Video Game Industry Receives Hefty Tax Breaks

According to the NY Times, the video game industry receives many tax breaks in the U.S.—so many, in fact, that other companies can only dream of having them. Tax breaks are nothing new to business, with several businesses using all the breaks they can. Juggernauts exist in every industry, and EA is certainly one of the biggest in gaming.

EA hired on a new head tax lawyer in 2004, Glen Kohl. He’s been responsible for lobbying greater tax breaks for the gaming industry and providing EA with the same by setting up off-shore subsidiaries. Jeff Brown, an EA spokesman had this to say:

Company officials say they have no qualms about taking all the tax breaks legally available to them. To do otherwise would be like a consumer “insisting on paying full price during a store sale.”

EA isn’t the only company advocating to keep these current tax breaks in place. Shane Frank, the chief operation officer at the Alliantgroup, which helps game studios and other business take advantage of these tax incentives, had this to say:

Software and high-tech industries are the brain trust of the U.S. We can’t afford to lose that knowledge and those high-paying jobs to India or anywhere else.

The gaming industry has been growing rapidly over the past decade, which is now bigger than the music industry and quickly gaining on the movie industry. Calvin Johnson, who worked in the Treasury Department and is currently a tax professor at the University of Texas at Austin, said the following:

Those tax incentives — a collection of deductions, write-offs and credits mostly devised for other industries in other eras — now make video game production one of the most highly subsidized businesses in the United States.

The article also shows the negative side of other business’s view points towards the gaming industry about these tax breaks.

Because video game makers straddle the lines between software development, the entertainment industry and online retailing, they can combine tax breaks in ways that companies like Netflix and Adobe cannot. Video game developers receive such a rich assortment of incentives that even oil companies have questioned why the government should subsidize such a mature and profitable industry whose main contribution is to create amusing and sometimes antisocial entertainment.

The U.S. is only one of a few places who’s providing tax breaks for the gaming industry. An article from Develop-Online has stated that the tax breaks in Quebec, Canada will cost the province about US$118 million this year.

Analysis: It is no secret that the U.S. has been losing a number of high paying jobs, many of them going overseas because they don’t pay as much per hour like tech support. These are hard times worldwide and having these tax breaks is one way to attract business to your country, but are these tax breaks for the gaming industry too much? This is a double-edged sword, having both its pros and its cons on either side of the argument.

I personally would rather see that the gaming industry benefit from this over other companies, such as big oil, and those who do little to nothing with what they receive. When was the last time you saw big oil take a hit in profits because they wanted to keep gas prices down? Never. At least in gaming it’s malleable as companies come and go, and those like EA can fail if they royally screw up. I know there’s a tax break put in place for R&D: if you look at the time in the 20’s, they used almost all of that tax break for R&D. Now it’s almost nothing with big oil being the worst, if I recall correctly.

Complaints will always come from those who feel left out, but in business, they let their lawyers do the complaining. There are never any simple solutions to national or even global issues, and a compromise is an agreement that no one is completely happy with. Until we can all learn to live with less, including business and government, we’ll never be truly happy with every rule or exception given.


About Brandon Mietzner