831–840 of 991 posts
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If you give me 1000$ today and I give you back 1000$ in 5 years do you break even?
This US American idea of paying taxes = giving money away is weird. Especially coming from tech people, as what is preventing other nations from taxing the hell of big/US tech is the US government and its threats.
The company has to pay money upfront (as salary) and then gets it back later.
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 :)
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>treat the asset securing the loan as having the pre-gains price That’s no different than if the asset had no unrealized gain at all. >they’ll be more subtle It only takes a small rise in interest rates before it’s cheaper to pay the tax—assuming the tax isn’t outrageous. Unsecured are much riskier because of the way unsecured creditors are treated in bankruptcy, so they already have higher interest rates. It would b…
> That’s no different than if the asset had no unrealized gain at all. It lets you get loans based on 100% of your pre-gain money with zero taxes paid, which I think is too generous. You wouldn't do that if it was actually all your money. It mostly fits the idea of only taxing the "used" money, but not entirely, and I don't really favor that idea in the first place. > It only takes a small rise in interest rates befo…
You already paid taxes on the money you used to buy the asset. You aren’t using any part of the unrealized gain.
>You wouldn’t do that if it was actually all your money.
People take out loans secured by assets that haven’t appreciated all the time, they even put up assets that haven’t appreciated depreciated as collateral.
>only to yo to 90% of the post—gain asset value
Unsecured creditors come last in bankruptcy. They routinely end up taking pennies on the dollar. That’s the extra risk of making an unsecured loan vs a secured loan and the reason interest rates on unsecured loans are generally somewhere around 20% higher.
It would be very easy to some tweaks to bankruptcy law to increase the difference.
>stop unsecured loans from happening
We don’t have to stop them, but I think stopping unsecured loans over some large value would be a lot less problematic than taxing unrealized gains.
>15% tax is pretty big
It shouldn’t be the same rate as capital gains. You’re not getting the same value as if you’d sold the asset because you have to pay back the money with interest.
Even at 15% you only need to get the delta between a secured and unsecured loan to 3 points before the additional interest costs more than the tax.
>I don’t like this one at all
Well I mean if you don’t like it at all.
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…
In general, the tax code does not provide immediate deductions for purchase of assets that generate recurring income. Instead, the cost of the asset must be depreciated over time. The provision you point to excludes land, physical property, and software from treatment as R&D expenditures. Because all of those things generate recurring revenue over time. It’s specifically listed in that statute, but it’s not treated a…
Further, software is the only type of R&D explicitly called out as required to count as R&D. Which means it should be taken as a given that most other industries are finding ways to count their R&D as anything else, while we've been intentionally given the short straw for some reason by having our specific field be the only one identified by name so as to leave no wiggle room. I'd say that definitely counts as being a special case. The section is even labeled "Special Rules".
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They're still expenses, they just now need to be amortized. Buying a truck is an expense, as is buying gas for the truck. But the former you have to amortize over x years, the latter you can expense immediately. The law used to be "employee salaries for software are like buying gas" and now it's "employee salaries for software are like buying a truck".
The critical difference is that the business owns the truck but not the employee. The amortization assumes that the asset can be sold for value. An employee can quit at any time for any reason. You don’t retain the right to their labor for five years.
if anything, the amortization should match copyrights or patent lengths
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> Because generating an asset IE software isn’t a pure loss that’s why you’re doing it in the first place. Tell me you're not an experienced software engineer without telling me you're not an experienced software engineer. Code is a liability, not an asset.
> Code is a liability, not an asset. So you have no idea what that phrase means. If you don’t think code is an asset don’t write it. O wait obviously that’s not what code is a liability means. Code is a liability in the same way roads or buildings are a liability, they incur an ongoing cost, but removing the US highway system would be just as idiotic as a startup deleting their source repository from a misunderstood…
I love this example! It perfectly illustrates a case where the government intentionally subsidizes a liability that no sane company would take on without government funding. Well said.
So we're agreed that the government should incentivize R&D with a favorable tax code that makes it not completely insane to take on the risk of doing something new.
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Because almost no voters would be against the bill and it harms almost none of the supporters of representatives
If you think no voters would be against the bill, I would suggest your model of our media landscape could use a refresher.
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The company does not pay payroll taxes. Individuals pay those taxes.
It doesn't actually matter that much who actually writes the check to the government (although in the US, both parties pay taxes). Either way, the total cost of employment is higher for the employer than the after-tax income of the employee.
If corporations were able to operate in a high trust fashion and actually take responsinility for their tax burden properly, instead of trying to shirk it, then this policing wouldnt be needed, but we dont live in that world
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Avg for house is 12.5 and 8.5 in senate
Mitch McConnell has been serving in the senate since 1985. He's been a senator longer than most Americans have been alive. I think the outliers are far more consequential than the averages in this case.
* or whatever the threshold is
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> Code is a liability, not an asset. So you have no idea what that phrase means. If you don’t think code is an asset don’t write it. O wait obviously that’s not what code is a liability means. Code is a liability in the same way roads or buildings are a liability, they incur an ongoing cost, but removing the US highway system would be just as idiotic as a startup deleting their source repository from a misunderstood…
> O wait obviously that’s not what code is a liability means. Code is a liability in the same way roads or buildings are a liability, they incur an ongoing cost, but removing the US highway system would be just as idiotic as a startup deleting their source repository from a misunderstood idea. I love this example! It perfectly illustrates a case where the government intentionally subsidizes a liability that no sane c…
LOL, try again liabilities like buildings don’t need incentives. Software that is only barely worth maintaining isn’t worth subsidizing, highly valuable software needs no incentives.
If anything you’re making a solid argument government should discourage the creation of software so only the most valuable software is created and maintained. Except the optimum economic efficiency as so often happens occurs without government incentives.