in the policing of those tiers. When it comes to taxes, it costs 20% of taxes to pay for taxes. Apple is not going to want to have to create an Apple Revenue Service to police people looking for loopholes. The Apple app ecosystem is completely automated. If a $200,000 company can make $30,000 more simply by splitting their company into a single company per app, it may very well be cost-effective to do this. Will that be a violation? If not, Apple will lose a lot more than Hunter’s analysis shows; if it is, then Apple will end up spending money policing those looking for loopholes. But just as with taxes, the people who can afford to pay for experts will be better able to take advantage of the complex revenue rules. Apple, after all, won’t know who is or isn’t trying to break the rules until after they investigate. This means that developers making under $100,000 will also have to pay the costs of compliance, proving to Apple that they are not breaking the rules. Just as we do today with taxes.

Hunter’s analysis is also very oblivious:

For an independent developer, the difference between their gross revenue and their net revenue after Apple’s 30% cut could very well be the difference between being able to work full-time building for the App Store or not. At $100K in net revenues per year, you may be a successful independent developer. At $70K in net revenues per year, your spouse could be telling you to get a day job.

Seventy thousand dollars a year puts you in the top 67th percentile of households. That is, your household makes more than two-thirds of the rest of the country. As an individual, $70,000 puts you in the 86th percentile: 86% percent of the United States makes less than that. If your spouse is telling you to give up $70,000 a year and “get a day job” to replace it, just because of the money, you probably need a new spouse, not a new job.

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