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

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

#191

Post by tomrod »

joshuanapoli wrote: post #183
kopecs wrote: post #172

Earlier quoted context omitted.

Well, presumably the claim would be that a factor in their not having taxable income was the fact that they didn't have to amortize their development cost.

Yeah; start-ups will start paying tax much sooner since salaries are the main expense in software development, and only a fraction can be deducted per year. The tax change must make things marginally more difficult for young companies that have some revenue, aren't cash-flow positive, and have a short horizon.

It's not marginal. It significantly impacts sub-$10MM companies.

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

#192

Post by altairprime »

bboygravity wrote: post #115
warkdarrior wrote: post #97

Earlier quoted context omitted.

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).

Yeah, make everybody equally poor. That'll solve things.

If you look at happiness and indexes versus taxation rates - yes, making everybody poorer does tend to solve things. Not too soon in the growth curve - but certainly not never.

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

#193

Post by pjc50 »

layer8 wrote: post #185

As a non-American, it seems strange to me that the cost of regular software development, i.e. that is neither “research” nor “experimental” in a conventional sense, would be deductible in the first place (amortized or not). Isn’t that subsidizing a whole business sector? Maybe I’m misunderstanding something.

Most businesses let you deduct inputs and capital expenses from your revenue so that tax only applies to profit.

Since this is done on annual buckets it's very common to try to move items in both columns between years to minimize tax.

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

#194

Post by tomrod »

victoro wrote: post #157
radley wrote: post #132

Earlier quoted context omitted.

It's not really targeted at tech, insomuch as at Democrats. Everyone assumed it was a traditional accounting hack. But given the timing and the reinitialization, it's clearly political, not economic. The code is a strategic time-bomb designed to cause a high-profile economic downturn during a presidential election cycle, specifically when the following president is a Democrat and Republicans have a house majority. It…

The Democrats had control of the presidency and the house in 2022 when this provision first went into effect but had 2 fewer senators (1 fewer if you count the tie-breaking VP). Why didn't they try to change it? Is there some reason a change in the tax code like this can't be modified or repealed once its in place?

They tried. They had Senate spoilers.

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

#195

Post by simantel »

layer8 wrote: post #185

As a non-American, it seems strange to me that the cost of regular software development, i.e. that is neither “research” nor “experimental” in a conventional sense, would be deductible in the first place (amortized or not). Isn’t that subsidizing a whole business sector? Maybe I’m misunderstanding something.

Businesses are taxed on profits, not revenue. Paying people to write code is an expense, so you'd normally deduct that expense (plus all your other expenses) from your revenue to arrive at an amount that should be taxed.

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

#196

Post by xiphias2 »

californical wrote: post #113
cyberax wrote: post #100

Earlier quoted context omitted.

> 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.

It is complex - is it better for the money to go back into the economy by paying high salaries to a specific group of highly-educated people ? Or is it better for the money to go back into the economy through taxes, then disbursing the benefits to lower-income benefit programs ? I’m not sure what the answer is. The former is likely to drive some innovation, which I’m sure varies by company. Where the latter could als…

The answer is simple: it's the biggest growth generator in USA.

Growth has its own problems of course (I don't want to estimate the health impact of Coca Cola), but it's a prerequisite of a country not falling behind others.

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

#198

Post by Terr_ »

Reason077 wrote: post #186

The OBBBA (“Big Beautiful Bill”) suspends amortization requirements for domestic R&D expenditure, and explicitly allows domestic software development as an R&D expenditure eligible for immediate expensing. The new rules would apply from 2025 to Dec 31, 2029: https://www.crowell.com/en/insights/client-alerts/house-comm...

That "suspends" should be understood as "continues to hold-hostage" / "renews as a time-bomb to screw over some other party".

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

#199

Post by creer »

mensetmanusman wrote: post #5

I wonder if this was an unintended consequence, or if the politicians backed by big business really wanted to disrupt the software infrastructure.

It was a very explicit change with its own very specific paragraph. Some stuff can be unintentional. This could not.

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

#200

Post by madaxe_again »

tomrod wrote: post #190
Reason077 wrote: post #186

The OBBBA (“Big Beautiful Bill”) suspends amortization requirements for domestic R&D expenditure, and explicitly allows domestic software development as an R&D expenditure eligible for immediate expensing. The new rules would apply from 2025 to Dec 31, 2029: https://www.crowell.com/en/insights/client-alerts/house-comm...

That would be the one positive I have heard regarding OBBB. This should be put into its own bill.

That isn’t how legislation is passed. If anything, it needs a section about acceptable tar shingle application standards for roofs within 6 nautical miles of any heliport operated in a subarctic area on the west cost. Then it’s looking like a bill.
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