By combining tax breaks, deductions, and subsidies designed for the Cold War, video game production is now one of the most highly subsidized businesses in the United States, reports the New York Times. Leading software developer Electronic Arts, for example, has made $1.2 billion in profits worldwide over the past five years, but was able to report a loss thanks to creative accounting, and paid only $98 million in taxes in that time.
“Software and high-tech industries are the brain trust of the US,” said the chief operating officer of a software consulting group. “We can’t afford to lose that knowledge and those high-paying jobs to India or anywhere else.” Many states are ramping up tax breaks, hoping to encourage software jobs, but many studies cast doubt on the effectiveness of this strategy. “The research credit benefits the wrong companies and encourages the wrong kind of research,” said a tax expert and technology executive. “By diverting funding and attention from where it could be most useful, the credit is hobbling American innovation.” (Read more video game developers stories.)