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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

#331

Post by sarchertech »

dragonwriter wrote: post #321
jandrewrogers wrote: post #309

Earlier quoted context omitted.

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 w…

> The unrealized values are a fiction. Then instead of taxing the gains, you'd accept the government nationalizing the assets by eminent domain and paying fair compensation that was significantly less than the "fictional" unrealized value? Or if someone unlawfully deprived you of the asset, you'd accept as restitution or seek as civil damages for the loss something significantly less than the "fictional" value? Or, w…

It would be much better to tax the benefits of the unrealized gain that a person realizes.

It’s much easier to do because there is no disputing the assessment since the person implicitly agrees to the valuation. And it allows people to forgo realizing any benefit from the unrealized value at all to avoid taxation.

Say take x% of the top of the money lent to someone who uses their unrealized gain to secure a loan. Make the money paid count against any tax they owe if they sell the asset later.

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

#332

Post by jmpetroske »

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 the TikTok debacle not a way higher profile case?

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

#333

Post by triceratops »

cake_robot wrote: post #241
luckylion wrote: post #230

Earlier quoted context omitted.

The chef doesn't create a meal once that you can sell for the next 10 years though. You pay him for time X, he makes a meal, you sell that meal. That's fundamentally different from regular software development outside of agencies where there is no direct relationship. Software development is closer to an investment than an expense. Amortization sucks in general, yes, because the money is gone and it doesn't affect yo…

When someone pays for labor to build an apartment building they profit off for decades, do they amortize that labor?

A comment I read in the thread here says the answer is "Yes". To which I have to say, that sucks.

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

#334

Post by sherburt3 »

rurp wrote: post #275
sherburt3 wrote: post #223

Earlier quoted context omitted.

Removing it would make Congress less powerful, and we can't have that now can we.

If anything it has been the opposite problem, with modern congresses having been more than happy to delegate away their powers. You might have heard the recent tariff news for example.

Presidencies last 4-8 years, congressional careers last decades.

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

#335

Post by jmyeet »

sylens wrote: post #324
jmyeet wrote: post #144

Earlier quoted context omitted.

Yes. And I reject that claim. Big tech companies are both doing mass layoffs AND hiring. How does this fit the narrative that the tax change is at least in part responsible? The new hires still have the same deduction issue, right? So what impact does this really have? Think of it this way: if this passes, will the layoffs end? Or reduce? Absolutely not. All this does is give line the pockets of shareholders. That's…

Things wouldn’t be called layoffs then, people would just be aggressively PIPed out

That's a solvable problem and probably already solved. Fire more than a certain threshold of your employees over a certain period for any reason and it's a layoff in effect, say 3% over 12 months.

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

#336

Post by mayneack »

glompers wrote: post #326
tomrod wrote: post #306

Earlier quoted context omitted.

Explicitly?

US Senator was an office initially designed to be selected by state legislatures rather than by direct popular election like the representatives. To a populist or a party boss, that might count as a spoiler to the will of the people or to the will of those in DC, or to both. But I may misinterpret GP's point.

I assume the person you're replying to is talking about the Filibuster and supermajority requirements not the direct election history. The filibuster is a senate rule not a constitutional design, so it wasn't part of the "design". Maybe they're both different ways of adding veto points to the same effect, but I think spoilers as "explicit design" is probably not how I'd describe it.

https://en.wikipedia.org/wiki/Filibuster_in_the_United_State...

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

#338

Post by malshe »

jopsen wrote: post #279
sampton wrote: post #133

Amortization is bad policy when it comes software. Software is inherently high risk. Every piece of software is unique and does not guarantee steady income over 5 years. Most startups won't survive 5 years to fully realize the deductions. This is the end of US software dominance.

Amortization makes sense for things that have some inherent value. Like a microscope or computer. A bankrupt company can still sell their computers. Selling you code, lol -- code is more of a liability really :)

> Amortization makes sense for things that have some inherent value. Like a microscope or computer.

I am nitpicking but since a microscope or a computer is a tangible asset, the correct term is depreciation. Amortization applies to intangible assets.

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

#339

Post by [deleted] »

Retric wrote: post #315
jt2190 wrote: post #304

Earlier quoted context omitted.

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.

What specifically do you disagree with? That R&D is an investment? I mean outside of the tax code that’s what it means to do R&D. As to my other point, the highest risk category of startup has zero customers for years they also have zero revenue, zero profit, and zero taxes to pay here. On the 5th year they can deduct R&D from each of those years making the net effect on them minimal vs a startup with profits on year…

[deleted]

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

#340

Post by jandrewrogers »

cjbgkagh wrote: post #317
jandrewrogers wrote: post #298

Earlier quoted context omitted.

The unrealized value is notional, not actual. This is a very important distinction. The notional value is often not remotely realizable. In many cases, the realizable value can be a tiny fraction of the notional value. Most laypeople grossly conflate notional and real value. Taxing notional value massively inflates the adverse impact of tax incidence on expected returns relative to people’s casual intuition based on…

For many assets, like real estate, there are liquid markets with market prices. There are a number of US states that already tax based on real estate value, you can dispute the assessed value but that impacts other things like insured value. Being difficult to assess value is a problem they’ll make you pay an accountant for and punish you if you get it wrong, it’s not going to stop them.

In the US, most recent studies of asset portfolios suggest that 60-70% of notional asset value has no liquid market. We already generate fictitious valuations for compliance purposes in many cases (e.g. 409A) that no one confuses with being representative of actual value. Tax policy based on overt fiction is bad policy.

Even in the case of real estate, a large amount of value is locked up in extremely non-liquid markets. You might get a vaguely representative market-clearing transaction once per decade, with high price volatility that makes it nearly impossible to predict what the next market clearing transaction will look like. I’ve owned assets in these types of non-liquid markets; differences in subjective valuations can vary by an order of magnitude and there is no evidence from the market to support any of those values.

If you only include extremely liquid markets for tax purposes in order to make valuations vaguely plausible, assets will be made non-liquid such that they are excluded from consideration. Ultimately this is why taxes on unrealized gains have been a challenging proposition in practice. We have no way to accurately model realizable value for the majority of assets and current simple approaches produce extremely wrong estimates a substantial percentage of the time.

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