[tomohawk]

Agree that these companies are using the tax code to write off losses that they are intentionally incurring in order to achieve a lower cost point than their (profitable) competitors. This is a very predatory practice that should be ended. Companies should compete in the marketplace. Having tax payers foot the bill for some companies disruption gambit makes no sense.

[icebraining]

Any new company, including a mom&pop restaurant or whatever, will have startup costs that established companies do not (e.g. buying equipment, training people, etc). How do you propose to distinguish those from these "predatory" losses? Or should those losses not be carried over either?

[notacoward]

That's a really good question, and - contrary to HN tradition - I'm not even going to pretend I have a complete answer. Some cases are easy, for example a lot of non-tech startups are funded by loans rather than equity exchanges. Other cases are surely harder, but I think clear lines can and should be drawn.

The key IMO is that the company should be paying tax somewhere along the line. Right now VC is a double gift - it provides funds to grow, and the corresponding expenditures magically turn into "losses" that erase future tax. Besides its effect on government revenue, it also gives VC-funded companies an unfair advantage (as though they didn't have enough) over competitors who are being taxed more for having the audacity to grow organically.

[icebraining]

The effects on government revenue seem more complex than that. For example, if a customer of a startup spends $8 instead of $12 thanks to VC subsidization, those $4 remaining in their pocket will be spent somewhere else, and the IRS will get to tax that expense too.