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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

#681

Post by rbultje »

mrweasel wrote: post #622
calderwoodra wrote: post #599

Earlier quoted context omitted.

I'm not an accountant, but as I understand it, you don't pay taxes on profits, but on revenue. So previously, some 20% of all revenue would be owned as corporate income tax, and startups would deduct it all as they're spending much more on R&D than they owe in corporate income tax. But with this tax change, the deduction would be much lower (80% lower IIUC).

If companies paid tax on revenue the US budget would be perfectly fine.

Large companies always find a way to not pay taxes. It's the little guys that end up paying (a lot!) more, to the extend that it cripples and kills them. But transformative innovation happens with the little guys. As a result, this tax change cements monopolies for megacorps. They will be fine and still pay nothing.

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

#682

Post by t0mas88 »

netcan wrote: post #672
fauigerzigerk wrote: post #605

Earlier quoted context omitted.

That was my first thought as well, but on second thought I can see how this might cause problems: For established profitable software companies there was a cliff edge in 2022 when this change kicked in. Staff costs for previous years had already been fully expensed while only 20% of the current year's costs could be deducted. Second, any sudden increase in research expenditures is now discouraged. This could make com…

> For unprofitable startups it could cause issues during a phase of very high revenue growth. So I guess my most question is "how this work irl?" Say a new startup raises money and hires 20 people. Pays $5m in salaries, office space and such. All 20 people are developing a software product. Are 100% of this startups expenses amorotized? Then they sell the product. They receive $2m in revenue. What does the P&L look l…

1 million profit, while they have 3 million negative cashflow, that's exactly the problem. They can only take 20% of that 5 million in R&D investment as depreciation in the first year.

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

#683

Post by rbultje »

chemmail wrote: post #553
mountainriver wrote: post #258

Earlier quoted context omitted.

This is one of the worst things MAGA has done. Tech startups are the source of so much of our wealth, and this makes it very challenging to ever build one. I can’t believe this still exists, and no one has changed it. We truly are governed by morons

But we are great now. What else do we need?

The way this is "fixed" right now, every five years we need another round of republican government to make things great again. If only enough democrats cared to fix this.

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

#684

Post by paulryanrogers »

xyzzyz wrote: post #648
throwaway173738 wrote: post #639

Earlier quoted context omitted.

This totally ignores values and motivations, and I would argue that only one group in your comment values winning at any cost.

I don’t even know which group you mean, but “my group has good values and motivations, but the enemy group just values winning at any cost” is exactly what a total partisan who values winning at any cost would say.

The evidence is that independent commissions drawing maps makes for more competitive districts. Which party is most opposed to such commissions? Which party is gleefully dismantling all accountability and oversight positions and departments? Which party is openly inviting corruption and pardoning those they should be prosecuting?

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

#685

Post by vlovich123 »

lucianbr wrote: post #474
bluGill wrote: post #400

Earlier quoted context omitted.

If the list doesn't go on and on that is a clear sign that corruption is being hid.

Could be a sign that the commenter was not willing to spend all his day writing, especially once his point was made.

I can’t tell if they’re trying to refute the point (ie the list being long means that it’s definitionally not being hid) or support (ie the list I made is finite and therefore the corruption is hid).

But I think of it like trying to estimate the size of an iceberg by observing the tip. Just because you know a little bit doesn’t mean you actually know about the scale. And there’s every reason to believe it’s quite extensive given how easily money flows from corrupt countries through USD and US persons and companies (eg the major bank that’s constantly getting fined for laundering terrorist and drug cartel money - either they’re the only ones and they’re making a killing providing this service anyway or they’re the only ones anyone is bothering to investigate, but that business is clearly lucrative to continue to engage in).

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

#686

Post by gortok »

netcan wrote: post #572
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…

What are the implications of this. As I understand accounting, this means that reported profits would be higher, and therefore incur more corporate income tax liability. Cash flow isn't effected besides tax. A startup isn't likely to be making a profit yet, under either accounting rule. Is there a benefit to reporting a larger loss? My first thought is that this effects Google and suchlike, not startups. But... assum…

> A startup isn't likely to be making a profit yet, under either accounting rule. Is there a benefit to reporting a larger loss?

As an example, A two person software startup; both drawing a salary, each making $100,000 per year. Each doing things related to software development.

Startup brings in 200,000K in revenue.

Under pre Section 174 changes, the profit is zero. Both salaries are expensible in the year they were incurred.

Post Section 174, the profit is now $160,000 each year. Now they pay taxes on $160,000, even though they literally have no money left over because revenues equaled expenditures.

At 25% tax rate, that’s $40,000 in taxes, for a business that made literally no money.

That’s why this is so devastating to small software businesses; unless you’re highly profitable and have cash reserves, this change hits hard.

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

#687

Post by PaulDavisThe1st »

rayiner wrote: post #653
glompers wrote: post #429

Earlier quoted context omitted.

This civic control correlation can simply have more to do with the most-white-supremacist Democrats switching to the GOP en masse and also simultaneously leaving multiethnic cities and school districts en masse after the 1960s. That self-selection left Republicans not a competitive amount of credibility or voter pool behind to work with. Your implication that policy dysfunction has ensued on that account rather than…

> That self-selection left Republicans not a competitive amount of credibility or voter pool behind to work with. So by your logic New York is a better governed state than Florida? Net internal migration would seem to disagree.

... because nobody moves to Florida for (what they perceive of) the weather, right? Especially not retirees tired of the idea of one more winter in NY.

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

#688

Post by tomrod »

CactusRocket wrote: post #540
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?

Hi, I'm just really curious about something. Why write AAPL, GOOG, and FB, and not Apple, Google/Alphabet, and Facebook/Meta?

Stock tickers are common and more readable than FAANG

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

#689

Post by rbultje »

e40 wrote: post #221
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…

And if the R&D uses foreign workers, because you can't afford to pay US wages, then the 5 years goes to 15 years! This hurts small companies (like mine) that were priced out of the US developer market.

We don't talk about this enough. International R&D is not offshoring of call-centers to India. International R&D is the IP for the next generation of global communication standards being owned by US-based or foreign corporations, because international (e.g. Canadian, European) standards experts/developers become un-affordable for US-based corporations and are forced to work for our "adversaries" instead. Crazy.
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