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Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

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Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#791

Post by kiba »

happymellon wrote: post #707
kiba wrote: post #668

Earlier quoted context omitted.

Taxes on income or capital inherently reduce income and capital. Ditto for sale taxes, which reduces transaction volume. This is bad for the economy and ultimately reduce our tax base. About the only thing that doesn't happen is for non-reproducible privileges such as land, intellectual properties, the electromagnetic spectrum, etc.

Taxes reduces taxes? So are you saying that 0% rate taxes would capture the most tax?

Notice I note categories where it is fine to levy taxes without seeing a reduction in supply.

If you tax the usage of the electranetic spectrum too much, you would get no usage but the electromagnetic spectrum would still be there.

Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#792

Post by andrewlgood »

elictronic wrote: post #181
freedomben wrote: post #127

Earlier quoted context omitted.

Why is it still in place?

The Republican Party is actively antagonistic to any legislation from the Democratic Party basically. You need a 60% vote or you need to take away someone else’s pie. Medicaid/medicare/social security are current contenders based on Republican planning. The bigger issue is Republican voting districts gain less from putting it back in place. Most software devs are on the coasts and Denver.

Don’t need 60% for budget bills in reconciliation (the process of merging bills from the House of Representatives and the Senate). One of the times filibusters (which create 60% requirement) do not apply.

Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#793

Post by andrewlgood »

Terr_ wrote: post #189
acdha wrote: post #135

Earlier quoted context omitted.

Republicans really want to cut taxes for rich people but they don’t want to just straight-up acknowledge a huge debt increase for that goal, so they come up with different ways to say that something is budget neutral. That’s why a lot of the 2017 bill cuts were time-limited so regular people got the tax cut immediately and would hopefully remember it, but the time limit meant that CBO wouldn’t count it as a long-term…

There's a risk they'll try to break the Senate rules outright [0], by pretending that certain promised-to-be-temporary tax cuts now cost $0 to extend. To put it in domestic terms: * [January 1st] "Honey, I want to rent a Ferrari, I did the math and it fits if it's just one month! Pleeeeeease?" * [February 1st] "Oh, that? It's the Ferrari rental-fee for the next month, don't worry, it's an existing expense, it's alrea…

Both parties do this to make spending bills appear smaller. This is why clean energy tax credits generally passed during Democrat administrations have to be periodically renewed.

Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#794

Post by andrewlgood »

arrowsmith wrote: post #736
atxtechbro wrote: post #76

Signed. As a US-based developer, I fully support restoring the deductibility of software development expenses. This policy change quietly gutted countless startups and engineering teams—it’s long past time we fix it. Appreciate YC and folks like @itsluther pushing this forward. This isn’t just a tax issue—it’s about keeping innovation and talent thriving in the US. Let’s get it done.

[flagged]

That is actually why software development was allowed to be expensed prior to 2017 - to keep innovation thriving in the US. In 2017, they US simply stopped giving preferential treatment to R&D.

Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#795

Post by bigbacaloa »

abeppu wrote: post #207
stego-tech wrote: post #7

I’m all for reverting that part of the tax code, but only on the condition that it’s inapplicable to H-1B visa or foreign worker salaries/payments, provided that employer pays local taxes in those countries for those roles. Keep good paying jobs in the USA. If we need immigrant labor, give them Green Cards instead of precarity.

> Keep good paying jobs in the USA. If we need immigrant labor, give them Green Cards instead of precarity. I'm all for giving more people a faster path to a green card if they want it. But should a person really have to get permanent resident status to have a decent job here? If someone wants to work for a few years in the tech industry in the US but expects that they may want to go back to their home country (or an…

[dead]

Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#796

Post by Dylan16807 »

ndriscoll wrote: post #245
arcbyte wrote: post #73

Earlier quoted context omitted.

Corporate taxes are indeed levied on net income after expenses . Trading money for capital assets is not considered expense. If you start the year with 0$ in your bank. After the end of the year you have made $200k in revenue. However you "spent" $200k on software salaries. However, because these are software costs, they must be depreciated over 5 years, so only 20% of that $200k software cost can be applied as depre…

You do, however, have $160k worth of software that is generating ~$16k/mo in revenue (or more since you presumably did not make that $200k evenly spread out across year 1 while you were developing the software), so in year 2 you could halt further development, use a loan to get through the 2 months it takes to make the money to pay your taxes, and then make $176k profit. Then you pay your taxes on year 2 and walk awa…

> You do, however, have $160k worth of software

That is a huge assumption that is probably not true.

> in year 2 you could halt further development, use a loan to get through the 2 months it takes to make the money to pay your taxes, and then make $176k profit.

This is almost certainly not true.

Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#797

Post by dsr_ »

trhway wrote: post #732
bunnie wrote: post #728

Earlier quoted context omitted.

Fair enough, that was not the best example. But I'd also observe that since business owners have to capitalize the wages of the machine operators producing injection molds, then there is an advantage to outsource the whole operation. Comparing a procurement manager and a CNC operator [the person running the milling machine making a mold] paid the same amount, the CNC operator has a bigger negative impact on the busin…

>as management is an expense, but software engineers are not. is manager of AI agents (especially when they become more productive and capable than people) going to be a manager or software engineer?

IF they are a manager, then they are managing people. Are you paying appropriate salaries and benefits to your AI agents? Does HR have them in the system?

...no, not a manager.

Aircraft are also more productive and capable than people in specific activities, and useless wastes of money in others.

Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#798

Post by andrewlgood »

sergiotapia wrote: post #283
codingdave wrote: post #155

Signing a letter is fine, but will not have the same impact as phone calls made to your representatives. https://5calls.org/why-calling-works/ You don't need to use that site - the point is that if you want to have the loudest voice, make some calls.

Ok, say I call. What do I say: "Hey I want to show my support for the Big Beautiful Bill because it reverses the tax deduction for software engineers." And then what? (asking honestly lol for anyone who's done this before)

For clarity, the issue at hand is the “Big Beautiful Bill” does NOT reverse the tax treatment. The request here is to change the bill to reverse the current treatment.

Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#799

Post by gastonmorixe »

throwaway7783 wrote: post #309
naikrovek wrote: post #243

Earlier quoted context omitted.

> it massively increases that depends entirely on how much the business is taxed. every $1 deducted from taxable income is NOT $1 saved in that business' tax payment. It's much more like $0.10-$0.30 saved in taxes.

Whether it is $1 or $0.10, it is non existent for young software companies. If I'm penniless (after real expenses), where will I get those 10 cents to pay the taxes? And I'm not making this up. We are about to get cash flow neutral in our company, and this law will literally kill us and make 20 US citizens unemployed.

Get a loan. /s

Re: Tell HN: Help restore the tax deduction for software dev in the US (Section 174)

#800

Post by dsr_ »

eadmund wrote: post #772
happymellon wrote: post #707

Earlier quoted context omitted.

Taxes reduces taxes? So are you saying that 0% rate taxes would capture the most tax?

> Taxes reduces taxes? Yes. It’s a second-order effect. Imagine if there were a 100% tax: the government would probably get no taxes, because there would be no economy. > So are you saying that 0% rate taxes would capture the most tax? No. There’s a sweet spot. Everyone argues about where it is, but obviously 0% and 100% tax rates would both be problems.

It all depends on where you apply the taxes.

If you tax inputs but not outputs, then a 100% tax rate increases the cost of goods and services but does not necessarily kill the business.

If you tax income, then a 100% tax rate kills all income. However, income taxes are usually progressively, so a 100% marginal tax rate places a cap on income, but income below that can exist.

If you tax profit, a 100% tax rate leads to shifting profits to reinvestment and salaries and benefits.

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