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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

#901

Earlier quoted context omitted.

Because they are a patriot. If not why are they in politics..?! Whom am I kidding...

Back during the communist vs capitalism and free market era Politicians were patriotic like you hope them now to be, they were worried about the rise of communism and were extremely attentive and focused and unified to making sure capitalism and free market works for the masses, that everyday westerners are enriched and have better social and health outcomes than their communist counterparts. It did succeed to the po…

> They gutted our manufacturing and industries, outsourced all our jobs with no better ones for those without jobs to replace them.

We have been very close to record-low unemployment last year and the real median household income is higher than ever

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

#902
post #537

Earlier 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…

> 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. That’s how it works for every business! If Jim Bean builds a distillation facility it has to amortize the investment in that over time. If the distillation facility doesn’t pan out, then it doesn’t get a refund for the taxes p…

The comparison with Jim Beam is misplaced. Both TSMC and Jim Beam already have to amortize their production equipment over several years. I'm not arguing that this should be changed. This is because the primary risk taken in a distillery build-out or a fab build-out is if there is market demand for a known product. It's primarily a business risk, not a research risk. Tax code is a reasonable tool to regulate business risk.

The people this tax code change hurts are those doing basic research. In the context of semiconductors, that would be a company like ASML (except they are Dutch, so they can happily continue their research practices) who took a decades-long bet to build their EUV steppers.

In the case of basic research, one could be spending millions of dollars on hardware prototypes when you know it can't produce any salable product. There's no upside profit to amortize expenses against: it's like building a distillery that you know can't produce a single drop of salable bourbon because you're working out a radical new distillation technique.

In summary: in basic hardware research, one could be spending millions of dollars to put a whole system together just so you can learn how it fails. It's a true "expense", with no path to amortization.

Now, in addition to making the right technical decisions, the tax law changes force the R&D teams to also consider how to amortize their experiments over many years. You now have have pressure from management to do things like stage prototypes and expenses in the right tax year so the company can continue to show a profit for the shareholders. You could argue that the lessons learned are perhaps IP that have "goodwill" value, but now you're opening a can of worms trying to price a fair market value on a negative result, and you're now having senior research staff spend more time arguing with accountants than directing research. You also have to get to that negative result within a tax year - which effectively penalizes any research project that takes more than 12 months to complete.

Same-year 100% deduction of R&D expenses is simple and it reflects the actual nature of basic research risk. Yes, it allows companies to convert short-term windfalls into long-term research gains by converting taxable profits into research projects, but I'd argue that's not actually a bad social policy.

I think US is probably unique among developed nations in having a tax code that punishes basic research; other countries at least allow it to be deducted. Some even allow super-deductions (e.g. you can deduct $2 for every $1 of R&D expense) or the research is explicitly subsidized through grants.

The argument for special treatment of research is that pioneers put their careers on the line to discover new things, so the rest of us can live in risk-free comfort; so, as a collective we give them some reward for taking that risk.

I suppose the counter-argument is that research incentives and subsidies are socialist "market manipulation" and violate the "free market" principle, and thus America is justified in sanctioning and trade warring with the rest of the world that is socializing basic research costs. That's an opinion one is entitled to hold, but we'll have to agree to disagree on that opinion.

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

#903

Earlier quoted context omitted.

Lol only for it to kick back in in 2029 during the next administration. Your employment has now become a bargaining chip in the GOP's handbook.

I don't follow. Why is the GOP to blame here? If the other party allows these cuts to expire, why wouldn't you blame that party?

These were... Introduced, and passed, by the Republican party? Seems kinda obvious that we should blame them. Let me know who you blame for cancer: the tumor or the doc who "let it happen"

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

#904

Earlier quoted context omitted.

I think you may misunderstand. For most of those, you get the choice to amortize if you prefer. In this instance, you must amortize, which is a big problem for startups.

Generally it’s not a choice. Valuable assets are required to be amortized over their useful life with limited exceptions

Your previous comment mixed tangible and intangible. R&D is intangible, so I focused there. Your response mostly applies to tangible. I think the other reply to you here makes a great point. Let's try not to talk past each other!

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

#905
post #674
post #585

Earlier quoted context omitted.

"Could be much worse" is a platitude not an argument. "It is improving" might be, if it were true.

I often couch my arguments in soft language like a conversation would be in order to have a discussion. The idea that the US is miles behind developed nations is nonsense.

Depends. Would you still insist it's nonsense if any of these things you mentioned happened to you or your family?

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

#906
The America government now has the best socioeconomic footgunning snipers that don't even do the covert job of making the 0.003% richer over the long term properly anymore.

America's balance sheet distribution (not income) breakdown:

8.5% $1M+

1.6% $10M+

0.003% $100M+

0.00026% $1B+

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

#907
post #627

Earlier quoted context omitted.

> a source control system that hides the source files from the contributor's view of the repository. How would that work? > You'd need a custom license where everyone in the world could use the results except for the contributor That one is incompatible with copyright laws in many countries outside USA.

> That one is incompatible with copyright laws in many countries outside USA. How so? You can't sign away your interest in a copywrighted work?

In fact, many countries don't let you sign away your statutory rights in general.

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

#908

Earlier quoted context omitted.

> But what would trump have done if he retained the presidency and lost congress? Trump is blaming Biden for the obvious outcome of Trump's tarrif nonsense. What do you think Trump would have done?

You have to be fair though, politicians always blame someone else and its usually the last person that was in charge. How often do you hear any one politician claim the glory of a situation that they had nothing to do with? And when was the last time you actually heard a politician own their failing or apologize?

> You have to be fair though, politicians always blame someone else and its usually the last person that was in charge.

I don't think this is a reasonable or informed take. It's quite obvious that the tarrif lunacy is single handedly causing an economic downturn. Trump himself has downplayed the relevance of this downturn with inane comments over how tarrifs would also be painful to the US economy. If you see a politician like Trump claiming both that tarrifs will be painful to the US and that the economic pain caused by Trump's tarrifs is blamed on whoever was there before him, you need to be massively disingenuous or naive to claim that "politicians always blame both sides". There is nothing normal about Trump's actions.

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

#909
post #22

This is insane, how does it make sense? Employee salary expenses are no different from other expenses to run your business. Imagine they did this for raw material instead, a restaurant could only expense 20% of the food that they sell. If they purchased $100 worth of food, but could only sell $50 worth of it, they have to pay tax on that even when making a net loss overall. It just does not make any sense. There woul…

It makes sense when you consider that there is no minimum tax rate on businesses. Given the choice, Amazon would rather spend 100% of its profits on itself than allow any of its profits to be paid out in taxes. Section 174 was implemented without a minimum tax on corporate profits before voluntary deductions such as research. Therefore, it’s exploitable and all companies ought to hire and fire staff to ensure their p…

That isn't a loophole. It is working exactly as was intended. Reinvesting is good.

The deal is that you can delay taxes by reinvesting (and either make the government more money at the end or lose it all if you were a fool, but you gain nothing by losing it all) but you cannot skip them when it comes to taking the profit out. The entire point of it was to promote investment into businesses which has kind of been a crucial factor in international competitiveness since the Industrial Revolution. Remember the fall of US Steel? That happened because they didn't reinvest.

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

#910
post #162

Earlier 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?

I don't have the brain-rot of calling all of mainstream economics 'neoliberalism' so I have absolutely no idea what you are trying to say here.
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