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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

#211

Post by nitwit005 »

gregw2 wrote: post #10
tjchear wrote: post #3

Earlier quoted context omitted.

> For almost 70 years, American companies could deduct 100% of qualified research and development spending in the year they incurred the costs. Salaries, software, contractor payments — if it contributed to creating or improving a product, it came off the top of a firm’s taxable income. According to the article, as long as the tech workers contribute to improving or creating a product (be it games or apps), they coun…

To qualify for R&D tax breaks, IIRC having identified qualifying work for a segment of my firm, there must be elements of hypothesis, experimentation, results, etc that I would consider more science-y 'Research' than just turn the crank software 'Development.' It has to be both. And that has to be documented. And offshore research+development doesn't get you a tax break. The irony is that the R+D tax actually discour…

At the last couple of companies we worked at, they just sent out surveys on what time went to different activities. We couldn't possibly fill that out honestly, as that wasn't tracked.

Which, I think is an overlooked part of this. They must constantly have gotten feedback that people were lying to them.

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

#212

Post by cyberax »

shafyy wrote: post #162
cyberax wrote: post #128

Earlier quoted context omitted.

> 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? Yes. Also, the salary will not go _only_ to highly-educated people. For example, if Amazon decides to build a new distribution center, it will employ blue-collar workers to build it, not software engineers. > Or is it better for the money to go back into the economy through t…

Jesus man, how can you look at the economic history of the past 30 years and still think neoliberalism is the way to go?

I used to think like you, until I saw what the lack of neoliberalism does to countries. And before I witnessed the magic of market economy that adapts to changes far, far, far better than anything else.

If you want a static economy that supports gradual decline (preferably with a mineral-based income stream), then a lot of state spending is fine.

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

#213

Post by wenbin »

Let me guess - the keyword here is "Section 174", just from the title alone :)

Dealing with Section 174 amortization in those first one to three years is a real headache (and your tax bill ends up higher than if it didn’t apply). Once your startup survives that the first few years of doing Section 174, things do get easier... but, sadly, most don't make it that far.

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

#214

Post by [deleted] »

layer8 wrote: post #205
pjc50 wrote: post #193

Earlier quoted context omitted.

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.

So if company A pays company B to develop some software, that revenue for company B (or rather, its profit) is still taxable? Then it makes sense I guess.

[deleted]

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

#215

Post by trinsic2 »

anonym29 wrote: post #182
timewizard wrote: post #154

Earlier quoted context omitted.

Is US software dominance because of our startups? Or because of the giant trillion dollar monopolies we have? Didn't AAPL, GOOG and FB all create products _before_ they had any taxable income? Would this change have had any actual impact on their foundings?

It's worth noting that FB was quite possibly being secretly funded with taxpayer money by national intelligence interests at inception, which would have substantially reduced or eliminated commercial pressure early on. DARPA was working on Project LifeLog starting in 2003, was to be "an ontology-based (sub)system that captures, stores, and makes accessible the flow of one person's experience in and interactions with…

I often wonder if national intelligence interests are behind or have taken control of major corporate players like Microsoft, Google and Apple. There was an article [0] back in 2015 that brought forth the proposition that google was created by the CIA. It would explain the current enshitification of these companies and the lengths they are going to take away choice.

[0]: https://medium.com/insurge-intelligence/how-the-cia-made-goo...

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

#216

Post by klipt »

shafyy wrote: post #162
cyberax wrote: post #128

Earlier quoted context omitted.

> 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? Yes. Also, the salary will not go _only_ to highly-educated people. For example, if Amazon decides to build a new distribution center, it will employ blue-collar workers to build it, not software engineers. > Or is it better for the money to go back into the economy through t…

Jesus man, how can you look at the economic history of the past 30 years and still think neoliberalism is the way to go?

Real neoliberalism (with land value tax and pigouvian tax) has never been tried.

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

#217

Post by Reason077 »

youngtaff wrote: post #166
demosthanos wrote: post #96

There are some misunderstandings in the comments that seem to stem from not having read the section, so I thought it was worth referencing the actual text [0]. It's quite short and easy to read. The most important bits: * Subsection (a) requires amortizing "Specified research or experimental expenditures" over 5 years (paragraph (2)) instead of deducting them (paragraph (1)) * Paragraph (c)(3) is a Special Rule that…

I worked for a UK company that amortised it’s development costs… it led to the false belief that the company was profitable when it really wasn’t

Exactly. And if you’re more profitable on paper, you have to pay more tax, making you even less profitable in reality.

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

#218

Post by cyberax »

orwin wrote: post #141
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.

Mostly, Amazon will do stock buybacks, so that its investor can invest into other top stocks.

Funds for the stock buybacks are not R&D, they'll be taxed.

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

#219

Post by candiddevmike »

tomrod wrote: post #194
victoro wrote: post #157

Earlier quoted context omitted.

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.

As a progressive, it seems like the Democrats always have Senate spoilers...

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

#220

Post by candiddevmike »

wk_end wrote: post #187

Why is this the first we’re hearing about this, three years in? The article says these companies blamed other factors for the layoffs - why?

There were a ton of stories around this in 2022 as a bunch of startups scrambled to make ends meet due to this bill taking effect.
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