By Jack Ganssle

The Bug Tax

Published 6/10/2004

Death and taxes. We can't avoid them. While it might be possible to evade taxes - for a while at least - both the grim reaper and the IRS eventually extract their pound of flesh.

Most of our household expenses are more or less discretionary. Though no one is thrilled about making mortgage payments, we do have the option of moving into a cheaper place. That unwanted electric bill is the product of the TV, a broadband `net connection, and heating and air conditioning. Slice it in half by freezing in the winter and roasting in summer. Taxes, though, are involuntary payments made because the alternative is spending the summers and winters in jail with our new best friend Bubba.

While writing that check to the IRS hurts more than a root canal we recognize that at least some of the money goes to the public good. Education, roads, some (not enough in my opinion) fundamental research, police, fire and other services do give us certain direct benefits. But too many of our tax dollars disappear into the sinkhole of bureaucratic waste; it's dissipated like entropy, serves no useful purpose, and drains families' coffers in difficult economic times. None of us supported these improvident expenditures; the government essentially sneaks in like a thief in the night and raids the checkbook.

The famous May 2002 NIST study (http://www.nist.gov/director/prog-ofc/report02-3.pdf) pegs the cost of software errors at up to $60 billion annually. Ultimately these costs are born by consumers. So each of the 108 million families in the United States (http://www.census.gov/prod/1/pop/p25-1129.pdf) pays, on average, $555 per year for unwanted bugs.

Did you order $555 worth of bugs last year? I didn't. Yet these charges are buried in the cost of the products, services, and utilities we buy. It's a tax, a charge extorted from consumers. By, well, us. Software developers. NIST blames our inadequate testing for the costs. I'd argue there are a lot of other factors also responsible for the poor quality, but ultimately it comes down to the developers and companies providing crummy code.

$555 might not sound like a lot in the grand scheme of things. How does it shape up against other taxes?

Federal taxes on individuals total $1.038 trillion (http://www.irs.gov/taxstats/article/0,,id=102886,00.html), or just under $10k/family. That's a big bite!

Property taxes vary widely depending on the jurisdiction. In my home state of Maryland such revenues account for $472 million over about 2 million households- or less than half the bug tax.

Sales taxes in my state run about $2.9b (http://www.dbm.maryland.gov/DBM_Search/Budget/TOC_FY2004_%20Fiscal_Digest/fiscalDigest04ExhB.pdf), or two and a half times the bug tax. Most of us wince at the sales tax when buying a car or computer; we should be equally squeamish about the cost of bugs.

Some products are taxed multiple times, with one duty levied on top of another. Take liquor- there's a federal tax, a state tax, and sales tax on top of that. If it's imported duties add to the government's revenue as well. The feds tax a quart of 80 proof liquor at $2.75 (http://www.legis.state.wi.us/lfb/Informationalpapers/8.pdf). Current liquor statistics aren't available, but based on 1995 data (http://www.atf.gov/alcohol/stats/95stats/95newa06.htm) it's reasonable to estimate consumption at about 2 billion gallons per year. So we pay $22b per year in federal liquor taxes, or $203 per family. About a third of the bug tax.

Gas prices today are the stuff of road rage. Yet in England the petrol tax approaches 75% (http://www.bized.ac.uk/current/mind/2003_4/061003.htm) of the price of a gallon of gas. Those poor Brits pay 80 pence/liter (http://www.thisislocallondon.co.uk/misc/print.php?artid=488924), or $5.50/gallon. That's $65 to fill a small car's tank. Ouch.

Here in the USA Federal and local authorities levy about 40 cents per gallon (http://encyclopedia.thefreedictionary.com/gasoline%20tax), or less than 20% at today's fuel prices.

Passenger cars averaged 20.5 MPG (http://www.sustainableenergy.org/resources/technologies/transportation.htm) in 1999 despite CAFE standards mandating 27.5 (http://www.nhtsa.dot.gov/cars/rules/cafe/overview.htm). The 196 million cars currently in use each average 12,100 miles per year (http://www.sustainableenergy.org/resources/technologies/transportation.htm). Doing the math we find the average family in the United States pays $461 in gas taxes, less than the amount we cough up for the bug tax.

(I know that most taxes are far higher than advertised; the 40 cents/gallon on gas, for instance, doesn't reflect other Federal levies on the companies that produce fuel. But it's not unreasonable to assume that some similar mechanism inflates the bug tax as well).

Rebellion followed England's imposition of the Stamp tax on unwilling American colonies. Will our customers revolt against the bug tax? Will some proposition 13-like movement force software engineers to reinvent the way we build systems?

But wait. I can hear a crowd in the distance, their anti-bug banners are flying. They chanting something. it sounds like "we're mad as hell and we're not gonna take it anymore!"