The time bomb in the tax code that's fueling mass tech layoffs

Post by khuey » Fri, Jun 06, 2025, 8:26 PM UTC

jmyeet wrote: post #38

I reject this framing. What really changed things was the end of ZIRP [1] and even then it was opportunistic. Labor costs are a massive cost for tech companies. They have continually tried to suppress wages. In the 2000s, it was the anti-poaching agreement between Steve Jobs, Eric Schmidt and others. In the 2010s, high growth ahnd zero interest meant labor costs continued to balloon. But then Covid came along and was…

Post by californical » Fri, Jun 06, 2025, 8:27 PM UTC

cyberax wrote: post #100

altairprime wrote: post #40

Earlier quoted context omitted.

It makes sense when you consider that there is no minimum tax rate on businesses. Given the choice, Amazon would rather spend 100% of its profits on itself than allow any of its profits to be paid out in taxes. Section 174 was implemented without a minimum tax on corporate profits before voluntary deductions such as research. Therefore, it’s exploitable and all companies ought to hire and fire staff to ensure their p…

> Given the choice, Amazon would rather spend 100% of its profits on itself And why is this bad, exactly? Money will be spent and will go back into the economy. Amazon will have to use the funds to build new offices, datacenters, do research, whatever. And even if execs give themselves $10^11 USD in bonuses, they will be taxed as personal income, at even higher rates than corporate income.

Post by bboygravity » Fri, Jun 06, 2025, 8:27 PM UTC

warkdarrior wrote: post #97

thayne wrote: post #60

Earlier quoted context omitted.

The company already pays payroll taxes on those salaries, and the employees pay income taxes. And the people hurt by this aren't the shareholders or top executives, it's the rank and file workers getting laid off, losing benefits, and being asked to work more for the same pay. What this change effectively did was make software developers significantly more expensive, without increasing the amount those developers get…

Software developers are already too expensive in US, so this applies some downward pressure on those salaries. Frankly the economy will be much better off when tech salaries equalize across geos, thus avoiding the deep whole US manufacturing is in (for example, manufacturing wages in Vietname are one tenth of US manufacturing wages, and thus it is better to open new plants there).

Post by klipt » Fri, Jun 06, 2025, 8:31 PM UTC

beezle wrote: post #109

Bloomstink has a short article on R&D expenses/tax credits as does Reuters on some of the back and current history. But just as an accounting note: R&D expense has nothing to do with the company having revenues for an existing product, which already is allowed to deduct cost of goods sold, selling and admin expense. It is a cost related to future business and in that regard, it is not crazy to say it should be amorti…

Post by throwawaymaths » Fri, Jun 06, 2025, 8:32 PM UTC

wdaher wrote: post #56

svara wrote: post #46

> For cash-strapped companies, especially those not yet profitable, the result was a painful tax bill just as venture funding dried up and interest rates soared Can someone explain this? What taxes do unprofitable US businesses owe that this would be deducted against?

Here's a toy example that hopefully makes this clear: In 2024, your business has $1m in revenue and has $2m in expenses. 100% of these expenses are R&D salaries (engineers you hire.) Your company loses $1m/year. (You brought in $1m and spent $2m.) Under the old rules, you'd owe no tax because you were unprofitable. After Sec 174, what the IRS now says is: You had revenues of $1m. But you only had $400k in expenses (b…