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The time bomb in the tax code that's fueling mass tech layoffs
751–760 of 991 posts
Re: The time bomb in the tax code that's fueling mass tech layoffs
#752Earlier quoted context omitted.
> The rule as written means contractors who write Windows drivers could deduct their expenses (as they would have no residual rights to a closed-source work product), but contractors who write Linux drivers may not (as they would have some rights to open-source Linux drivers). Is it just me or are you conflating two orthogonal things? An open-source Windows driver would have the same issue, no? And a closed-source pr…
I could see it being inferred that way but, the way I read it, they are not meant as unilateral facts. Rather, they serve as rhetorical examples of where you might find contractors doing similar work, but where the one more in service of "public good" is taxed higher because it's open source. Strictly speaking, Windows bits are not all closed source and there exist closed source Linux bits. But it's not a point that…
> I think it's fair to use Windows and Linux as stand-ins for closed vs open source because it's a very accessible example
We're talking about businesses here that would struggle with these tax rules. Which I guess is, mainly, contractors or startups. How common is it for them to write open-source drivers vs. closed-source ones? I would've imagined the majority of drivers in such cases are closed-source, on every platform. But I would find it interesting to hear if things are somehow different on Linux.
Re: The time bomb in the tax code that's fueling mass tech layoffs
#753Earlier 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
for anyone curious, this wasn’t specifically trump, but it was indeed a republican congress bill. texas republican was the initial sponsor and then republicans lined up to cosponsor. this was done to fuel their tax cuts to a small group of a certain people. you can see all of the sponsors here: https://www.congress.gov/bill/115th-congress/house-bill/1/co...
It was indeed passed by Republicans in Congress (with Democrats mostly voting Nay), but it was signed by Obama (12/22/2017). Why did he sign it?
Re: The time bomb in the tax code that's fueling mass tech layoffs
#754Earlier 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…
This example only really has the emotional impact it does because of the specific numbers used, but doesn't really generalize for an arbitrary N.
Clearly if two software engineers build a product that brings in $10M, and each pay themselves $5M, it doesn't seem so outrageous that the can't really claim they're running "a business that made literally no money." Clearly in this second example the problem is that the engineers are paying themselves way too high given the return on their efforts.
What this means is that software engineers will be required to bring in more value to justify their high pay. In your example, it simply means that a software engineer that brings in $100,000 of value to the company, probably shouldn't be paid $100,000.
This seems entirely reasonable to me, and doubly so when I consider how many large corporate teams (who I think will ultimately be impacted more than startups) has huge numbers of highly paid engineers not doing all that much.
In most startups I've worked in it was pretty common for engineers to be delivering multiples of their cost in value, and in every big company I've worked in, it was very common to be delivering fractions of one's cost in value.
Re: The time bomb in the tax code that's fueling mass tech layoffs
#755There 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's pretty bad. It had a huge impact on my personally, I'm a small R&D shop and basically I have had to end all risky long-term research projects. In addition to the research costs, I'd also have to pay taxes on the research costs mostly up-front. Significantly, if the project doesn't work out, I'm still out of pocket for the tax money. It's a penalty for taking a risk, and it kneecaps American innovators in a globa…
You’re likely overreacting.
It makes software temporarily 16.7% more expensive in year one if you’re operating a profitable company, but you do eventually get to deduct that over time. Pay 8% on a 4 year loan and that drops to ~4%.
Re: The time bomb in the tax code that's fueling mass tech layoffs
#756Earlier 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…
If they hire 20 devs in their first year paying $5m in salaries, only $1m or $500k (if the mid-year convention applies) would count as a business expense in that first year.
If their revenue was $2m, that would leave them with $1m (or $1.5m) of taxable profits unless that was eaten by other costs.
It doesn't have to be a problem, but if revenue grows fast and they go on another hiring spree in the following year then it could become a problem.
That said, if revenue grows so fast, it seems likely that they would have huge marketing and sales costs that could be expensed immediately. So maybe this isn't really a problem for many startups. I'm not sure.
Re: The time bomb in the tax code that's fueling mass tech layoffs
#757Earlier quoted context omitted.
No, education is not brainwashing. These terms have different definitions. One is by definition good, one bad. Words matter, definitions of words matter.
I’d love an education system that only teaches scientific consensus, and leaves moral conclusions to parents and households. However I’m sure you’d appreciate that’s not what we have.
what moral conclusions?
Re: The time bomb in the tax code that's fueling mass tech layoffs
#758Earlier quoted context omitted.
It's pretty bad. It had a huge impact on my personally, I'm a small R&D shop and basically I have had to end all risky long-term research projects. In addition to the research costs, I'd also have to pay taxes on the research costs mostly up-front. Significantly, if the project doesn't work out, I'm still out of pocket for the tax money. It's a penalty for taking a risk, and it kneecaps American innovators in a globa…
Just pledge copyright of contributions to eff or something.
Create a shell company with an X$ investment.
Have the shell company write code. (Or more risky pay your company to write code as a work for higher.)
Devolve the shell contributing its assets to OSS.
Take a X$ loss in that year.
Argue that it is perfectly legal to the IRS.
Re: The time bomb in the tax code that's fueling mass tech layoffs
#759Earlier quoted context omitted.
for anyone curious, this wasn’t specifically trump, but it was indeed a republican congress bill. texas republican was the initial sponsor and then republicans lined up to cosponsor. this was done to fuel their tax cuts to a small group of a certain people. you can see all of the sponsors here: https://www.congress.gov/bill/115th-congress/house-bill/1/co...
It was indeed passed by Republicans in Congress (with Democrats mostly voting Nay), but it was signed by Obama (12/22/2017). Why did he sign it?
I encourage you to look closer at the "in office" section here.
Re: The time bomb in the tax code that's fueling mass tech layoffs
#760Earlier quoted context omitted.
I’d love an education system that only teaches scientific consensus, and leaves moral conclusions to parents and households. However I’m sure you’d appreciate that’s not what we have.
what moral conclusions?
For example: What’s the right way to live? How to relate to others? On what basis do we cooperate? What are/are not the overall goals of society? What’s the meaning of life? What is it to be a good person?