Fixing independent programmers’ no-win scenario

The actions of Joe Stack, the disgruntled software developer who committed suicide by flying his airplane into the Internet Revenue Service building in Austin, Texas, last week, were callous, selfish, and inexcusable. While in no way condoning his actions, programmers may nonetheless hear a familiar ring in his frustration with a country that seems to actively discourage self-reliance and entrepreneurship, especially in the software industry.

Among the litany of complaints in his articulate (if rambling) suicide note, Stack gave special mention to Section 1706 of the 1986 Tax Reform Act, an obscure law that he claimed reduced him to “a criminal and noncitizen slave.” Under the law, certain classes of workers, including anyone who engages as a “computer programmer, systems analyst, or other similarly skilled worker engaged in a similar line of work,” are considered de facto employees for tax purposes, regardless of whether they claim to operate their own businesses as independent contractors. The IRS can impose significant tax penalties on companies who hire such workers as contractors rather than full employees, a fact that can make it extremely difficult for self-employed programmers to find work.

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Section 1706 was originally sponsored by Sen. Daniel Patrick Moynihan of New York, who hoped that forcing highly paid software developers to become employees would limit their ability to take advantage of tax breaks for small businesses. Ironically, it was also Moynihan who, when a study determined the law was not bringing in the desired tax revenue, tried to have it repealed a year later. He failed, and it’s still on the books today.

But Section 1706 isn’t the only thing making life hard for independent software developers. Employees typically don’t have to pay for their own health insurance, the way contractors do. Individual health plans generally offer worse coverage than group plans, and they can be incredibly selective about who they allow to join. Those who are accepted can expect their premiums to rise every year, often by double-digit percentages. Given these conditions, developers who have families to support or preexisting medical conditions are well advised to hang on to their salaried jobs for dear life — no pun intended — rather than run the gauntlet of the dysfunctional American health insurance industry.

And if the prospect of being bankrupted by medical bills wasn’t frightening enough, add the increasingly hostile legal climate surrounding the software development profession. In response to all-too-common reports of software bugs and security breaches, some organizations have begun lobbying for contractual language that makes software developers accountable for any defects in their code. For example, the SANS Institute has proposed a detailed contract that would require developers to certify that they had received appropriate training, observed any and all security procedures deemed necessary, and that their code was free of defects to the best of their knowledge, among other clauses.

Fans of such contracts say structural engineers are routinely held accountable for the quality of building projects, and that software engineers should meet the same standard. But a software program with a security vulnerability isn’t the same as a bridge that collapses because it was poorly designed. Modern software applications are incredibly complex systems, and they draw upon countless APIs and libraries whose quality may be beyond the control of any one developer. Under the terms of the SANS Institute’s contract, nearly any bug could potentially be grounds for a lawsuit; while an employee of a large software vendor might be shielded from individual liability in such suits, an independent contractor would not.

And, as my colleague Bill Snyder recently wrote about in his InfoWorld blog, software developers now also face sloppily written new guidelines — whose intent is noble but execution is poor — on identifying software bugs.

Given these harsh realities, it’s easy to see why software developers would give up on entrepreneurship. For many, the risks simply don’t match the potential rewards. Better to keep their heads down, not rock the boat, and hope they can hang onto their jobs until retirement.

Reform is the best stimulus This situation must change. In a knowledge economy, programmers rank among our most valuable workers, yet the current legal and regulatory climate makes a career as an independent software developer virtually a dead-end prospect.

That’s great news for big software vendors such as Microsoft and Google. They’ll be ensured an endless supply of programmers desperate for the safe haven of a steady paycheck, predictable taxation, health benefits, and a shield from civil prosecution when their code turns up buggy. But where will the next Microsoft come from? A field that discourages self-reliance sends the message that the status quo is the highest goal.

Worse, these problems affect American programmers only. Coders overseas aren’t subject to taxation by the IRS, so Section 1706 doesn’t apply to them. If they’re lucky (and many are), their health care system isn’t the disaster we have in the United States. In effect, by placing such onerous demands on independent contractors, the United States creates a ready-made market for offshore outsourcing firms such as Infosys and Wipro. They can afford to do the work; American contractors can’t.

The Obama administration has already spent billions on the president’s economic stimulus project, which the Congressional Budget Office says has saved or created millions of jobs. But tort reform, combined with a more modest health care reform proposal and the repeal of Section 1706 of the 1986 Tax Reform Bill, would go a step further. It would enable citizens to create new jobs at the grassroots level, by allowing out-of-work software developers to return to the economy as independent contractors with their own small businesses.

The alternative is to stick with what we have now: an economy that would sooner send business overseas than encourage entrepreneurship at home. You don’t need to be a programmer to see that’s just not logical.

This article, “Fixing independent programmers’ no-win scenario,” was originally published at InfoWorld.com. Read more of Neil McAllister’s Fatal Exception blog and follow the latest developments on software development at InfoWorld.com.