Underreported Factor in Mass Tech Layoffs: Trump Tax Cut

[iluvatar5150]

TIL that there was a provision in the Trump Tax Cut plan that changed the way companies had to deduct salaries of software developers (which are treated as an R&D expense). Instead of giving companies the option of deducting it upfront or amortizing it over 5 years, it just required them to amortize over 5 years. When the provision kicked in in 2022, any dev whose salary had been deducted up front got quite a bit more expensive.

This provision was added to the bill to keep it “revenue neutral” so it could pass via budget reconciliation and only kicked in after 5 years, because…. reasons?

The Pulse: Will US companies hire fewer engineers due to Section 174?

It’s rare that a tax change causes panic across the tech industry, but it’s happening in the US. If Section 174 tax changes stay, the US will be one of the least desirable countries to launch startups

blog.pragmaticengineer.com

 

[Laodicean60]

My boy Gergely finally understands what happens when you tax the "Rich". Every company feels the effect of raised taxes and they layoff people or pass them on to the consumer to keep their margin. Something else I don't understand; The complaints about Trump's tax cuts benefiting the rich and now when taxes are raised Gergely complains.

This provision was added to the bill to keep it “revenue neutral” so it could pass via budget reconciliation and only kicked in after 5 years, because…. reasons?

I hope this isn't implied to be detrimental to the current administration because the tax went into effect in 2022, Trump fully expected to be president during this time and still thinks so today.

"An unexpectedly high tax bill out of nowhere"
How was this unexpected when the TCJA was created in 2018?

 

[iluvatar5150]

My boy Gergely finally understands what happens when you tax the "Rich". Every company feels the effect of raised taxes and they layoff people or pass them on to the consumer to keep their margin.

Long-term, this didn’t change the amount of tax collected (or wouldn’t have if employment hadn’t dropped). It merely changed when it was collected. This was basically an accounting gimmick to enable Trump’s plan to go through.

Something else I don't understand; The complaints about Trump's tax cuts benefiting the rich and now when taxes are raised Gergely complains.

Again, they weren’t raised so much as reorganized, abruptly.

An unexpectedly high tax bill out of nowhere"
How was this unexpected when the TCJA was created in 2018?

This facet of the bill hasn’t gotten much press. It’s my understanding that the bigger players tried to make some noise about it at the time.