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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

#381

Post by thayne »

altairprime wrote: post #174
jay_kyburz wrote: post #169

Earlier quoted context omitted.

In some parts of the world we have a sales tax which is a form of minimum tax on business outputs. The consumers of plumbing and software pay 10% regardless on a businesses profitability.

Yeah, VAT would help tremendously in alternative here, but for gestures at United States sociopolitics reasons the existing U.S. taxation methods can’t keep up and won’t be repaired any time soon. I could boil the ocean on this down to bedrock (citizens should be taxed on [redacted] in excess of threshold, services and goods should be VATed) but I stand by “section 174 with a sub-100% cap” as what at minimum would ha…

In many parts of the US there are sales taxes, but they are state or local taxes, not federal taxes.

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

#382

Post by bearjaws »

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 :)

The software that companies make is sold off in bankruptcy all the time.

I have a few friends who specialize in it with 2 ongoing contracts for splitting off pieces of software.

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

#383

Post by downrightmike »

Investors and stock holders should be extremely outraged that all of these businesses are knee capping their future profitability. Can't make all those future pension payments if all your investments can't stay relevant in the market.

Some people will point out that AI will fix this, no it won't:

1) The real cost is higher than anything you'd pay for a person an there is not likely any real change there.

2) AI will be lies like Actual Indians that won't scale

3) Here's the kicker: If AI does succeed, now these multi-billion dollar firms will have to compete with multi-billion dollar single person businesses, that eat their lunch

Its a race to the bottom right? That means you need to invest in the business and all these layoffs are exactly not that, and will leave companies unprepared for the next 10 years.

Remind me in 2035.

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

#384

Post by mjevans »

curtis3389 wrote: post #367
droopyEyelids wrote: post #346

Earlier quoted context omitted.

Who sponsored this text in the bill?

Here's the cosponsors of the bill: https://www.congress.gov/bill/115th-congress/house-bill/1/co... I think the purpose of the change was to "increase revenue": > Requiring that certain research or experimental expenditures be amortized over a five-year period or longer, starting in 2023, would increase revenues by $109 billion over the period from 2023 to 2027. https://www.congress.gov/congressional-report/115th-cong…

They want to call it anything other than a tax.

It's a specific tax, on a particular class of better educated workers in specific jobs.

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

#385

Post by rcpt »

curtis3389 wrote: post #367
droopyEyelids wrote: post #346

Earlier quoted context omitted.

Who sponsored this text in the bill?

Here's the cosponsors of the bill: https://www.congress.gov/bill/115th-congress/house-bill/1/co... I think the purpose of the change was to "increase revenue": > Requiring that certain research or experimental expenditures be amortized over a five-year period or longer, starting in 2023, would increase revenues by $109 billion over the period from 2023 to 2027. https://www.congress.gov/congressional-report/115th-cong…

Also, that administration was pissed off at tech.

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

#386

Post by tomrod »

bearjaws wrote: post #382
jopsen wrote: post #279

Earlier quoted context omitted.

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 :)

The software that companies make is sold off in bankruptcy all the time. I have a few friends who specialize in it with 2 ongoing contracts for splitting off pieces of software.

The value is far less than the amount being amortized for its development.

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

#387

Post by tomrod »

Supermancho wrote: post #290
jopsen wrote: post #279

Earlier quoted context omitted.

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 :)

> Selling you code, lol -- code is more of a liability really :) It's important to consider that lawmakers (who are not well informed or downright stupid) might think code has intrinsic value because of media married with a lack of real-world experience.

Continuing your observation, this presumes they read and think deeply about the bills they vote on. They do not.

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

#388

Post by coderatlarge »

pclmulqdq wrote: post #343
youngtaff wrote: post #166

Earlier quoted context omitted.

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

"Profitable" in an accounting sense has nothing to do with your cash position. This is something that people in tech don't really seem to understand.

i think people in tech are usually focused on free cash flow, aka playing around money.

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

#389

Post by rbultje »

demosthanos wrote: post #316
tommy_axle wrote: post #314

Earlier quoted context omitted.

Wasn't there something when this went into effect about the mid-year being the start so it is 10% in years 1 and 6?

Yeah, I just read that. So it's actually 10-20-20-20-20-10, which is both weirder and also slightly worse than my formula above.

That part is not so weird, you didn't pay all salaries on January 1st. But amortizing salaries in general is ridiculous.

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

#390

Post by tomrod »

lesuorac wrote: post #250
demosthanos wrote: post #226

Earlier quoted context omitted.

We're not talking about a tax deduction in the sense of a special privilege, we're talking about simple calculations of profit. Before this change, tax for software development was calculated against: * Profit = Revenue - Expenses And software developer salaries fell neatly into Expenses unless you were looking for an R&D tax credit. After this change, tax for software development is calculated against this new equat…

It is a subsidy! Why should money spent on software _development_ not have to be deprecated over time like other money spent on _development_? I get that it sucks from a cash flow standpoint but the same is going to be true of other R&D expenses. It's just that we're more exposed to this specific R&D expenditure and not others.

Because you slinging a React component or Vibecoding a security pile requires no Technology Readiness Level assessment nor does it have development liability. Rather, what we call Software Development is more appropriately labeled Software Engineering.
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