That’s not what “ghost in the machine” means.
The time bomb in the tax code that's fueling mass tech layoffs
691–700 of 991 posts
Re: The time bomb in the tax code that's fueling mass tech layoffs
#692There 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…
It might be "quite short" but it's full of click bait style text. This tax law will change everything, but we won't say what it is for 4 or 5 paragraphs, nor what changed for another 3 Edit : sorry I just realised you meant the tax law is short. The article itself is very annoyingly written
Agreed. I think the article's text was responsible for the confusion in the comments prior to me posting this. They could have been much more clear and straightforward.
Re: The time bomb in the tax code that's fueling mass tech layoffs
#693There 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 don’t get the big hoopla. Here in Germany I’m opting to turn development costs into assets (I simplify a bit). I need assets on the balance sheet, otherwise we’re over-indebted. As long as the development costs are much higher than income (I.e. as long as you’re not profitable), then it shouldn’t matter. And once you are profitable, you pay some more corporate taxes, but aren’t they kind of not too high in the us a…
the big hoopla is this: you're a newish startup. You have $300k/yr revenue and $$270k/yr expenses of which $250k is paying your programmers.
prior to this rule change, what you pay your programmers is just a deductible expense, so you owe taxes (in this very simplified example with no other expenses etc. etc.) on just $50k.
after the rule change, you can deduct only $50k of the labor cost (in this year), so now you owe tax on $250k.
there is a very good chance you do not have the cash available to make this payment.
of course, after 5 years, things all balance out and are effectively "back to normal". but you have to get through those 5 years first.
Re: The time bomb in the tax code that's fueling mass tech layoffs
#694There 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…
This was also a gift to big tech, boxing out competitors.
Re: The time bomb in the tax code that's fueling mass tech layoffs
#695Re: The time bomb in the tax code that's fueling mass tech layoffs
#696Re: The time bomb in the tax code that's fueling mass tech layoffs
#697Earlier quoted context omitted.
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…
Yeah, this provision is a complete fuck up.
Re: The time bomb in the tax code that's fueling mass tech layoffs
#698Earlier 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?
Same as the communists, in that it hasn't been truly implemented anywhere?
Re: The time bomb in the tax code that's fueling mass tech layoffs
#699Earlier quoted context omitted.
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.
The little guy always pays all taxes. Corporate tax is just a way to palatably shift tax burden to the low and middle classes and away from the owner class. It is pure double speak.
Re: The time bomb in the tax code that's fueling mass tech layoffs
#700Earlier quoted context omitted.
As anyone that has ever sold software IP knows, most of the value is vested in the person that wrote the code, not the code itself. The code is not a factory, it is the output of the factory.
> ...most of the value is vested in the person that wrote the code, not the code itself. You must have misphrased what you intended to say. If what you wrote was true, a software company's most valuable asset would be the specific programmers in its employ. If true, average tenure of a programmer would be way longer than 1.5->2 years as companies worked really , really hard to keep their most valuable assets from wal…
Most programmers do approximately zero work that is R&D. The most you lose if they walk out the door is institutional knowledge.
On the other hand, I've worked almost exclusively on software R&D for decades and seen the loss of a single person effectively end a project even when the software was essentially finished. Software R&D is about developing abstract knowledge, concrete implementation code is just a useful byproduct of that since R&D is typically motivated by a specific novel requirement.
If the software IP that results from R&D is not core to your business or a competitive risk, there is money to be made by licensing it. I've licensed this type of IP to big tech companies a number of times. If you are not actually doing software R&D, you are unlikely to be in a position where this is a possibility.
In almost every IP sale and licensing deal for software R&D I've seen, the value of any code is almost entirely conditional on retaining the services of person(s) that designed and wrote it. The entire "acquihire" phenomenon is an explicit admission of this. This is true even when the code is in a mostly finished form. Companies are buying capability, not revenue, so the code can't be a black box to their engineers. Companies usually spend more to acquire people with the code knowledge than the actual code.
The practical reality is that it is difficult to reverse engineer abstract knowledge from a concrete implementation. No one wants your code per se, they want to adapt your code to a different application that requires having a deep understanding of the domain the code represents -- they don't know what they don't know.
If you are just grinding out software that could be vibe coded then there is minimal asset value being created in the software artifacts. Anyone else would be better off reimplementing it themselves.
So yes, almost all of the value of code produced by software R&D vests in the people that wrote it. This is evident across many software IP transactions.