You have yet to make an argument how campaign finance reform would change any of the above.
- No more gerrymandering
- Mandatory voting(You can still vote for nobody, but you have to go to a polling station)
- Voting always on a weekend
- Strict rules about how many polling places per X many people
- Preferential Representation voting system instead of first-past-the-vote.
Look at how Australia does it.
For the remaining stuff, you need federal bills passed, so we're talking about both chambers of Congress + president. So the one party that isn't opposed to all that needs to have a trifecta, for starters. Majorities are razor thin these days, especially so in the Senate, so filibuster in the latter is another hurdle (although it could be dropped for something like this).
That's why it's such a nasty deadlock - the system is in a state wherein there are no legitimate methods to recover its operation.
Made me glad our founders are so fiscally conservative, as other startups around had to lay off some people to have cash on hand to pay the increased taxes.
"Tech companies, specifically, have lots of money. How can we get some of it?"
I’m also fairly skeptical that this is all that much of a deterrent to doing business in the United States. The US had uncommonly high corporate tax rates until recently, and that didn’t seem to adversely affect economic dynamism. I mean, sure, one can avoid this particular taxation regime by (checks notes) moving the entire operation to another country, but that obviously sacrifices the advantages of doing business in the US (deep and liquid capital markets, well-known legal regime associated with investing in a Delaware corp, network and agglomeration effects, etc.) and the replacement jurisdiction is certainly going to have its own set of downsides.
The salary is not the asset, it's an expense that produces an asset.
If a company invests $1 million into an asset that earns $250k each year over 5 years, the company would otherwise see a $750k loss the first year followed by $250k profit for 4 years. By following an amortization schedule, they are taxed on a steady $50k profit each year. In other words, the taxable effect of the expense is "spread" through the years in which that asset is expected to earn income.
Of course, Congressional budget negotiations have been an unproductive circus show for a while, so this never actually happened and the thing that was never actually intended to go in place went in effect. With the current razor-thin majority in the House constantly getting derailed over budget negotiations, this is unlikely to resolve any time soon.
Since Obama became president, all legislation basically needs 2/3rds of the senate to pass if it's remotely controversial and every tax change is controversial. There is one exception though: if the bill is of a budgetary nature, and is revenue neutral over 10 years.
Trump really wanted to pass some tax cuts in 2017. But as you'd expect, claiming that a big tax cut is revenue neutral is far more than the senate parlamentarian would believe. So instead, some tax cuts are made temporary, and some tax changes are made that would gain revenue. Then the whole thing appears to be revenue neutral over a decade, because nobody expects that the poison pills at the end will actually be allowed to happen. They tend to come in 6+ years later, as to make sure that all senators and the president might also claim said increases are not their problem.
So the expectation is that a future congress will just undo those tax changes, and push them further into the future, by again making another bill that looks revenue neutral in the long run, but is just kicking the ball down the road.
The congress since the midterms, however, is even less functional than in the Obama or Trump years: So the poison pills that are not supposed to happen are starting to happen. Other cuts that occurred, like the increase of the standard deduction, were also marked as temporary, and could come back if congress doesn't do anything.
So ultimately it's all side-effects of people trying to bypass congressional rules, because otherwise we'd not see anything other than emergency spending bills passing in congress. Changes to legislation that would make this kind of dysfunction stop happening are even harder to pass. Every incentive pushes politicians of all parties to play with fire. This time we got burned.
> In 2017, then-President, Donald Trump, signed the 2017 Tax Cuts & Jobs act, which overhauled tax codes and reduced tax – for example, it reduced the top tax bracket from 39.6% to 37%. To make the bill pass strict budgetary rules, the Senate used a process called reconciliation: adding in tax code changes that delayed tax increases. These delayed increases “balanced out” the tax reduction.
> One of these changes was Section 174, set to come into effect 5 years later, in 2022. These parts deliver the blow by making it clear that software development costs need to be amortized over 5-15 years. Most experts expected Congress to push back the Section 174 amendment to a later date, or simply remove it. But Congressional negotiations to repeal the changes fell apart at the last minute in December 2022, meaning it became law.
> Amazon, Microsoft, Intel, Ford, Lockheed Martin, and other US companies created the US R&D Coalition in 2018 to advocate in reversing this change. This group concludes... "By diminishing the near-term value of R&D expenditures, the Tax Cuts and Jobs Act will reduce incentives for companies to invest in the development of new products, ultimately hurting consumers and businesses alike.”
> What about VC-funded companies? For loss-making companies this change doesn’t make much of a difference. But the change does impact VC-funded companies near to break even. Most VC-funded companies close to breakeven have big-enough cash buffers with which to pay unexpected tax bills. However, these companies might reduce hiring – or even consider letting go staff.
My 2c are that big tech companies with large amounts of cash on hand wanted to be seen optically as fighting against this change... but those with cash on hand would also benefit from being the only ones able to weather the storm relative to their would-be competitors. It's unclear that incentives were aligned here among those companies with lobbying budgets.
I don't think there's any real logic to it, it's just a way to balance the tax budget.
For 1, presuming that all software engineering is "research or experimental" is faulty. The vast majority of software engineers are implementing known things, and the "experimental" status reflects its reliability. Most "experimental" software isn't really doing experiments to answer questions, it's just checking whether an approach works correctly. I don't think anyone could honestly call writing an Okta integration for a SaaS app "experimental". You know that it will work ahead of time, you just aren't sure if your pass implements it correctly.
For 2, this would imply insane things if applied to other fields. What is the correct period to amortize a bridge engineer's salary over? 50 years? 100? We still have some Roman bridges around, maybe we need to look in the thousands of years. Patents are good for 20 years, so any salaries that lead to a patent clearly need to be 20 year amortization. Copyright is life + 70 years, so graphical designer salaries should be amortized over at least 100 years.
I don't think there's any real logic here, it's just a way to balance the tax budget.
if I understand it correctly it means the cost of this year would be written of over 5 year each year 20%, but if you keep your employees it means in the second year you have 20% write off from that year and 20% of the previous years and so one, so 5 years in still 100% write off every year
I wonder if that would motivate companies to have a more constant number of employees or more precise a similar income bill every year.
Through it would definitely mean if you had considered layoffs this year is the year to go.
If you spent $100M on developer salaries in FY2022, you'd create an amortization for that over the next 5 years.
And then in FY2023... even if you had fired your entire software department... you'd still get to claim that year's portion of that previously created amortization.
IANAL but have filed corporate taxes many times.
but when keeping a job position (not necessary the same person tho) through overlapping writeoffs it will lead to a consistent 100% writeoff
not doing so can lead to spkies of little writeoff when increasing company size and the opposite when shrinking it. This would make new hires on a limited budged harder and in turn should motivate more long term planing when it comes to head count and that might lead to less head count fluctuations maybe
1) Tech workers are liberals
2) Liberals being owned is good if you're an administration consumed with punishing your enemies and enriching your allies
#2 is also why SALT deduction was curtailed, to punish blue states. While I think that's accidentally good policy, it made people mad enough to flip the House in 2018.
Especially in vesting environments, where devs need to wait for the vesting to have made their R&D-heavy roles worth it from a monetary point of view. Well, large firms will need to give their devs enough runway now so that they can depreciate the costs over a longer period of time instead of only thinking in the short term. They can still fully deduct the salaries, just over a longer period of time. It is 5 years for domestic R&D / development and 15 years for foreign. I think that is good and will cause better treatment of developers in the long run.
Last startup I worked for is on round 7 of layoffs / restructuring right now.
Your mindset is only valid in the explicit context of a company
A) not having cut you
B) having cut others prior to you
As soon as that context is lost in the next two years when you get fired or find a new job, you're back to square one, except you're also competing against Joe Google Engineer.
I think this is a normal trade off. You left a team or a company for more money. There is nothing wrong with this, but you necessarily need to start from a new context since it’s a new team. When times are tighter because of economic cycles, this means that you should be more intentional with changing a team so that you are sure you will be able to compete with Joe Google Engineer. It’s still a competition in some ways, and that’s fine.
If you find a good place, stay a while in tighter economic cycles in order to build more skills and rapport and then hopefully, and realistically based on experience, you’ll have more runway within that company even if times are bad or if your performance sometimes is low because of life events.
Prior to this change in the tax code, your software labor costs for that year would all count against your income so you'd be taxed on $0 in profit.
With this tax code, you can only amortize 10% of software labor in the first year so now your business just had $900k in profit as far as the IRS is concerned. You now have to pay ~200k in taxes. You have to come up with that money somehow, and for most businesses the only short-term option is a combo of reducing costs (layoffs) and loans.
Let’s say you have $100 in revenue, $100 in salary expenses and $50 in other expenses.
Pre 174 you would be considered to have a loss and wouldn’t pay taxes on profits since you don’t have any.
However, post 174, since you’re amortizing salary expenses, you can only deduct $20 out of that $100 (actually the scaling is a little weird I believe, so it’s even worse and the first year you can only set aside 10%), so as far as the IRS is concerned you made $100 in revenues and $50 + $20 in expenses, so you had a profit of $30. So somehow you now need to find actual cash to pay for the $30 in profits when in reality you’ve paid out more than you’ve made.
This just means you have to raise more funds for something that is not returning any value to you.
Your competitors abroad don’t need to do this. Your deep pocketed large competitors don’t need to do this. They have cash to pay and they will get the money back in 5 years, a time which you may not even survive to receive that set off.
This is the worst kind of policy because it doesn’t even make the government more money (the overall tax deduction is still largely the same) but it makes things way worse for companies.
To take a simple example under Section 174 rules let's take a bootstrapped business with one US-based developer developing a SaaS product. If you pay them $100K and also bring in $100K revenue, prior to Section 174 the taxable revenue was 0. Under section 174 the business now can only claim $20K and the taxable revenue is $80K. Your tax bill is some fraction of that after you get done applying credits of various sorts.
The problem with the Section 174 change is 2-fold. It was unexpected--most people assumed it would be corrected. It also hits bootstrapped businesses hardest, which are exactly the sort of businesses we should be encouraging. VC-backed businesses have less of a problem early on because their expenses tend to be so high that even with Section 174 they aren't profitable. However even there as a founder there can be a substantial impact, because the Section 174 charges eat up your Net Operating Losses (NOLs) which you can use to offset the profit from selling the company or future tax bills.
Edit: as others have pointed out the amortization schedule is apparently not linear, so 20% might not be right. The other complication is that there are many deductions and adjustments that affect your taxable revenue. NOLs are the biggest in my experience but there are others.
When I bought a laptop for my business, it was amortized over... 3 years I think. Kinda nuts but, whatever. It's a couple thousand dollars.
But the example above (somewhere) with the 5 employees at $200k/each... only being able to deduct $100k of that, even assuming $1m in revenue... meaning 'profit' of $900k.... it's just crazy.
Take credit for "lowering taxes"... push the effects of the time bomb on to a future administration. Definition of stable genius... ;)