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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

#301

Post by CardenB »

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...

It's perhaps noteworthy that OBBBA is not the first bill to attempt to revert this tax law. It's simply the latest. There have been other attempts to revert section 174.

Other attempts that come to mind: 1. Tax Relief for American Families and Workers Act of 2024 (H.R. 7024) 2. American Innovation and R&D Competitiveness Act of 2025 (H.R. 1990)

This article is informative: https://www.cebn.org/media_resources/section-174-sign-on-let...

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

#302

Post by Retric »

anp wrote: post #294
Retric wrote: post #286

Earlier quoted context omitted.

Those subsidies lasted a long time, but just as with a TV they didn’t last forever. So if your argument is some subsidy will probably happen next year sure, but individual subsidies change over time. No specific subsidy is the default.

This doesn’t seem connected at all to your previous claim. You said that the default is an absence of subsidies?

There’s no contradiction between saying:

For any specific situation the default is no subsidy.

With millions of situations some of them are not going to be at the default.

In 500 years will some specific things be subsidized? Vs in 500 years will something be subsidized?

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

#303

Post by runako »

madaxe_again wrote: post #200
tomrod wrote: post #190

Earlier quoted context omitted.

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.

Just last year, Congress snapped to attention and wrote and quickly passed a bill to ban the eminent national security threat of a video-sharing app. That bill doesn't do anything else.

Just a reminder that Congress, even now, can rapidly act on a laser focus when it is sufficiently motivated.

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

#304

Post by jt2190 »

Retric wrote: post #181
jt2190 wrote: post #146

Earlier quoted context omitted.

Thanks for clarifying. This will of course discourage “riskier” startups and dampen innovation and give more power to profitable incumbents who will have less incentive to innovate. (Perhaps the result of this looks like Europe?)

Risky startups with multiple years of R&D before revenue would be the least impacted. You’re only paying taxes if the business is profitable ignoring investments like R&D spending.

You seem extremely confused.

Section 174 specifically made those R&D costs “ignorable” from a tax standpoint. When it ended R&D costs could no longer be used to offset income.

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

#305

Post by tomrod »

dragonwriter wrote: post #251
candiddevmike wrote: post #219

Earlier quoted context omitted.

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

> As a progressive, it seems like the Democrats always have Senate spoilers... With Republicans usually being dominant in a number of states, if Democrats have a Senate majority, it is usually both narrow and dependent on a very small number of Democratic and/or Dem-leading moderate independent Senators from Republican-majority states who vote with the party on leadership, but are soft (or firmly opposed to the progr…

Hell, just first past the post would eviscerate the current parties.

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

#306

Post by tomrod »

SpicyLemonZest wrote: post #234
candiddevmike wrote: post #219

Earlier quoted context omitted.

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

Providing spoilers was the explicitly designed purpose of the US Senate. It's not a one-sided problem - Senate spoilers are also why the Affordable Care Act didn't get repealed in 2017.

Explicitly?

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

#307

Post by Retric »

demosthanos wrote: post #300
Retric wrote: post #179

Earlier quoted context omitted.

> Early-tags startups into cash bond fires As a practical measure it’s really not. The transition is difficult for existing companies, but a future startup is going to be minimally impacted. Year 0 you’re unlikely to have any profits, future years you have multiple years of R&D to offset with. But let’s assume the worst case. Taxes are 21% of profits and at minimum deduction 20% of R&D so the theoretical maximum dist…

> Year 0 you’re unlikely to have any profits, future years you have multiple years of R&D to offset with. You're only unlikely to have no profits if you have no revenue. And you only get to break even 5 years in, which most startups will never reach. In practice what is likely going to happen is that we'll see more and more startups deliberately avoid revenue in the early days. More and more free tiers followed by ru…

> unlikely to have no profits if you have no revenue.

It’s much easier to have revenue than profits, set the price lower and suddenly zero profit. Some company avoiding profits because of the 21% tax on profit like that would be mathematically dumb.

> There is no unplanned economy, only different outcomes from better or worse plans. And I'm having a hard time imagining a worse plan than one that intentionally disincentivizes businesses from adopting a sustainable business model early in their lifetime.

There’s zero advantage to avoiding revenue or profit here. You’re tilting at windmills.

You simply need less investor money for R&D when other parts of the company are profitable. As to central panning, the mistake you just made is mitigated when many people are all independently making plans. Governments always need to get it right, the market is fine if some people get it right and therefore can reinvest in their success.

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

#308

Post by lostlogin »

runako wrote: post #303
madaxe_again wrote: post #200

Earlier quoted context omitted.

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.

Just last year, Congress snapped to attention and wrote and quickly passed a bill to ban the eminent national security threat of a video-sharing app. That bill doesn't do anything else. Just a reminder that Congress, even now, can rapidly act on a laser focus when it is sufficiently motivated.

Is there a good summary of that episode somewhere? I've tried to read up on it as I don't really understand how it was an eminent (imminent?) security threat.

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

#309

Post by jandrewrogers »

lesuorac wrote: post #252
aeonik wrote: post #249

Earlier quoted context omitted.

But you haven't gained... you could be taxed over and over again, and if the stick drops or hits zero then what? It's all on paper and not "real".

imo, it's in the best interest of the market for people to have to realize their gains otherwise the price of an item is pretty imaginary if it's never realized.

Gains are frequently not realizable as a matter of law and/or contract, for good reason. Additionally, there are many assets with notional value conditional on not liquidating them, which makes them de facto not realizable. And of course, the majority of assets have no liquidity, so realizability is a practical fiction.

The unrealized values are a fiction. There is significant value in treating values as unknowable when they are, in fact, unknowable. Forcing people to make up a fake valuation creates a lot of adverse incentives.

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

#310

Post by lostlogin »

jorvi wrote: post #110
wdaher wrote: post #56

Earlier quoted context omitted.

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…

> Amusingly, if you're pre-revenue, none of this matters (you have no income at all, so it doesn't matter what your expenses are.) https://youtu.be/BzAdXyPYKQo

There is so much gold in that show. Just rewatching it now. Fucking billionaires...
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