A decades-old tax rule helped build America's tech economy. A quiet change under Trump helped dismantle it
For the past two years, it’s been a ghost in the machine of American tech.
Between 2022 and today, a little-noticed tweak to the U.S. tax code has quietly rewired the financial logic of how American companies invest in research and development. Outside of CFO and accounting circles, almost no one knew it existed. “I work on these tax write-offs and still hadn’t heard about this,” a chief operating officer at a private-equity-backed tech company told Quartz. “It’s just been so weirdly silent.”
Still, the delayed change to a decades-old tax provision — buried deep in the 2017 tax law — has contributed to the loss of hundreds of thousands of high-paying, white-collar jobs. That’s the picture that emerges from a review of corporate filings, public financial data, analysis of timelines, and interviews with industry insiders. One accountant, working in-house at a tech company, described it as a “niche issue with broad impact,” echoing sentiments from venture capital investors also interviewed for this article. Some spoke on condition of anonymity to discuss sensitive political matters.
Since the start of 2023, more than half-a-million tech workers have been laid off, according to industry tallies. Headlines have blamed over-hiring during the pandemic and, more recently, AI. But beneath the surface was a hidden accelerant: a change to what’s known as Section 174 that helped gut in-house software and product development teams everywhere from tech giants such as Microsoft (MSFT) and Meta (META) to much smaller, private, direct-to-consumer and other internet-first companies.
Now, as a bipartisan effort to repeal the Section 174 change moves through Congress, bigger questions are surfacing: How did a single line in the tax code help trigger a tsunami of mass layoffs? And why did no one see it coming?
A tax break that built the modern tech economy
For almost 70 years, American companies could deduct 100% of qualified research and development spending in the year they incurred the costs. Salaries, software, contractor payments — if it contributed to creating or improving a product, it came off the top of a firm’s taxable income.
The deduction was guaranteed by Section 174 of the IRS Code of 1954, and under the provision, R&D flourished in the U.S.
Microsoft was founded in 1975. Apple (AAPL) launched its first computer in 1976. Google (GOOGL) incorporated in 1998. Facebook opened to the general public in 2006. All these companies, now among the most valuable in the world, developed their earliest products — programming tools, hardware, search engines — under a tax system that rewarded building now, not later.
The subsequent rise of smartphones, cloud computing, and mobile apps also happened in an America where companies could immediately write off their investments in engineering, infrastructure, and experimentation. It was a baseline assumption — innovation and risk-taking subsidized by the tax code — that shaped how founders operated and how investors made decisions.
In turn, tech companies largely built their products in the U.S.
Microsoft’s operating systems were coded in Washington state. Apple’s early hardware and software teams were in California. Google’s search engine was born at Stanford and scaled from Mountain View. Facebook’s entire social architecture was developed in Menlo Park. The deduction directly incentivized keeping R&D close to home, rewarding companies for investing in American workers, engineers, and infrastructure.
That’s what makes the politics of Section 174 so revealing. For all the rhetoric about bringing jobs back and making things in America, the first Trump administration’s major tax bill arguably helped accomplish the opposite.
Undercutting the incentive structure
When Congress passed the Tax Cuts and Jobs Act (TCJA), the signature legislative achievement of President Donald Trump’s first term, it slashed the corporate tax rate from 35% to 21% — a massive revenue loss on paper for the federal government.
To make the 2017 bill comply with Senate budget rules, lawmakers needed to offset the cost. So they added future tax hikes that wouldn’t kick in right away, wouldn’t provoke immediate backlash from businesses, and could, in theory, be quietly repealed later.
The delayed change to Section 174 — from immediate expensing of R&D to mandatory amortization, meaning that companies must spread the deduction out in smaller chunks over five or even 15-year periods — was that kind of provision. It didn’t start affecting the budget until 2022, but it helped the TCJA appear “deficit neutral” over the 10-year window used for legislative scoring.
The delay wasn’t a technical necessity. It was a political tactic. Such moves are common in tax legislation. Phase-ins and delayed provisions let lawmakers game how the Congressional Budget Office (CBO) — Congress’ nonpartisan analyst of how bills impact budgets and deficits — scores legislation, pushing costs or revenue losses outside official forecasting windows.
And so, on schedule in 2022, the change to Section 174 went into effect. Companies filed their 2022 tax returns under the new rules in early 2023. And suddenly, R&D wasn’t a full, immediate write-off anymore. The tax benefits of salaries for engineers, product and project managers, data scientists, and even some user experience and marketing staff — all of which had previously reduced taxable income in year one — now had to be spread out over five- or 15-year periods.
To understand the impact, imagine a personal tax code change that allowed you to deduct 100% of your biggest source of expenses, and that becoming a 20% deduction. For cash-strapped companies, especially those not yet profitable, the result was a painful tax bill just as venture funding dried up and interest rates soared.
The layoffs begin
It’s no coincidence that Meta announced its “Year of Efficiency” immediately after the Section 174 change took effect. Ditto Microsoft laying off 10,000 employees in January 2023 despite strong earnings, or Google parent Alphabet cutting 12,000 jobs around the same time.
Amazon (AMZN) also laid off almost 30,000 people, with cuts focused not just on logistics but on Alexa and internal cloud tools — precisely the kinds of projects that would have once qualified as immediately deductible R&D. Salesforce (CRM) eliminated 10% of its staff, or 8,000 people, including entire product teams.
In public, companies blamed bloat and AI. But inside boardrooms, spreadsheets were telling a quieter story. And MD&A notes — management’s notes on the numbers — buried deep in 10-K filings recorded the change, too. R&D had become more expensive to carry. Headcount, the leading R&D expense across the tech industry, was the easiest thing to cut.
In its 2023 annual report, Meta described salaries as its single biggest R&D expense. Between the first and second years that the Section 174 change began affecting tax returns, Meta cut its total workforce by almost 25%. Over the same period, Microsoft reduced its global headcount by about 7%, with cuts concentrated in product-facing, engineering-heavy roles.
Smaller companies without the fortress-like balance sheets of Big Tech have arguably been hit even harder. Twilio (TWLO) slashed 22% of its workforce in 2023 alone. Shopify (SHOP) (headquartered in Canada but with much of its R&D teams in the U.S.) cut almost 30% of staff in 2022 and 2023. Coinbase (COIN) reduced headcount by 36% across a pair of brutal restructuring waves.
Since going into effect, the provision has hit at the very heart of America’s economic growth engine: the tech sector.
By market cap, tech giants dominate the S&P 500, with the “Magnificent 7” alone accounting for more than a third of the index’s total value. Workforce numbers tell a similar story, with tech employing millions of Americans directly and supporting the employment of tens of millions more. As measured by GDP, capital-T tech contributes about 10% of national output.
It’s not just that tech layoffs were large, it’s that they were massively disproportionate. Across the broader U.S. economy, job cuts hovered around in low single digits across most sectors. But in tech, entire divisions vanished, with a whopping 60% jump in layoffs between 2022 and 2023. Some cuts reflected real inefficiencies — a response to over-hiring during the zero-interest rate boom. At the same time, many of the roles eliminated were in R&D, product, and engineering, precisely the kind of functions that had once benefitted from generous tax treatment under Section 174.
A crippling change even outside tech
Throughout the 2010s, a broad swath of startups, direct-to-consumer brands, and internet-first firms — basically every company you recognize from Instagram or Facebook ads — built their growth models around a kind of engineered break-even.
The tax code allowed them to spend aggressively on product and engineering, then write it all off as R&D, keeping their taxable income close to zero by design. It worked because taxable income and actual cash flow were often not quite the same thing under what’s known as GAAP accounting practices. Basically, as long as spending counted as R&D, companies could report losses to investors while owing almost nothing to the IRS.
But the Section 174 change broke that model. Once those same expenses had to be spread out, or amortized, over multiple years, the tax shield vanished. Companies that were still burning cash suddenly looked profitable on paper, triggering real tax bills on imaginary gains.
The logic that once fueled a generation of digital-first growth collapsed overnight.
So it wasn’t just tech experiencing effects. From 1954 until 2022, the U.S. tax code had encouraged businesses of all stripes to behave like tech companies. From retail to logistics, healthcare to media, if firms built internal tools, customized a software stack, or invested in business intelligence and data-driven product development, they could expense those costs. The write-off incentivized in-house builds and fast growth well outside the capital-T tech sector. This lines up with OECD research showing that immediate deductions foster innovation more than spread-out ones.
And American companies ran with that logic. According to government data, U.S. businesses reported about $500 billion in R&D expenditures in 2019 alone, and almost half of that came from industries outside traditional tech. The Bureau of Economic Analysis estimates that this sector, the broader digital economy, accounts for another 10% of GDP.
Add that to core tech’s contribution, and the Section 174 shift has likely touched at least 20% of the U.S. economy.
The result? A tax policy aimed at raising short-term revenue effectively hid a time bomb inside the growth engines of thousands of companies. And when it detonated, it kneecapped the incentive for hiring American engineers or investing in American-made tech and digital products.
It made building tech companies in America look irrational on a spreadsheet.
Repeal may come too late
A bipartisan group of lawmakers is pushing to repeal the Section 174 change, with business groups, CFOs, crypto executives, and venture capitalists lobbying hard for retroactive relief. But the politics are messy. Fixing 174 would mean handing a tax break to the same companies many voters in both parties see as symbols of corporate excess. Any repeal would also come too late for the hundreds of thousands of workers already laid off.
And of course, the losses don’t stop at Meta’s or Google’s campus gates. They ripple out. When high-paid tech workers disappear, so do the lunch orders. The house tours. The contract gigs. The spending habits that sustain entire urban economies and thousands of other jobs. Sandwich artists. Rideshare drivers. Realtors. Personal trainers. House cleaners. In tech-heavy cities, the fallout runs deep — and it’s still unfolding.
Washington is now poised to pass a second Trump tax bill — one packed with more obscure provisions, more delayed impacts, more quiet redistribution. And it comes as analysts are only just beginning to understand the real-world effects of the last round.
The Section 174 change “significantly increased the tax burden on companies investing in innovation, potentially stifling economic growth and reducing the United States’ competitiveness on the global stage,” according to the tax consulting firm KBKG.
Whether the U.S. will reverse course — or simply adapt to a new normal — remains to be seen.
Read the original article
Comments
By demosthanos 2025-06-0620:1622 reply 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 requires that all software development expenses be counted as a "research or experimental expenditure".
That's it. All software expenses must be treated as research and experimental expenses, and no research and experimental expense can be deducted instead of amortized. Ergo, all software expenses must be amortized over 5 years.
I strongly recommend reading the section before forming an opinion. It really is quite unambiguous and is unambiguously bad for anyone who builds software and especially for companies that aren't yet thoroughly established in their space (i.e. startups).
Also note that this makes Software a special case of R&D. It's the only form of R&D that Section 174 requires you to categorize as such and therefore amortize.
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 globally competitive technology race.
The rules are even worse than the article notes because it double-dings open source developers. See Section 6.4 of https://www.irs.gov/pub/irs-drop/n-23-63.pdf. The relevant bit is here:
> "However, even if the research provider does not bear financial risk under the terms of the contract with the research recipient, if the research provider has a right to use any resulting SRE product ... costs paid or incurred by the research provider that are incident to the SRE activities performed by the research provider under the contract are SRE expenditures of the research provider for which no deduction is allowed ..."
The rule as written means contractors who write Windows drivers could deduct their expenses (as they would have no residual rights to a closed-source work product), but contractors who write Linux drivers may not (as they would have some rights to open-source Linux drivers).
> 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 paid.
In my (admittedly lay) understanding of the issue, it boils down to software maintenance being taxed as research and development.
In general, costs for running a business (buying inventory) are immediately deductible, while establishing new business (building factories) has to be amortized, since the factory can be used for several years.
In software, the line is a bit more blurry - coding creates new IP (research), but is also required to keep many software companies running (maintenance) by e.g. fixing bugs and updating infrastructure. Here, the IRS has decided that all software development counts as research.
This would kinda make sense if you could hire programmers for a single year to develop software, fire them and then sell the software for 5 years, but I think that's rarely the case.
By rapidaneurism 2025-06-108:08 Isn't the firing bit what has been happening?
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.
By throwaway2037 2025-06-126:30
It is interesting that you think building a new state-of-the-art fab isn't a combination of both business and research risk. As I understand, the first X months (up to 2 years) of a fab's life is spent increasing yields. On day one, your semiconductor yields from manuf'd silicon wafers might be completely loss making. I have no idea how TSMC handles this tension between business and research risk when building a new fab. I am sure there is an army of tax lawyers who argue about how to categorize these expenses.> 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.By magicalhippo 2025-06-0816:53 Norway did something similar with oil[1]. Companies could get most of their oil search expenses covered by the state, to encourage finding new oil fields.
But if a company starts extracting oil from a field they have to pay heavy taxes on that oil.
[1]: https://www.offshorenorge.no/om-oss/nyheter/2019/01/leterefu...
By mulmen 2025-06-0918:55 This is different because the value of the distillation facility is not defined as “the wages of the builders”.
It doesn’t matter. Jim Bean doesn’t compete with an R&D software company. The R&D software company does compete with other companies in different jurisdictions with better regulations.
By monkeywork 2025-06-081:591 reply Jim Bean competes with other beverage makers who also operate out of different jurisdictions that may have different regulations ... not sure your point is as much of a "gotcha" as you think it is.
By throwaway-blaze 2025-06-0823:26 TIL that Hacker News readers think the Jim Beam whiskey company is called Jim Bean.
> The rule as written means contractors who write Windows drivers could deduct their expenses (as they would have no residual rights to a closed-source work product), but contractors who write Linux drivers may not (as they would have some rights to open-source Linux drivers).
Is it just me or are you conflating two orthogonal things?
An open-source Windows driver would have the same issue, no? And a closed-source proprietary Linux driver privately written for some company wouldn't have this issue either, right?
I could see it being inferred that way but, the way I read it, they are not meant as unilateral facts. Rather, they serve as rhetorical examples of where you might find contractors doing similar work, but where the one more in service of "public good" is taxed higher because it's open source. Strictly speaking, Windows bits are not all closed source and there exist closed source Linux bits. But it's not a point that really matters in the context of the conversation.
I think it's fair to use Windows and Linux as stand-ins for closed vs open source because it's a very accessible example. And knowing the technicalities clearly doesn't undermine the argument.
> I think it's fair to use Windows and Linux as stand-ins for closed vs open source because it's a very accessible example
We're talking about businesses here that would struggle with these tax rules. Which I guess is, mainly, contractors or startups. How common is it for them to write open-source drivers vs. closed-source ones? I would've imagined the majority of drivers in such cases are closed-source, on every platform. But I would find it interesting to hear if things are somehow different on Linux.
Linux kernel drivers often end up being GPL'd, but out of tree. This is because Linux releases many very useful (and sometimes critical to the use-case!) functions behind a GPL-license API restriction. This is EXPORT_SYMBOL_GPL.
By dataflow 2025-06-0816:12 Are you sure this is exactly what it means? You're basically saying that if I start hacking on a driver that consumes such an API tonight, I must release it as GPL somewhere publicly the moment I start consuming the API? I can't even work on it for a bit privately?
I'm surprised if so, because usually these sorts of licenses only apply if you're redistributing the code, not if you're just using it privately.
By econ 2025-06-083:30 What would happen if closed source is [later] released as open?
You're right, the law text doesn't specifically call out the Windows operating system or the Linux operating system. The example you gave of Open Source Windows drivers is valid.
The Grandparent's point about that "it double-dings open source developers" is still correct and poignant even with this clarification.
> The Grandparent's point about that "it double-dings open source developers" is still correct and poignant even with this clarification.
I feel like I'm missing what subset of people this is, exactly. We're talking about businesses here that would struggle with these tax rules. Which I guess is, mainly, contractors or startups. How common is it for such businesses to release their software as open-source, vs. as closed-source? I would've (naively) expected most paid OSS developers to be funded by large organizations/businesses that have plenty of money to fund them, not small businesses/contractors that would be severely impacted by this law. Is this actually a large set of people?
By pabs3 2025-06-081:27 There are lots of small OSS businesses that are contractors to the big companies you mention. My go-to example is Igalia, who work on web browser and other core OSS tech, but there lots of others, some mentioned on the FOSSjobs wiki.
https://www.igalia.com/ https://github.com/fossjobs/fossjobs/wiki/resources
By bunnie 2025-06-0717:36 You are correct. I picked this example under the general assumption that the Windows driver would be closed-source, but you are correct that it doesn't necessarily have to be closed source.
The problem goes with the license, not with the OS.
By gbacon 2025-06-080:16 “The power to tax is the power to destroy.”
By djfivyvusn 2025-06-078:252 reply Just pledge copyright of contributions to eff or something.
Work-for-hire open source contributions often already bear a copyright holder of the entity paying for the work. The problem isn't who is the copyright holder.
The problem is that the license assigned says that anyone is free to use the code. Anyone is a set of people that includes the contributor, which then triggers the interpretation that the research is incrementally in the contributor's benefit and thus disqualified from preferential tax treatment.
You'd need a custom license where everyone in the world could use the results except for the contributor, and then like, a source control system that hides the source files from the contributor's view of the repository.
By walterbell 2025-06-081:53 > Anyone is a set of people that includes the contributor
Should every other member of that set, i.e. everyone minus contributor, also amortize their software development expenses because they have a hypothetical, non-exercised right to use some (i.e. all) open-source "R&D" software... somewhere? Or should the tax liability be invoked starting on the date of first use of any open-source code?
If some code is upstreamed to Linux kernel or userspace, should this obligate every Linux distro consumer to amortize their Linux software development expenses?
There must be _some_ legal boundary for dispersal of the tax obligation with respect to open-source code, since it self-evidently cannot be intended to apply to the entire universe of businesses and union of all OSS development. If necessary, a court case can establish this distinction.
By anticensor 2025-06-0712:392 reply > 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.
By mystified5016 2025-06-0714:171 reply The point is that it's a ridiculous and impractical workaround that makes no sense
By bunnie 2025-06-0717:36 ^^ this
> 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?
By jashmatthews 2025-06-0714:522 reply The USA hasn’t managed to completely impose their idea of intellectual property on everyone yet. Some countries you can’t sign away authorship even if you can commercial rights.
By throwaway2037 2025-06-126:54 I am unsure if I fully understand your point, so let me ask a related question to see if I understand.
For many open source projects, there is a CLA (contributor license agreement) that must be signed before contributions can be accepted. The Free Software Foundation (which holds the copyright for most/all? GNU tools) is pretty in/famous for requiring it. Their reasoning: If there are copyright violations, they have the time and financial resources to pursue the violators.
Are you saying that these CLAs and their intended purpose are invalid in some jurisdictions? If yes, please share some examples. To be clear: I'm only interested in "normal/regular" jurisdictions that have at least accepted the Berne Convention.
By hiatus 2025-06-0715:31 Parent objected to:
> 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.
Does authorship confer usage rights?
By anticensor 2025-06-088:25 In fact, many countries don't let you sign away your statutory rights in general.
Create a shell company with an X$ investment.
Have the shell company write code. (Or more risky pay your company to write code as a work for higher.)
Devolve the shell contributing its assets to OSS.
Take a X$ loss in that year.
Argue that it is perfectly legal to the IRS.
By jay_kyburz 2025-06-080:531 reply I wonder of you could also just pay bounties for specific features to be written for OSS.
Or have your shell company operating out of any other country.
By irf1 2025-06-0813:10 Algora.io for OSS bounties!
You’re likely overreacting.
It makes software temporarily 16.7% more expensive in year one if you’re operating a profitable company, but you do eventually get to deduct that over time. Pay 8% on a 4 year loan and that drops to ~4%.
By demosthanos 2025-06-0718:473 reply Eventually, as long as you survive that long.
As has been said repeatedly in this thread, this change is purely a boon for existing big tech companies that now have even less to worry about from startups. It takes a startup 5 years before they'll be playing on an even field with big tech.
> if you’re operating a profitable company
You keep saying this across this thread, and keep ignoring that Section 174 has now redefined "profitable" for tax purposes to include companies who:
* Are in year 1 with no history of expenses to draw on.
* Have spent <900% of their year 1 revenue on software development expenses.
i.e., a startup that earns $1mil and spent $8mil in software dev expenses is only able to deduct 10% * 8mil = $800k of expenses, which means that as far as the government is concerned they made a profit of $200k and owe taxes on that on top of their already-net-loss of $7mil.
You can keep ignoring this fact, but ignoring it doesn't help your case. If you want to argue that this is fine and dandy you need to explain why the above math doesn't prevent new companies from competing on fair terms with big tech.
By majormajor 2025-06-0720:402 reply > As has been said repeatedly in this thread, this change is purely a boon for existing big tech companies that now have even less to worry about from startups. It takes a startup 5 years before they'll be playing on an even field with big tech.
The article also blames it for 2022 mass layups at existing big tech companies with cash reserves.
That seems like a big stretch compared to the "oops we over-hired in 2021" theory, especially if it's net-advantageous for big tech vs up and comers.
By AnthonyMouse 2025-06-0819:48 > The article also blames it for 2022 mass layups at existing big tech companies with cash reserves.
It's possible for two things to be true at once. The new rules can be moderately bad for big companies and cause them to do layoffs and also cause them to be catastrophically bad for startups, giving incumbent big tech companies another relative advantage over them.
This is also ignoring the short-term vs. long-term effects. In the first year the incumbent companies are in the same boat as the new ones because they already deducted all their R&D expenses from the previous year when they were still allowed to, so they get a minimal deduction this year and have no advantage. But five years from now, they'll have five years worth of R&D they're still amortizing -- notably, this means the government is no longer getting more revenue from them in the current year than they would otherwise, since their average R&D expense and their average amortized deduction are now equal -- whereas the startup has no historical R&D to deduct and is put at a disadvantage.
By PunchyHamster 2025-06-0722:55 Article theory is bullshit, but it can still be some factor for startups, as research costs for them are effectively higher they probably just hire less.
> You keep saying this across this thread, and keep ignoring that Section 174 has now redefined "profitable" for tax purposes to include companies who:
Because generating an asset IE software isn’t a pure loss that’s why you’re doing it in the first place. Companies with a cash flow problem are different than companies which an actual loss.
> i.e., a startup that earns $1mil and spent $8mil in software dev expenses is only able to deduct 10% * 8mil = $800k of expenses, which means that as far as the government is concerned they made a profit of $200k and owe taxes on that on top of their already-net-loss of $7mil.
That assumes 100% of expenses are software development related. But the numbers are imaginary so using your example taxes are 21% of 200k, so 7 million in losses = 7.042 million in losses. A 1/2 of 1% increase, the sky is fucking falling.
Further a competent account would likely want you to carry the majority of those expenses to the future. Given the option many companies voluntarily did so because it made financial sense. You can only carry 80% of losses forward a likely future issue, but these expenses don’t fall under that category.
By AnthonyMouse 2025-06-0820:00 > That assumes 100% of expenses are software development related. But the numbers are imaginary so using your example taxes are 21% of 200k, so 7 million in losses = 7.042 million in losses. A 1/2 of 1% increase, the sky is fucking falling.
The problem here is that the losses are often in time or future liabilities but the government expects to be paid in cash. Your developers were mostly working for stock options or some other deferred compensation, which may cost you tomorrow but tomorrow you'll have more revenue. Where are you getting the cash to pay the government right now?
By demosthanos 2025-06-0722:551 reply > 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 idea.
More importantly valueless code stops being a liability because you can abandon it. Calling it a liability implies it has value.
By AnthonyMouse 2025-06-0820:19 > More importantly valueless code stops being a liability because you can abandon it. Calling it a liability implies it has value.
This is kind of missing the issue though.
Suppose you pay a million dollars this year to develop something that will also cost a million dollars a year to maintain, but is worth over a million dollars a year, so you do it anyway.
So this year you spend a million dollars, make $1.1M, have a profit of $100k. Next year you'll spend a million dollars, make $1.1M, have a profit of $100k. But if you don't do the maintenance, it ceases to comply with changing regulatory requirements and not only has to be shut down but causes you to incur criminal penalties, or develops public security vulnerabilities and then criminals break in and destroy your business and cause you to be sued into bankruptcy by your customers.
In other words, the code creates an obligation that offsets the value of the asset. These two things can easily cancel out so that the total value is ~0 -- or even negative in ways that don't allow you to walk away, e.g. because you entered into a contract to supply this thing for a defined price but underestimated the maintenance cost.
But now the government is telling you that you have something worth most of a million dollars even though it's not worth a dime without putting another million dollars into it -- and even then it still wouldn't be worth two million dollars.
The reason you continue to do it is that the continued development made you $100k this year, not because what you had left at the end of the year that would be worth something without further investment.
By demosthanos 2025-06-0723:391 reply > 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 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.
By Retric 2025-06-0723:50 > It perfectly illustrates a case where the government intentionally subsidizes a liability that no sane company would take on without government funding. Well said.
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.
By deadbabe 2025-06-0720:46 Wow all this time I thought the key to a successful startup was to just be better and more disruptive than the competition but really I guess it all comes down to being more tax efficient.
We are small and so have been on a hiring freeze since 2022. I’d like to hire but the upfront cost is high.
For those around when this went into effect many business owners were surprised. Our accountants told us they seriously thought congress would fix this before it went into effect.
By spwa4 2025-06-0719:48 ... they did that because that's exactly how Trump presented the change. The article points that out: this change was an attempt to lie to the congressional budget office, not intended to be an actual tax change.
And then it suddenly was an actual tax change.
Like so many Trump actions: "oops".
By throwup238 2025-06-076:433 reply [flagged]
By dan-robertson 2025-06-077:562 reply Often the way this works is that some time bomb is added to the tax code so that forecasts for future tax revenue will be higher (justifying more spending in the short term) and congress then needs to remember to remove the time bomb before it blows up. So it isn’t that uncommon for these things to be reverted.
By throwup238 2025-06-078:19 Everyone knows it’s a time bomb but the only way we can get an omnibus funding bill through Congress is reconciliation. That’s how our government has been functioning since like 1980 and almost nothing has been “reverted” since then except for the time bombs required to get through the reconciliation process.
By jacobolus 2025-06-0718:08 Or in this case, not justifying extra spending, but justifying extra tax cuts for incomes above a half million dollars per year, inheritances of more than 5 million dollars, corporate profits, private jet flights, and a variety of other special tax cuts, mostly aimed at wealthy GOP donors.
By viraptor 2025-06-077:19 It's actually not uncommon for something stupid to make it to the official tax code and then get reverted. They knew the history.
By bandyaboot 2025-06-0713:491 reply Get better citizens.
By master-lincoln 2025-06-0714:392 reply Get better education for kids that grow to become citizens
By datavirtue 2025-06-0715:58 This. We are seeing the ROI for "education" in America.
There's another word for "educating" people until they reach the decision you want them to.
Brainwashing.
You know it's completely possible that people have a different outlook or opinion or perspective on things and that is why they disagree with you, not necessarily a lack of education?
Some people think these are good ideas and they vote or welcome them. Some people think they are bad ideas and they vote or oppose them.
By iancmceachern 2025-06-0716:523 reply No, education is not brainwashing. These terms have different definitions. One is by definition good, one bad. Words matter, definitions of words matter.
By thegrimmest 2025-06-0717:032 reply I’d love an education system that only teaches scientific consensus, and leaves moral conclusions to parents and households. However I’m sure you’d appreciate that’s not what we have.
By compfingers 2025-06-0717:581 reply what moral conclusions?
By thegrimmest 2025-06-0718:031 reply For example: What’s the right way to live? How to relate to others? On what basis do we cooperate? What are/are not the overall goals of society? What’s the meaning of life? What is it to be a good person?
By iancmceachern 2025-06-0719:361 reply These are most certainly left up to the individual. None of these things were part of my, and most folks' public education.
By thegrimmest 2025-06-0720:041 reply I would disagree. Many ideological worldviews are taught in the curriculums of the public education system. For instance, the idea that homosexuality is wrong (not a view I personally hold) is not tolerated. Students are taught that homosexuality is a valid, normal, way to live (and I happen to agree).
However, whether it is right or wrong, valid or invalid, is an ideological argument. Schools should simply teach that it occurs in humans, and leave the question of whether to accept or reject it to parents (there are plenty of other natural behaviours many of us reject on ideological grounds, polygamy for instance). There are countless other examples where ideology is taught as curriculum.
By compfingers 2025-06-0820:13 School's do not teach ideologies because Ideologies are a set of beliefs resistant to contrary fact.
Homosexuality being normal and valid is not an ideology, it's accepted scientific truth. Being against it is an ideology.
You are saying "countless ideological worldviews" are being taught, but I'm struggling to come up with even one, and my wife is a teacher
So, what is a view you personally do hold, to defend your viewpoint so firmly?
By iancmceachern 2025-06-0717:141 reply Fortunately our system is setup such that passionate folks like you can work to effect change. Go do it - volunteer for your local PTA, run for school board positions, show up to public hearings. Be the change you want to see in the world. God Speed my friend.
By thegrimmest 2025-06-0717:192 reply Having the ideology of the majority taught in schools is the outcome of a strictly democratic process like the one you’re describing. I’m suggesting that the separation between church and state be extended to any ideological teaching.
By hn_acc1 2025-06-0921:55 Maybe when churches start obeying the "no pushing any political candidate" laws and stop pushing things like "all scientists are evil", it would be a more acceptable position for those outside the church? Seriously - I've seen (not joking) statements like: all scientists know god exists, but deny it because they don't want to follow the laws of the bible. This was before I deconverted.
By iancmceachern 2025-06-0717:341 reply I get it, I'm not trying to chat about that.
I am saying if you can convince enough other people that this makes sense you can effect change. And im wishing you good luck with that.
By thegrimmest 2025-06-0717:381 reply > No, education is not brainwashing.
I’m directly responding to your point. Ideological education is brainwashing. In fact “brainwashing” is usually just another way of saying “an ideological education I disagree with”, also known as “indoctrination”.
By iancmceachern 2025-06-0719:041 reply What is ideological education and why do you think it is all of education?
I'm saying flowers smell good.
You are saying flowers smell bad because of that one flower that smells bad.
By thegrimmest 2025-06-0719:151 reply Any conclusion that cannot be arrived at cannot be arrived at by a scientific process is inherently ideological. You’re saying flowers smell good. I say they smell bad. Neither of us is any more right than the other, since these are entirely subjective takes. The closest you could get is that flowers might smell good to x% of the population, which is what schools should teach. Not that they smell good or bad.
The distinction is small but important, since the latter conclusion doesn’t make any judgements about people with a legitimate minority opinion.
By iancmceachern 2025-06-0721:111 reply What about art,Mozart, the Dead shakespeare, south park and everything in-between? Those aren't science, but are some of the most vital components of education.
By thegrimmest 2025-06-0721:361 reply Education describing what cultural artifacts exist and how to produce them isn’t ideology. These are objective areas of study. Though lots of cultural education is ethnocentric, where minority cultures are less represented, making the education less well rounded.
By iancmceachern 2025-06-081:09 Education is not about what cultural artifacts exist, but why and how. Music appreciation and art appreciation, music history and art history are a small part of a music or art Education for someone who is hoping to practice it.
By mcsniff 2025-06-0722:23 I didn't say it was, but you've conveniently ignored the rest of the sentence to derail the discussion.
And if the R&D uses foreign workers, because you can't afford to pay US wages, then the 5 years goes to 15 years!
This hurts small companies (like mine) that were priced out of the US developer market.
By deeth_starr_v 2025-06-076:452 reply I’m not sure this is exactly true. If your foreign workers are a service contract then those are services expenses immediately deductible. Same if you are using local service contracts. My understanding is this creates a drag for companies that want to hire f/t.
Foreign workers are to my knowledge effectively always a service contract, since it's pretty complicated (if even possible) to hire FTEs across borders without subsidiaries, which are expensive to maintain.
I'm curious if contract work is really exempt, would look like a major loophole to me.
> Foreign workers are to my knowledge effectively always a service contract, since it's pretty complicated (if even possible) to hire FTEs across borders without subsidiaries, which are expensive to maintain.
It's impossible (yes, I'm being absolute) to hire an employee who lives in or outside the US who is not a citizen or doesn't have a green card. All employees must have an SSN and go through i9 verification, which requires in person verification of legal ability to work in the US.
The foreign developers I'm talking about are not US citizens and do not have green cards.
Their work is subject to 15 year amortization per section 174. Period.
By iancmceachern 2025-06-0716:551 reply Not if they are contractors. That's the point the parent commenter was making. All the reasons you list make it so they need to do so, instead of "hiring" them directly.
By hoodwink 2025-06-080:58 It doesn’t matter if the foreign workers are contractors or employees. The expense is considered R&D and must be amortized over 15 years. I’ve dealt with this personally since 2023 for my company working with a legion of tax consultants. There’s no loophole here, I assure you.
Tax law is full of major loopholes. It’s highly political law, so doing one thing while saying you are doing another is a feature, not a bug.
By e40 2025-06-0716:39 There are definitely gray areas to the law, but in my decades of experience dealing with lawyers, they won't steer you to do something very far over the line. I think the companies that do step far over the line, to game the system, are doing so knowing full well they are breaking the law, but they believe they are unlikely to be caught. And they're very likely right. You could separate CEO's/CFO's in to two camps: stay legal and do what you need to do to make the almighty $$. In the 80's the phrase "greed is good" was born, but the last 2 decades have really upped the ante on this.
This is simply not true. Says my lawyer and CPA. And every other CEO/CFO I've talked with.
By hoodwink 2025-06-080:59 Same.
By rbultje 2025-06-0715:49 We don't talk about this enough. International R&D is not offshoring of call-centers to India. International R&D is the IP for the next generation of global communication standards being owned by US-based or foreign corporations, because international (e.g. Canadian, European) standards experts/developers become un-affordable for US-based corporations and are forced to work for our "adversaries" instead. Crazy.
What are the implications of this.
As I understand accounting, this means that reported profits would be higher, and therefore incur more corporate income tax liability. Cash flow isn't effected besides tax.
A startup isn't likely to be making a profit yet, under either accounting rule. Is there a benefit to reporting a larger loss?
My first thought is that this effects Google and suchlike, not startups. But... assuming steady state "r&d" expenditure... it's not that much. Everything gets deducted within 5 years anyway.
So... maybe this hinders more modestly profitable, and fast growing companies most. Those that can't afford to carry 5 years worth of paper profits as easily.
Otoh... I am curious about how the difference between r&d expenses and operational ones are determined irl.
This should be quantifiable. How much extra assets are software companies actually booking?
It seems questionable that this "silent killer" had actually affected employment so much.
> A startup isn't likely to be making a profit yet, under either accounting rule. Is there a benefit to reporting a larger loss?
As an example, A two person software startup; both drawing a salary, each making $100,000 per year. Each doing things related to software development.
Startup brings in 200,000K in revenue.
Under pre Section 174 changes, the profit is zero. Both salaries are expensible in the year they were incurred.
Post Section 174, the profit is now $160,000 each year. Now they pay taxes on $160,000, even though they literally have no money left over because revenues equaled expenditures.
At 25% tax rate, that’s $40,000 in taxes, for a business that made literally no money.
That’s why this is so devastating to small software businesses; unless you’re highly profitable and have cash reserves, this change hits hard.
Wait, salary costs do not count as costs for the year they're made in? That is completely nuts, no matter what kind of company you have.
Although for a startup it might be least bad, because for their first few years, their revenue might well be closer to zero; they tend to burn money, sometimes for quite a while.
They count as costs, but towards a capital expense. The expectation is that that expenditure resulted in the creation of a valuable asset (and not one which was sold for $200,000).
Revenue: $200,000 Expenses: -$200,000 Assets: $200,000
Net income: $200,000
You’re allowed to say ‘ah, but over the year the value of that $200,000 asset actually fell by 1/5’:
Asset depreciation: -$40,000
So your net income is now $160,000
You owe taxes on that income.
By dummydummy1234 2025-06-083:151 reply But no matter what you are doing, your not spending 100% of your time building a piece of software.
How does it work when a company uses salaried employees to build a structure. Are the salaried employees not deductible at all?
By gortok 2025-06-0810:31 The IRS releases guidance on tax code, and one of the issues with section 174 taking effect in 2022 (and the IRS believing it would be repealed before it went into effect) was that the guidance was released in 2023 under notice 2023-63
https://www.irs.gov/pub/irs-drop/n-23-63.pdf
To answer your question, the following are software development activities that are capitalizable (and instead of quoting the notice itself, I’m quoting from a better written blog post by accountants:
https://www.cohnreznick.com/insights/additional-guidance-irs...
> Section 4.03(1) of the Notice clarifies that labor costs – including those for contract employees and independent contractors – related to those who perform, supervise, or directly support SRE activities are considered Section 174 expenditures. All elements of compensation are to be included with the exception of severance, which is excludable and deducted by taxpayers in the period paid or incurred. SRE-related labor costs expenses included in the Notice expenses related to pension costs and stock-based compensation.
Section 4.03(1)(e) provides guidance pertaining to certain costs related to operation and management (i.e., rent, utilities, etc.) activities. Specifically, in addition to items such as rent, utilities, and insurance, expenditures such as taxes (i.e., property), repairs and maintenance, and security are now considered SREs subject to Section 174.
So what software development activities don’t count as “Specified Research Expenditures” (SRE)”?
> Training of employees in the use of the software
>Maintenance activities after the software is placed into service that do not constitute upgrades or enhancements (i.e., corrective maintenance to debug, diagnose, and fix programming errors)
> Data conversion activities (except activities to develop computer software that facilitates access to existing data or data conversion)
> Installation and other activities related to placing the software into service
> Marketing and promotional activities
> Distribution activities
> Customer support
If you’re a startup and you have a software developer doing the above activities as well as SRE work, then in order to expense the SRE parts of their job you either have to estimate (and be able to defend) the estimations, or your employee needs to track their time for each type of activity they do.
By datavirtue 2025-06-0716:00 Yeah, this provision is a complete fuck up.
By crystal_revenge 2025-06-0717:481 reply This example only really has the emotional impact it does because of the specific numbers used, but doesn't really generalize for an arbitrary N.
Clearly if two software engineers build a product that brings in $10M, and each pay themselves $5M, it doesn't seem so outrageous that the can't really claim they're running "a business that made literally no money." Clearly in this second example the problem is that the engineers are paying themselves way too high given the return on their efforts.
What this means is that software engineers will be required to bring in more value to justify their high pay. In your example, it simply means that a software engineer that brings in $100,000 of value to the company, probably shouldn't be paid $100,000.
This seems entirely reasonable to me, and doubly so when I consider how many large corporate teams (who I think will ultimately be impacted more than startups) has huge numbers of highly paid engineers not doing all that much.
In most startups I've worked in it was pretty common for engineers to be delivering multiples of their cost in value, and in every big company I've worked in, it was very common to be delivering fractions of one's cost in value.
By spwa4 2025-06-0719:59 In case you don't understand: obviously you still pay income tax. What you suggest would mean you now pay income tax on that $10M, which is going to be 40% or even 50% depending, far higher than corporate tax.
So with your suggested tactic the engineers get $2.55 million each. The rest, $4.5 million, is tax.
If those 2 engineers paid themselves $0, and instead paid the $10 million as dividends, they'd get 4.25 million each, and only 1.5 million would be paid as tax.
(Yes, this is a simplification, both situations are artificial and in both cases there'd be other taxes to pay, however, they'd be similar in both cases)
By roflmao123 2025-06-0717:052 reply > Post Section 174, the profit is now $160,000 each year. Now they pay taxes on $160,000, even though they literally have no money left over because revenues equaled expenditures.
They have the $200k they pulled from their startup, far more than what most people earn. If you make enough to pay yourself $100k then you make enough to pay taxes.
By runeks 2025-06-085:45 The amounts are irrelevant. It would be the exact same situation if all amounts were divided by e.g. 10: paying taxes on non-existent profits.
They do pay taxes. They each pay personal income tax on their $100k.
By roflmao123 2025-06-0717:303 reply Still plenty left to pay their business taxes.
By maaaaattttt 2025-06-0718:161 reply And if it’s employees? Do you ask them to contribute to the company’s taxes as well? After they’ve paid their own?
By roflmao123 2025-06-0719:101 reply You pay them less money so you can afford your taxes, like literally everyone else.
... or you never have the startup, and just have 2 people unemployed and no produce nothing of use to anyone.
Which is what's happening.
By roflmao123 2025-06-0720:442 reply If you can't afford your taxes your business model was flawed to begin with. In the above example there is more than enough money for it to still be worth doing.
By speakfreely 2025-06-084:40 You don't seem to understand the implications here. This requires bootstrapped startups to have gross margins substantially above incumbents in order to compete and not be cash flow negative after paying taxes.
It makes it substantially more cashflow intensive to build a new software business, which entrenches incumbents and reduces competition. It favors companies who have the cash to wait for the full 5-year depreciation cycle, i.e. the opposite of most bootstrapped startups.
Quick example:
$10,000 revenue
$8,000 paid to software developer
$1,000 paid to AWS
leaves $1000 in profit.
You received $10,000 into your business account, but spent 8000+1000 = $9000. Your business account has a balance of $1000 at the end of the year.
Section 174 means you can only deduct 1/10th of the $8000 in the first year, $800. Your total deductible business expenses for the year will be 800+1000 = $1800.
Your taxable profit for the year is 10000-1800 = $8,200. If your effective tax rate is 25% (generously low), you owe $2,050 in taxes.
You pay your $2,050 tax payment and your business account is overdrafted by $1,050. You need to add $1,050 from your personal funds to the business to cover the shortfall.
Your business was cash flow negative for the year. This makes it extremely difficult to bootstrap a software company.
By spwa4 2025-06-0721:06 Well, I said elsewhere, this effectively means (heavily) taxing anyone who's doing something new (meaning adding additional taxes on top of income tax). Essentially all of Europe does this, and people here often decry how they totally lack innovation across the entire continent.
I don't think these two are unrelated.
I also don't understand the objection. It's not like anyone's getting away from taxes due to this rule. This is about a temporary exemption from company income tax IF AND ONLY IF companies have someone pay income tax on that money (and only up to the point where that keeps makes sense). This "exemption" lets you not add 15%-20% tax on top of 40-55% income tax just to try a new business as a company.
So on the $200,000 it’s reasonable to you that they have to pay $120,000 ($80k income+$40k business) in taxes?
By roflmao123 2025-06-0720:461 reply Two people earning $100k each would pay $28k income taxes each, totaling $56k. Where did this $80k come from?
By dyauspitr 2025-06-081:49 What about state and city taxes? 80k might be a tad too high but in NYC on $100k, you would only take home around $65k.
The company doesn’t have any money to pay those taxes with.
If you give the company more money to use to cover its tax bill, then that further increases the company’s taxable income.
By roflmao123 2025-06-0722:492 reply Pay less salary so you can pay your taxes? This isn't as complicated as y'all seem to want to make it.
By zmgsabst 2025-06-084:56 That’s what makes them less competitive: they have to lower pay because they don’t have the cash on hand and revenue to amortize the deductions.
By throttlebody 2025-06-091:28 If you employ people on straight salaries, you are stuck. Not everyone is on share gravy train
By fauigerzigerk 2025-06-0712:211 reply That was my first thought as well, but on second thought I can see how this might cause problems:
For established profitable software companies there was a cliff edge in 2022 when this change kicked in. Staff costs for previous years had already been fully expensed while only 20% of the current year's costs could be deducted.
Second, any sudden increase in research expenditures is now discouraged. This could make companies less nimble.
For unprofitable startups it could cause issues during a phase of very high revenue growth. They could suddenly be liable to pay corporation tax in spite of the fact that they are not profitable in any reasonable sense of the word. It would smooth out later, but that may be too late for some.
What I do not believe for a second is that this is causing major job losses. Companies like Microsoft or Meta do not reduce research or software development just because there is a temporary tax hit. It could be an extra incentive for an efficiency drive I guess.
> For unprofitable startups it could cause issues during a phase of very high revenue growth.
So I guess my most question is "how this work irl?"
Say a new startup raises money and hires 20 people. Pays $5m in salaries, office space and such. All 20 people are developing a software product. Are 100% of this startups expenses amorotized?
Then they sell the product. They receive $2m in revenue. What does the P&L look like.
By fauigerzigerk 2025-06-0717:58 If they hire 20 devs in their first year paying $5m in salaries, only $1m or $500k (if the mid-year convention applies) would count as a business expense in that first year.
If their revenue was $2m, that would leave them with $1m (or $1.5m) of taxable profits unless that was eaten by other costs.
It doesn't have to be a problem, but if revenue grows fast and they go on another hiring spree in the following year then it could become a problem.
That said, if revenue grows so fast, it seems likely that they would have huge marketing and sales costs that could be expensed immediately. So maybe this isn't really a problem for many startups. I'm not sure.
By t0mas88 2025-06-0715:42 1 million profit, while they have 3 million negative cashflow, that's exactly the problem. They can only take 20% of that 5 million in R&D investment as depreciation in the first year.
By freeone3000 2025-06-0712:25 Your analysis is correct, but most software companies were mostly profitable or fast-growing. For every Google, there’s 1000 wordpress vendors you’ve never heard of.
In another year the initial shock will stabilize, but any growth now has a 5-year tax hit attached. And even Facebook doesn’t want to pay that if it doesn’t have to.
Google was reportedly amortizing (by choice) long before this was in effect, so while it might “affect them”, in practice it’s likely business as usual.
By nostrademons 2025-06-0716:301 reply It depends on the department. My salary (in a mature product) was already amortized - I suspect the same is true of all their other mature products like Search, Maps, GMail, Chrome, YouTube, etc. But I think they were deducting salaries in the more research-like areas like Gemini, Jax, Assistant, etc. So there is net still a fairly large charge related to it, even if it isn't as large as it could be.
By Tokumei-no-hito 2025-06-0822:021 reply pardon my ignorance but why would they amortize some and not others?
By tmp10423288442 2025-06-101:13 - In a steady state where you're spending the same amount every year, the tax burden of amortized vs. unamortized accounting makes no difference. It only matters for R&D - i.e., new products.
- I read once, although I have no idea how accurate this is, that a company could classify maintenance expenses (i.e., paying SREs and some SWEs to keep the service running and fix bugs) as non-R&D and therefore be able to amortize. That's another advantage to mature services over new services.
By juliennakache 2025-06-0712:07 The R&D credits are deducted from Payroll taxes, so they impact pre-revenue startups as well.
By calderwoodra 2025-06-0711:574 reply I'm not an accountant, but as I understand it, you don't pay taxes on profits, but on revenue.
So previously, some 20% of all revenue would be owned as corporate income tax, and startups would deduct it all as they're spending much more on R&D than they owe in corporate income tax. But with this tax change, the deduction would be much lower (80% lower IIUC).
No, you pay taxes on profits. What this does is reduce your upfront deduction.
Yes, but the main thing here is that ALL software development is now "profit" in the short term. In theory you've developed a capital good that benefits you over time, hence the amortization.
Simplified 2021 example before 174:
Simplified 2022 example after 174:100k Revenue 100k Software Dev Costs No profit or tax
Above example is year one of suddenly having these taxes, because if your software costs are the same or lower over time it gets easier. It's just extremely painful for smaller and especially fast growing companies like startups without a lot of cash, especially when interest rates are so high.100k Revenue 100k Software Dev Costs 90k "profit" 18.9k taxesAccountants: If I am wrong about the above, please correct me
By testrun 2025-06-0722:27 The profit is 80k, not 90k, but the principle is correct. This will affect cash flow.
By akoboldfrying 2025-06-0716:061 reply > you don't pay taxes on profits, but on revenue.
That can't be right. It definitely isn't in my country.
If own a car dealership, and I sell a car for $50,000 that I bought from the manufacturer for $40,000, surely I would pay tax on the $10,000 profit? The tax on the the full $50,000 revenue might exceed my profit!
Welcome to the Democrat version of taxes. In Michigan, restaurant owners had to pay a tax on revenue and not profit around 2008 or so.
lots of retaurants went out of business overnight.
By int_19h 2025-06-080:31 When taxes are paid on revenue rather than profits, the rate is obviously much lower, so that it would add up to roughly the same thing.
However, there are many benefits overall. For one, it completely kills off the various convoluted schemes to avoid classifying something that is obviously a profit as such (by shuffling things around subsidiaries etc, for example). See also: Hollywood accounting.
By hollerith 2025-06-0716:41 Sales tax (which most US states collect) specifically is a tax on revenue, but it is the exception.
If companies paid tax on revenue the US budget would be perfectly fine.
By nayuki 2025-06-083:43 If companies paid tax on revenue, then there would be a tremendous incentive toward https://en.wikipedia.org/wiki/Vertical_integration , because you wouldn't be allowed to deduct the expenses paid to your suppliers.
Large companies always find a way to not pay taxes. It's the little guys that end up paying (a lot!) more, to the extend that it cripples and kills them. But transformative innovation happens with the little guys. As a result, this tax change cements monopolies for megacorps. They will be fine and still pay nothing.
By datavirtue 2025-06-0716:031 reply The little guy always pays all taxes. Corporate tax is just a way to palatably shift tax burden to the low and middle classes and away from the owner class. It is pure double speak.
By jazzypants 2025-06-0823:06 Then, why do rich people lobby so hard against any attempt to raise their taxes?
This is reductive and frankly stupid.
By cyberax 2025-06-0723:56 Yeah. Let's bankrupt grocery stores that operate with margins measured in single percents. If that.
By speakfreely 2025-06-084:51 I am so interested in what business you work in that you would think this could be true.
By hshdhdhj4444 2025-06-0714:47 Exactly!
The change is very simple. And the predictable impact of the change is very clear.
It shouldn’t impact large companies that are already profitable. But it’s devastating for software companies that are not profitable yet.
And that’s without even getting into the philosophical issues with it.
I worked for a UK company that amortised it’s development costs… it led to the false belief that the company was profitable when it really wasn’t
By hollerith 2025-06-073:35 OK, but you've changed the topic from tax accounting to financial accounting/reporting.
In the US, it remains the case that programmers salaries must be treated as an expense (i.e., cannot be amortized) when calculating the company's income statement, balance sheet, etc. Not following that rule will get the accounting firm signing off on those financial reports in trouble (with the SEC, the Public Company Accounting Oversight Board, and maybe even the Justice Department if the purpose of the violation was to defraud investors).
"Profitable" in an accounting sense has nothing to do with your cash position. This is something that people in tech don't really seem to understand.
By coderatlarge 2025-06-072:191 reply i think people in tech are usually focused on free cash flow, aka playing around money.
By disgruntledphd2 2025-06-076:59 Tech likes free cash flow because share based compensation isn't included in it.
Yes, that is tremendously important aspect here - the US tech would look better on paper - higher paper profits due lower paper expenses - while getting increased cash flow stress due to decreased deductability of the salaries which are among the main expenses in software dev business.
By itsoktocry 2025-06-0622:123 reply >Yes, that is tremendously important aspect here - the US tech would look better on paper
It's completely unimportant. Nobody is getting fooled "on paper" by amortized salaries.
By trhway 2025-06-0622:28 Except for example the millions of stock market casual participants.
By kgwgk 2025-06-0622:30 People is getting fooled by "adjusted" earnings that reduce salaries "on paper" by hiding the "non cash" component.
By youngtaff 2025-06-079:49 Want a bet?
I’ve seen it used in UK listed companies to massage the profit numbers and make divisions of the company seem more profitable than they are
By Reason077 2025-06-0622:02 Exactly. And if you’re more profitable on paper, you have to pay more tax, making you even less profitable in reality.
I thought wages were deductible anyway. Say you pay a developer $250,000 a year. The employee pays the tax on their own wages.
By notimetorelax 2025-06-075:231 reply No, not in this case. 250k is an expense for the company. Company had to amortize this expense over 5 or 15 years. (15 for software engineers outside of the US)
By Tade0 2025-06-076:15 > (15 for software engineers outside of the US)
Yikes. Does that apply to outsourcing?
By walterbell 2025-06-075:20 W2 salary is different from fully loaded labor cost.
> All software expenses must be treated as research and experimental expenses
From what I've read, not for software fixes to ongoing products, but for new products and I can't remember for new feature work. Also if you contract for someone else I heard you can still write off expenses without amortization.
By nlitened 2025-06-076:13 I would guess that because in these cases software development costs would be classified as “cost of goods sold” instead of “research and development”
By droopyEyelids 2025-06-070:462 reply Who sponsored this text in the bill?
By curtis3389 2025-06-071:403 reply Here's the cosponsors of the bill:
https://www.congress.gov/bill/115th-congress/house-bill/1/co...
I think the purpose of the change was to "increase revenue":
> Requiring that certain research or experimental expenditures be amortized over a five-year period or longer, starting in 2023, would increase revenues by $109 billion over the period from 2023 to 2027.
https://www.congress.gov/congressional-report/115th-congress...
> I think the purpose of the change was to "increase revenue"
Yes, but in a specific way: they were trying to offset the tax cuts they wanted so they could pass it via the reconciliation process and avoid the Senate filibuster. They didn't actually care about this revenue and the assumption from most people was that the specific carve-out would disappear in some future bill.
By saghm 2025-06-074:40 And now with their attempts to keep the tax cuts around, they've just decided to ignore the rule entirely and pretend that extending a temporary tax cut counts as not costing anything. Of course, there's nothing that would stop them from getting rid of the filibuster entirely either, but that honestly just makes it weirder to pretend that this somehow fulfills the requirements rather than just is taking advantage of the rules being only self-enforced.
They want to call it anything other than a tax.
It's a specific tax, on a particular class of better educated workers in specific jobs.
By kasey_junk 2025-06-072:321 reply That typically don’t vote for that party and are unsympathetic.
By Braxton1980 2025-06-072:441 reply Unsympathetic because?
Generally R&D software developers aren't considered to be poor or disadvantaged.
By Braxton1980 2025-06-073:391 reply What if they lose their job?
By randomNumber7 2025-06-0711:50 Then they are still arrogant brats.
By rcpt 2025-06-072:11 Also, that administration was pissed off at tech.
Idk but it was under trump. And the meta issue was balancing the budget after all his tax cuts so he needed to find more tax revenues. Which this accomplishes pretty handily
By gertlex 2025-06-075:46 I think partially dismissing the question due to the bill happening "under trump" doesn't help the conversation here. If the bill was sponsored by particular reps/senators, then it's worth identifying those, so their voters can factor this bill in to their decision to vote for/against in the future, etc.
What i like about US is that compare to other countries (like for example Russia where i'm originally from) there is almost no lying and cheating here. Instead there is a respect of the law and an army of talented creative accountants and lawyers. Remember that stale "multi-used" sandwich served with the drink which by virtue of its existence converted drinking establishment into a food serving restaurant? Not being an accountant, i'd just speculate, out of sheer fantasy, that some hardware chip/gadget added to your software may similarly convert your software development into hardware/gadget one.
By vlovich123 2025-06-070:442 reply I'm not sure I buy into this. Sure, compared with Russia it's probably a lot less, at least in terms of being something everyday people engage in. But in terms of comparing with countries like Germany or Sweden I don't know.
Here's some food for thought:
* Global financial crises: Banks were paying (bribing) ratings agencies to rate junk bonds AAA.
* Savings & loan crisis: widespread fraud & insider abuse.
* Bernie Madoff: Ran the largest Ponzi scheme ever, with an estimated fraud total of $65B raking in $17.5B in invested cash.
* Enron: straight up accounting fraud sprinkled with intentionally causing brownouts in California to pad their pockets with a side bonus of making Gov Davis unpopular & get him recalled (Enron was closely aligned with the Bush administration).
* Nixon straight up using psy-ops against Democrats & finally trying to burgal the DNC offices.
In terms of stats, the FBI does a few hundred bribery and corruption cases annually. Are they good at catching white collar crime? Well such crimes regularly take more than 5 years to investigate.
And hell, some things that are basically lying and cheating are straight up legal. Usury is legal with minimal to no regulation of payday loans. Pyramid schemes are legal as long as you call it multi-level marketing.
The list goes on and on.
If the list doesn't go on and on that is a clear sign that corruption is being hid.
Could be a sign that the commenter was not willing to spend all his day writing, especially once his point was made.
By vlovich123 2025-06-0715:441 reply I can’t tell if they’re trying to refute the point (ie the list being long means that it’s definitionally not being hid) or support (ie the list I made is finite and therefore the corruption is hid).
But I think of it like trying to estimate the size of an iceberg by observing the tip. Just because you know a little bit doesn’t mean you actually know about the scale. And there’s every reason to believe it’s quite extensive given how easily money flows from corrupt countries through USD and US persons and companies (eg the major bank that’s constantly getting fined for laundering terrorist and drug cartel money - either they’re the only ones and they’re making a killing providing this service anyway or they’re the only ones anyone is bothering to investigate, but that business is clearly lucrative to continue to engage in).
There is corruption everywhere. If there is a short list that means that the truth is being hid, or your have way too much police (often both).
As you state, the size of the iceberg cannot be understood by what we can easially observe. While there is corruption in the US, it isn't really much worse than other places that are not known for corruption - though understand that the US has a lot higher population and so it might seem that way. (though often those other places are just hiding truth)
By vlovich123 2025-06-0821:21 The US also sees a huge amount of wealth directly or indirectly flowing through it. I would say that’s the attraction for illegal activities, less the amount of people.
And I don’t know how small you think the list is, but I suspect it’s quite small because whether you get prosecuted from some corrupt act is pretty random since someone has to notice the corruption and try to investigate. Additionally the recent moves by SCOTUS is to significantly raise the bar for prosecuting corruption. So however you think America is fairing compared to other countries, I’d say America today is allowing once more, more institutionalized corruption than it had in the second half of the 20th century (and America’s history is filled with top-to-bottom corruption).
By RankingMember 2025-06-071:213 reply > What i like about US is that compare to other countries (like for example Russia where i'm originally from) there is almost no lying and cheating here. Instead there is a respect of the law and an army of talented creative accountants and lawyers
I thought you were being sarcastic here at first because, good lord, there is plenty of corruption here in the US (though those doing it used to care more about hiding it). The US, especially in its current state, is certainly not a place I'd describe with "almost no lying or cheating". I do understand that Russia is on another level, though, given the open assassinations and doing things like what was done to Navalny.
> I thought you were being sarcastic here at first because,
You've never been in Russia. There is no clear law abiding business there. That opens a lot of opportunities for those with some power. Corruption is one of them, selective punishment is another. I'm sure in most 3d world situation is not better, but they at least don't have laws to cheat and bribing isn't a crime.
You have no idea about corruption if you haven't lived it in a BRIC country.
The funny thing, is that people not from America say that there IS corruption, but at least it happens in the open. I think OP is saying the same.
By Braxton1980 2025-06-072:451 reply >say that there IS corruption, but at least it happens in the open
How is that corruption?
Breaking the law is still breaking the law even if you don't hide it. If anything, not getting in trouble for breaking the law noticeably often means that there's also corruption from the ones who should be holding the corrupt accountable.
By Braxton1980 2025-06-074:392 reply Breaking the law isn't "corruption"
A good definition from AI "Is when government officials misuse their power for personal gain or to benefit their friends or associates"
By fc417fc802 2025-06-077:51 Right, which is illegal. Thus breaking the law. And remains both corruption and breaking the law even when it happens in the open.
By StackRanker3000 2025-06-0712:28 Where in that definition does it say that it can’t be done in the open?
See for example Trump’s shenanigans, which are done in plain sight for all to see, but with few if any repercussions (a very brief selection: having foreign dignitaries stay at his hotel in DC while he’s in office; having the Secret Service stay at his resorts when he goes golfing; scamming the public with his family’s meme coins; etc)
By coliveira 2025-06-072:58 Because this is SO much better..../s The only difference in style is that the American billionaire will corrupt everything and still say it is for your own good.
By selimthegrim 2025-06-071:35 You forgot putting a dead guy on trial.
> almost no lying and cheating here
Are you living in an alternate world?
By hattmall 2025-06-076:14 No, he's saying that people respect the law, which they do. It's all about finding loopholes, and sticking to the letter of the law while working around the law to do whatever the law prohibits but doing it in a way that remains legal. This entire situation came up because of loopholes. A great way to offshore money was to spend it on software developed by overseas subsidiaries.
If you’ve never lived outside the US you have zero idea how bad it gets. It literally is an alternate world.
The amount of daily activities in the US that just work 99.999999% of the time that would have a corruption aspect in some other countries is mind boggling.
The closest analogy I can come up with is imagine if every money transaction involved cash tipping the parties involved. And that’s just the beginning.
By throwaway173738 2025-06-0714:51 Like tipping the licensing agent every time you had to renew your driver’s license or get plates. Or tipping the judge for a favorable judgement.
By coliveira 2025-06-0818:22 A growing number of activities in the US require tipping, so it's getting there.
Or are cynical Americans living in an alternate world, blind to how much better the rule of law is here than most other countries? The commenter's comparison was to Russia. When was the last time Putin lost an election?
I'd say we're slightly behind western Europe as far as rule of law goes, not really sure about the advanced east (Japan, Korea), and miles ahead of just about everywhere else (eastern Europe, Russia, Africa, China, etc). Yes, even with Trump in office, though he really makes me worry.
I mean, the sitting President was shilling cars on the White House lawn and runs an active meme coin bribery slush fund.
This is not slightly behind Western Europe. This is miles behind any developed country. China may be corrupt, but Xi Jinping hasn’t yet sold beans or cars via press conference.
The rule of law gets down to nitty-gritty levels, too, not just a reality show at the highest altitudes: trust the police don't extort you, the ability to gain relief in court (small claims or civil), trust things you build won't be looted overnight, trust in your neighborhood to walk at night or leave something unlocked, trust in your bank to wire things, trust in your title companies, trust in your package deliveries, etc.
It's not perfect, but you could do so, so much worse.
"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.
By rini17 2025-06-087:52 Depends. Would you still insist it's nonsense if any of these things you mentioned happened to you or your family?
By lucianbr 2025-06-074:52 Why are these alternatives? I believe it is true that the situation in the US is better than many other countries (not most), and also that "almost no corruption" is false.
Being better than others really isn't the only thing that matters.
By edflsafoiewq 2025-06-075:101 reply If you pursue excellence, you compare yourself against the best, not the worst.
By rat9988 2025-06-075:32 Then the russian fellow shouldn't have dared to compare USA to his country?
By yencabulator 2025-06-0817:25 USA is pretty darn corrupt. Just because worse places exist does not make USA good.
https://en.wikipedia.org/wiki/Corruption_Perceptions_Index#2...
By mvdtnz 2025-06-0719:57 > It really is quite unambiguous and is unambiguously bad for anyone who builds software
Not "anyone". Anyone in America.
I don’t get the big hoopla. Here in Germany I’m opting to turn development costs into assets (I simplify a bit). I need assets on the balance sheet, otherwise we’re over-indebted. As long as the development costs are much higher than income (I.e. as long as you’re not profitable), then it shouldn’t matter. And once you are profitable, you pay some more corporate taxes, but aren’t they kind of not too high in the us anyway?
By PaulDavisThe1st 2025-06-0715:531 reply the big hoopla is this: you're a newish startup. You have $300k/yr revenue and $$270k/yr expenses of which $250k is paying your programmers.
prior to this rule change, what you pay your programmers is just a deductible expense, so you owe taxes (in this very simplified example with no other expenses etc. etc.) on just $50k.
after the rule change, you can deduct only $50k of the labor cost (in this year), so now you owe tax on $250k.
there is a very good chance you do not have the cash available to make this payment.
of course, after 5 years, things all balance out and are effectively "back to normal". but you have to get through those 5 years first.
How does this work, in your first year, to have 300K revenue on 270K development cost. It sounds like some very specific boot strapping case, and even then after 70K deductions its 230K profit, so like 50K in taxes on 30K profit. Sure it’s annoying, but it doesnt sound like total doom. Its more likely youll have 250K programmer expense in the first year, 100K in revenue, need 200K in outside investment, and pay very little taxes. After a couple of years it evens out anyway.
Consider some sort of logistics company. They might pay 250K for their hardware (e.g. vehicles), 50K in expenses, get 300K in revenue. Theyll be taxed the same as the startup building up their IT assets.
By PaulDavisThe1st 2025-06-0816:38 The logistics company example is not really relevant. The critical point about the rule change is the fact that all software related expenses, including salaries or contract labor costs, must now be amortized over 5 or 15 years. What was previously deductible no longer is, and this changes the cash flow situation dramatically for a software-intensive business, for 5 years.
Sure, for heavily capitalized startups that are losing money, the rule change is not an issue. But for companies that manage to get to profitable status soon, even if it is only a small profit, the rule change can be devastating. A quick search for past HN articles about this will provide lots of example links to follow.
By datavirtue 2025-06-0715:56 This was also a gift to big tech, boxing out competitors.
It might be "quite short" but it's full of click bait style text. This tax law will change everything, but we won't say what it is for 4 or 5 paragraphs, nor what changed for another 3
Edit : sorry I just realised you meant the tax law is short. The article itself is very annoyingly written
By demosthanos 2025-06-0715:50 Agreed. I think the article's text was responsible for the confusion in the comments prior to me posting this. They could have been much more clear and straightforward.
I have no doubt it's bad, but I can't believe that it's both fueling mass layoffs and also almost nobody has heard of it. Those are unlikely to both be true.
By demosthanos 2025-06-0717:04 I'm not sure why TFA makes it sound like almost no one has heard of it, but it was extensively discussed on HN in early 2023 as being a primary cause of layoffs, before it was cool to blame AI.
Software firms across US facing tax bills that threaten survival (924 points, 981 comments) April 18, 2023 https://news.ycombinator.com/item?id=35614313
Ask HN: How are you handling Section 174 changes for bootstrapped companies? (298 points, 187 comments) Feb 2, 2023 https://news.ycombinator.com/item?id=34627712
Why the big tech firms that suddenly laid off a bunch of people the instant they started looking at their 2022 tax bill didn't tell everyone explicitly that that's what was happening I can't say, but it's not like this has been happening in secret.
Obviously interest rates also play a role, and probably a larger one. But this is objectively a very very bad contributing factor, far worse than the impact of coding LLMs.
By iancmceachern 2025-06-0716:502 reply By what logic?
At least one person at every company impacted knows why they're firing people, right? Likely several people who are in a decision making capacity. At every company.
Those companies have R&D for a reason. A company _wants_ to make things, right? If this is impacting their ability to make things, wouldn't it be in a company's best interest to advocate openly against the tax code, rather than be silent about the reason, fire their staff, and just not make things?
It doesn't make sense to me how so many people are aware of this to the point that many many companies are all doing the same thing for the same reason, but seemingly nobody was talking about it before this post. That doesn't make a lot of sense to me.
By iancmceachern 2025-06-0717:18 It's not like this.
It's like this: Company wants to do R&D, they have a budget, they do math that says they can afford to pay X number of R&D workers with Y budget.
Government changes tax laws in unexpected way, that changes the math so that Y budget only can support X-A R&D workers because the "A" goes to taxes now.
Also important to note, the tech R&D space is a very small part of the overall economy. We exist in a little thought bubble here on HN.
Assuming this change is causing the layoffs, then these companies know about this.
If these companies don't know about this change, then why would we believe this change is causing it.
By iancmceachern 2025-06-0717:35 They didn't know the change was coming. Then it happened, now they have to revisit their budgets. Some thought it was going to be changed back before it went into effect, it wasnt.
By sandworm101 2025-06-071:452 reply But where an established company invests steadily in software, whether it is amoritized or deducted year to year is a wash. Rather than harm tech, this would seem to protect established US companies at the expense of startups. Thats probably great for shareholders in publicly traded companies. It seems just another querk of taxation meant to maintain the established order
Only bootstrapped startups, funded startups will get the amortization by the time they need to deduct from earnings.
By subarctic 2025-06-074:59 This is what I was thinking too
It's only a wash if they've been amortizing all along. There's been no advantage to doing so, so established ones have all been deducting, and will have the same five year window of increased taxable income that startups will.
By demosthanos 2025-06-073:481 reply Startups have to face that five year window every time they start up.
Each and every startup will have a year 0 where they're spending more than they earn, and under the new Section 174 they will only get to deduct 10% of their employee's salaries that year. In year two they get to deduct 20% of year 1's salaries and 10% of year 2's salaries, which is still 30% of what the established players will be able to deduct. By year 4, if they make it that far (which most startups don't) they'll finally be at 90% of a full deduction.
Add to that the fact that startups also by definition have a much higher rate of growth than established companies and you'll find that a startup almost definitionally will be paying substantially more in taxes as long as it remains a startup, because they only get to deduct an average of the last 5 years of expenses from this year's revenue in order to calculate this year's profit. That's fine when your last five years are more or less similar to this one, but it's terrible when you've been growing.
The net effect of this change can only be to disincentive startups and cement big, slow established players.
The net effect of this change can only be more tax income which benefits the society. Tax the rich
By mr_toad 2025-06-0711:35 Increasing taxes does not always increase tax revenue. It’s easy to do enough damage to the economy that total tax revenues fall. Past that point is easy for the economy and government revenue to fall into a dwindling spiral.
By StackRanker3000 2025-06-0712:201 reply Not if it limits growth to a commensurate extent (or more)
A big part of why America is as rich as it is in 2025 is Big Tech. If laws and regulations had prevented that industry from taking off by stifling the now-giants back when they were starting up, you may have been more equal today (you’d have fewer billionaires), but there would also have been a lot less wealth to go around, even for the working class
By madmask 2025-06-0721:46 Yes. See Europe
salary is already counted as an expense right? does that mean we were double billed as two expenses? salary and R&D?
By ridomune 2025-06-076:29 more like triple. do not forget the sales tax when you're spending it.
By ChuckMcM 2025-06-075:25 Excellent summary.
By mountainriver 2025-06-0622:386 reply This is one of the worst things MAGA has done. Tech startups are the source of so much of our wealth, and this makes it very challenging to ever build one.
I can’t believe this still exists, and no one has changed it. We truly are governed by morons
for anyone curious, this wasn’t specifically trump, but it was indeed a republican congress bill. texas republican was the initial sponsor and then republicans lined up to cosponsor.
this was done to fuel their tax cuts to a small group of a certain people.
you can see all of the sponsors here: https://www.congress.gov/bill/115th-congress/house-bill/1/co...
By dyauspitr 2025-06-0720:13 That sounds exactly like what the parent comment said- a MAGA bill.
By NooneAtAll3 2025-06-0719:281 reply what do you mean by "sponsor"?
By bradleyjg 2025-06-0722:13 In the U.S. Congress when a bill is introduced in either House it needs to have one or more members to formally ask the chamber to consider the bill—they are known as the bill’s sponsors.
By WisdomTreeDev 2025-06-0719:06 [dead]
It was indeed passed by Republicans in Congress (with Democrats mostly voting Nay), but it was signed by Obama (12/22/2017). Why did he sign it?
By albertsondev 2025-06-0718:01 I encourage you to look closer at the "in office" section here.
Pay attention to the dates. It was signed on 12/22/2017. Obama's last day in office was 01/20/2017. That means it was signed by Trump.
By jeffybefffy519 2025-06-0720:47 Democracy is broken… its so hard to tell who did this.
By jbverschoor 2025-06-076:292 reply It is being roled back partly https://news.ycombinator.com/item?id=44028106
By PaulDavisThe1st 2025-06-0714:59 Until is is rolled back, it isn't rolled back.
By FrustratedMonky 2025-06-0712:541 reply too little too late?
as we are seeing now on a number of issues, sure things can be rolled back, but that doesn't mean a return to normal.
Yes, you can kick over a bee hive, then pick it up and set it back upright, but you are not going to put all the bees back in immediately. There are long term consequences.
Off topic! Having knocked over a beehive and got 50+ stings as they crawled up my trouser leg in the dark, I can confirm.
When I got to bed, my heart was beating so hard that it kept my wife awake.
By hnjobsearch 2025-06-083:19 You went back to bed after being stung 50+ times by bees? That sounds like a medical emergency. I'm glad you are okay, but I'm amazed you were able to just shrug it off.
A dead post below says it was biden and somehow Obama, but sibling reply link says it passed into law in 2017, not 2022, the first year it went into effect I think.
The article is pretty clear that the law was from 2017 had a scheduled start date of 2022. Although probably not the actual intended effect, it does have the effect of confusing who would be responsible for it by those who don't read past the effective date.
By vineyardmike 2025-06-077:491 reply > Although probably not the actual intended effect
This is actually a really common intention in laws like this. Get the tax cuts during your term, and then kick the can down the road so your successor's term is marred by the bad law. If your successor wants to fix it, they need to pass a different tax to recoup the costs, and incur the publicity of "raising taxes".
By matthewdgreen 2025-06-0711:391 reply I think it’s partly that and partly the fact that tax bills tend to be scored on a ten year time window. Note that this law doesn’t actually change the amount of tax that software companies can deduct, it just requires them to spread the deduction over several years. So if you’re scoring your new tax bill on a ten year window and five years into the bill this thing kicks in, then it looks like more tax is being collected in years 5-10. But that’s just an illusion because all the deductions are still there, they’re just being pushed out beyond the end of the window where they don’t “count”. At least this is my understanding.
By teitoklien 2025-06-080:52 Cashflow is king.
You’re operating cashflow decides the health of your business, not your accounting profits, not anything else.
Only the operating cashflow and whether that grows as your startup/business grows decides whether your business lives or dies, everything else is for investors, mommy and daddy for final report card.
A business operator’s #1 focus is Operating Cashflow and this tax insanity law hurts cashflow tremendously for american service businesses who need to compete with all other major economies who dont have such an insane law.
By throwaway173738 2025-06-0713:42 This is 100% the intended effect of leaving a bomb like this unaddressed then stalling all legislation halfway through your opponent’s term. You make them look incompetent and then you complain about how they never fix anything, even though they never get anything done because you’ve stopped cooperating. And even though you’ve stopped you can keep complaining about how they always include things you don’t like in legislation so that’s why you never cooperate. The solution is simple in your eyes: just do exactly what you want and only what you want and then you’ll cooperate. This is how a lot of a certain party was talking on the news from 2021 to 2025 when they were interviewed.
The way this is "fixed" right now, every five years we need another round of republican government to make things great again. If only enough democrats cared to fix this.
By yencabulator 2025-06-0816:56 The problem was created in the first place by republicans.
https://www.congress.gov/bill/115th-congress/house-bill/1/co...
By philipallstar 2025-06-099:21 It's good to know that when the Republicans want to tax companies, people rush to defend those companies against taxation.
By MoonGhost 2025-06-071:47 [flagged]
It's not really targeted at tech, insomuch as at Democrats.
Everyone assumed it was a traditional accounting hack. But given the timing and the reinitialization, it's clearly political, not economic.
The code is a strategic time-bomb designed to cause a high-profile economic downturn during a presidential election cycle, specifically when the following president is a Democrat and Republicans have a house majority.
It was used to harm Biden's economy, and it will happen again in 2030 if the next president is a Democrat. While deferred, it will be spun as a major Trump "economic achievement" for the midterms, because companies will be able to afford to hire again.
The tech industry is merely high-profile fodder for extreme politics. It really is that petty.
The Democrats had control of the presidency and the house in 2022 when this provision first went into effect but had 2 fewer senators (1 fewer if you count the tie-breaking VP). Why didn't they try to change it? Is there some reason a change in the tax code like this can't be modified or repealed once its in place?
By vineyardmike 2025-06-077:55 Politics are complicated.
Generally, in tax bills they try to keep them "neutral" where any tax cuts or tax breaks are coupled with tax increases elsewhere BUT they tend to report the 10-year affect for whatever reason. This bill provided a ~30% cut in corporate tax on profits, with a delayed increase in tax cost on Software R&D pushed to the next term.
If the next party wants to reverse it, they'd have to find the money with an increase in tax - directly undoing it would be a ~50% increase in corporate tax rate, which (I guess?) would be a tough sell politically. Meanwhile, the tax code on software engineering sounds too niche to expend political capital on.
Either way, its another example of how corporate America is trading long-term growth (R&D, product development) for short term gain (lower taxes today).
By candiddevmike 2025-06-0622:035 reply As a progressive, it seems like the Democrats always have Senate spoilers...
By dragonwriter 2025-06-0622:313 reply > As a progressive, it seems like the Democrats always have Senate spoilers...
With Republicans usually being dominant in a number of states, if Democrats have a Senate majority, it is usually both narrow and dependent on a very small number of Democratic and/or Dem-leading moderate independent Senators from Republican-majority states who vote with the party on leadership, but are soft (or firmly opposed to the progressive preference) on a number of issues important to progressives.
If the US were approximately an equal democracy, this might be less of an issue.
By Braxton1980 2025-06-072:501 reply >If the US were approximately an equal democracy, this might be less of an issue.
How? Evenly divided voters and representatives are the issue. Each side can barely afford to lose 10% or so during votes
By dragonwriter 2025-06-076:491 reply No, the reason the "there is always an in-party Senate spoiler" effect (when they have a Senate majority) seems to be more true of Democrats is because it is more true of Democrats, and the reason is that when the two parties in rough balance by popular support (or even rough balance in Presidential electoral prospects, which has the same directional bias as the Senate but of lesser magnitude), the Republican Party has a systematic edge in dominance of states, which translates into a systematic advantage in the Senate, which means that when the Democrats have a Senate majority, it tends to have a decisive segment in red-state Democratic Senators who are unreliable on key priorities.
The issue being discussed in the Senate is not a symmetric issue resulting from near balance in support between the parties.
It’s also because republicans politically punish dissent, while it is more tolerated in the Democratic Party. The consequences of “disloyalty” are higher in the Republican Party.
This might change. After party leadership got 20% of democratic senators to vote for trump’s procedural blank check, the party’s approval rating dropped to 27%.
If it doesn’t change, I suspect the party will split.
By K0balt 2025-06-0911:10 I wonder which is better, the totalitarian left, or the totalitarian right?
Since technology has empowered centralized power while providing the tools easily repurposed to poison democracy, I suspect that democracy as we understand it will fail to compete with data driven central planning.
So maybe the question we should be asking is what flavor of total surveillance and centralized control do we want to live under?
> If the US were approximately an equal democracy, this might be less of an issue
Equal to what?
By paulryanrogers 2025-06-073:293 reply Equal in voting rights. Gerrymandering has been perfected by Republicans. Through that they manage to dilute votes of the opposition. Other measures discourage voters likely to vote against them, like people who cannot easily take time off to vote in person or who have changed their name. Blocking rank choice and maintaining first past the post also disenfranchise third parties, and reinforces the power of incumbents.
Trump himself admitted it's better for Republicans when fewer people vote.
> Equal in voting rights. Gerrymandering has been perfected by Republicans. Through that they manage to dilute votes of the opposition.
This thread is talking about the Senate. The senate isn't gerrymandered. Both senators are state-wide races.
If you want to view it that way, you can view the senate as "pre-gerrymandered". But the last time that was an option was in 1959, and both of those are just "the entire area the US owned, but wasn't a state yet. To get senate gerrymandering, you have to go back to 1912 and the admission of New Mexico/Arizona.
By vineyardmike 2025-06-078:11 > If you want to view it that way, you can view the senate as "pre-gerrymandered".
That is quite explicitly the history of the US Senate (and House), FWIW.
The Connecticut Compromise was reached to give low-populations states outsized legislative power in the senate. This is the main reason the senate exists.
Building on that, the 3/5th compromise was reached as part of this to give slave states outsized legislative power in the house.
The state of Maine used to be part of Massachusetts, but it was later set up as an independent state in order to increase the number of anti-slavery states in the senate (the Missouri compromise).
Gerrymandering can affect voter sentiment and trigger polling location changes during redistricting, both of which can affect voter turnout[1][2][3] (though the research doesn't seem conclusive on the effect).
And thinking about it more, though I haven't seen if there are studies on it: there are probably manpower/fundraising effects from gerrymandering.
If you're able to protect your political power in one area that probably better enables you to amass resources to use in the area you can't gerrymander.
But all that said, both parties practice gerrymandering and I don't think there's strong evidence of a significant advantage over a major party from current gerrymandering at the national level.
[1] https://da.lib.kobe-u.ac.jp/da/kernel/90008864/90008864.pdf
[2] https://electionlab.mit.edu/articles/gerrymandering-turnout-...
[3] https://stateline.org/2022/05/20/check-your-polling-place-re...
By paulryanrogers 2025-06-0712:381 reply > On a percentage basis, over three times as many districts were competitive in states where independent commissions drew maps as in states where Republicans drew maps.
https://www.brennancenter.org/our-work/analysis-opinion/how-...
That’s just confusing cause and effect. If your seats are safe, you have no reason to agree to forming an independent commission. The same is true in both heavily blue and heavily red states. Are districts more competitive in states where Democrats draw maps? I don’t think so.
By throwaway173738 2025-06-0713:462 reply This totally ignores values and motivations, and I would argue that only one group in your comment values winning at any cost.
I don’t even know which group you mean, but “my group has good values and motivations, but the enemy group just values winning at any cost” is exactly what a total partisan who values winning at any cost would say.
By paulryanrogers 2025-06-0715:431 reply The evidence is that independent commissions drawing maps makes for more competitive districts. Which party is most opposed to such commissions? Which party is gleefully dismantling all accountability and oversight positions and departments? Which party is openly inviting corruption and pardoning those they should be prosecuting?
I wonder why one party would be seeking to change a civil service that’s 90% staffed by members of the other party? I guess “democracy” means Democrats running the country no matter who wins the election, right?
By tomrod 2025-06-0811:53 First, your stats are wild. Please provide and unbiased citation.
Second, your solution was in place in the 1800s and was referred to as the spoils system. It led to bad outcomes and was rightfully abandoned. Your beef is with the fact that educated people tend to choose policies that you don't like (assuming your 90/10 split, which is still wild). You/the GOP have three options. First is to recognize that the policies pursued do not attract people which education (which I consider a red flag). Second is to re-adopt the spoils system despite it being illegal, and frankly just sort of dumb since when the other side is in power you suffee, but at least then you never need to think deeply about making policy for the whole country instead of a subset of supporters. Third, you/the GOP self-own via tearing up all the intellectual capital and international good will built up over the decades without a replacement, massively reducing American influence on the world in all dimensions.
By int_19h 2025-06-080:35 Democracy means "one person, one vote".
We all know which party is fighting tooth and nail against that on practically every issue that affects it.
By shadowgovt 2025-06-082:491 reply Are most members of the civil service Democrats? This is the first I've heard of this.
OP asserts this unsource. While it does seem to tilt towards Democrats since it is ethics and mission oriented and typically requires a degree, 90/10 sounds wild in my experience.
My prior is based on experience. Most of the civilian govies are centrist, "I just want to grill" types.
By shadowgovt 2025-06-0814:13 That makes sense to me. This is why I suspected that attempting to claim the election was stolen would be a losing proposition; I was sadly surprised to the contrary.
Elections are run by Republicans as well as Democrats. In fact several of the key locations that Trump claimed were stealing the election from him were basically locations where the Republican party had a lock on the administration of the election. As I remind people often, when they talk about someone stealing the election, that's not a hypothetical "someone," that's Betty three houses down that has the nice flower garden and organizes the bake sale at church every month.
?? Both sides happily gerrymander. It’s been around since 1812 and both sides are equally guilty at this point.
By paulryanrogers 2025-06-0712:39 I didn't say democrats were innocent. I said Republicans perfected the (ab)use of districting.
https://www.brennancenter.org/our-work/analysis-opinion/how-...
By Braxton1980 2025-06-074:24 Governors are elected by popular vote.
Hell, just first past the post would eviscerate the current parties.
By SpicyLemonZest 2025-06-0622:141 reply Providing spoilers was the explicitly designed purpose of the US Senate. It's not a one-sided problem - Senate spoilers are also why the Affordable Care Act didn't get repealed in 2017.
US Senator was an office initially designed to be selected by state legislatures rather than by direct popular election like the representatives. To a populist or a party boss, that might count as a spoiler to the will of the people or to the will of those in DC, or to both. But I may misinterpret GP's point.
By mayneack 2025-06-070:27 I assume the person you're replying to is talking about the Filibuster and supermajority requirements not the direct election history. The filibuster is a senate rule not a constitutional design, so it wasn't part of the "design". Maybe they're both different ways of adding veto points to the same effect, but I think spoilers as "explicit design" is probably not how I'd describe it.
https://en.wikipedia.org/wiki/Filibuster_in_the_United_State...
Not parent but the founders were like folks writing smart contract code, thinking about various exploits and vulnerabilities (that might reduce the wealth of their class) so many of the seemingly dysfunctional elements of the system turn out to be designed deliberately to be dysfunctional. Feature not bug.
They were not thinking about various exploits and vulnerabilities but rather making whatever compromises were necessary in order to form the union. It was negotiation, not planning.
By bbarnett 2025-06-077:34 A compromise can also be a feature to resolve a bug, from the point of view of the one demanding it.
By Braxton1980 2025-06-072:49 And get blamed for it. If every single Republican and two Democrats vote against something guess who people blame?
By kenjackson 2025-06-070:505 reply But this is the type of thing that progressives would like support (tax big corporate America).
No, this is a misunderstanding of the kind of taxation policy progressives tend to favor. Taxation on profit for businesses should be high, and taxation on upper tiers of individual income should be high, but taxation on funds businesses use to reinvest should be exempted or deductable. Basically the taxation we had in place after WW2 and on, with a steep corporate tax rate and more or less a maximum income for individuals. The R&D exemption removed in the 2017 bill, and discussed in the article, is key to that, because it encourages corporations to reinvest their income in building new products and paying workers rather than taking it directly as profit-- after all, at least they could reap the rewards (in growth and revenue) of the R&D later, instead of just giving the money to the government as taxes.
I don’t think most progressives think about it in that detail. Raise taxes on the rich tech companies that are gentrifying san francisco.
At first glance I support ... "social and economic equality" and "reforms to improve human conditions, combat corruption, and reduce inequality". Am I progressive?
If you ask me "should corporations pay more taxes?" I will say, yes. Famously so does Warren Buffet, is he also a progressive?
If you ask me, "hey should we gut tax incentives for R&D spending in the USA?" I will say, uhhh no? probably a bad choice?
Recently the progressives have latched on to culture war agendas against the wealthy, educated, white, male, straight and/or over the age of 35 crowd.
In other words, they have a popular agenda, but are political morons that are going to eventually wonder why they can’t break out of solidly blue districts.
By kenjackson 2025-06-0716:481 reply I think that is a misrepresentation of the fundamental progressive position, which is to make progress but never at the cost of the marginalized. Because we historically make most progress at the cost of the marginalized it can feel limiting or even discriminatory when we make sure they don’t beat the brunt of continued progress.
There is nothing against the group you mention except that it might be the group that most fights against progress toward equality.
> I think that is a misrepresentation of the fundamental progressive position, which is to make progress but never at the cost of the marginalized.
That just means that the marginalized become an anchor preventing progress. We can’t have nice things until we solve the problems of the bottom quantile—which we never will.
If progressives had been in charge, America and everything it created wouldn’t exist. They never would have allowed us to displace the Indian tribes so the land could be put to better use.
By int_19h 2025-06-080:39 What do you think is the best way to turn tables around and ensure that the marginalized are a net positive for progress? Perhaps we should reintroduce slavery? Or do you think that turning them into food or fertilizer would have more net benefit?
By kenjackson 2025-06-0816:30 “That just means that the marginalized become an anchor preventing progress.”
And that’s the difference. Progressives view it as important that we progress all groups and that challenge is fundamental to society, whereas you view them as an anchor.
By shadowgovt 2025-06-082:47 Progressives have been in charge, over and over again. You're discounting America starting from what is, by modern standards, a very regressive position.
Was the end of slavery a progressive or regressive move?
By const_cast 2025-06-0821:14 But this doesn't raise taxes on rich tech companies, it effectively does the opposite - the tax burden is proportionally lower the larger/more successful the tech company is.
Therefore, even by your own admission, this isn't progressive policy.
By dgb23 2025-06-077:34 I‘m not American but the above description of a tax policy is what I hear a lot from progressives in media.
By bloppe 2025-06-071:05 This tax is far more consequential for small companies than for large ones. It probably actually benefits larger companies because it hobbles competition.
By wvenable 2025-06-076:27 This time bomb was created because the bill slashed the corporate tax rate from 35% to 21%. Maintaining the status quo would mean taxing big corporate America more than this bill does.
By stahtops 2025-06-0710:42 But it isn't tax big corporate America. Did you read the article?
It's a 10% tax cut for big corporate America, with some economic poison for blue states in the future.
By Braxton1980 2025-06-074:25 What makes you think this?
By cma 2025-06-075:39 Both parties tend to when there is a narrow majority, e.g. McCain thumbs downing at the repeal of the ACA.
By naijaboiler 2025-06-0622:24 Why should they? Why did we allow a president to put in tax raise for the future. Replicants were playing politics from the start. Pass a bad bill, and then hope to get about it when the bad parts kick in when the other side woo be in power
If this was passed in 2017 to go into effect during the next presidential term, wouldn't that only work as a time bomb for Biden's presidency if Trump didn't expect to win a second consecutive term?
Given the history of prior presidents winning 2 consecutive terms, it seems like Trump could have reasonably expected a 2022/2023 tax change to be his problem.
By adgjlsfhk1 2025-06-071:323 reply if you retain power, you can fix it. the US government currently has the significant problem that one party campaigns on the government being dysfunctional, so they do their best to make it so.
By antif 2025-06-073:01 So.. criminal racketeering?
But what would trump have done if he retained the presidency and lost congress? That's also been pretty common over the last few decades if I'm mistaken, a president with one or both sides of Congress is reelected but Congress flips to the opposition party.
By Braxton1980 2025-06-074:271 reply He would do nothing because his supporters believe misinformation and worship him.
Prices haven't gone down at all nor will bringing manufacturing to the US do this (likely causing them to go up) but his approval rating is 50%
> He would do nothing because his supporters believe misinformation and worship him.
Interesting, that hasn't been my experience.
I live in a very red part of the country and most people I know are Trump supporters, including some family members have been very MAGA since 2016.
I've been hearing more and more complaints over missed promises: no Epstein files, raising budgets, RFK is starting to water down his promises, no end to the Ukraine or Gaza wars, etc.
He missed effectively every promise from 2016. Why did these people vote for him 2 more times, especially after an attempted coup? Maybe these "complaints" are just an attempt to dodge personal responsibility for having supported a catastrophe.
By _heimdall 2025-06-080:42 Sure you can guess at a person's intentions or reasoning, but my experience here is that there weren't many complaints in the first term for whatever reason and now there are.
I couldn't get inside their head to say why. My read on them is largely that the complaints are legitimate frustrations though. This isn't exactly a part of the country where voters are somewhat evenly split and Trump supports would need to save face or smooth over interpersonal friction by giving a nod to the idea that he may not deliver.
By Braxton1980 2025-06-080:40 He's removing the illegal immigrants and being very aggressive about it.
Hey, you knew a guy (Physics BA) who almost aced the LSAT cold. Do you remember what his score was and how old he was when he took it?
By jacobolus 2025-06-084:04 I don't remember his score, but he was probably about 22?
By Braxton1980 2025-06-080:401 reply > I've been hearing more and more complaints over missed promises: no Epstein files, raising budgets, RFK is starting to water down his promises, no end to the Ukraine or Gaza wars, etc.
I based my argument on the poll averages as shown below, most are high 40s similar to the past few months. I would think if people were upset about missed promises it would be reflected in these. It's been ~5 months.
You might say people are giving him a chance to implement a plan or that some action would take time therefore they are willing to give a thumbs up for now, hence the polls. The reason I discounted this is because I'm not aware of any plan or current actions by Trump that would reduce prices. The trade wars will either increase prices due to tariffs or increase prices if products are made in the US.*1
I believe you but maybe float a question to your neighbors - "If prices don't come down would you vote Democrat in 2027?"
https://www.realclearpolling.com/polls/approval/donald-trump...
By _heimdall 2025-06-084:08 Political polls are extremely misleading. Ask someone if they still agree with a decision they already made, they will more often than not find a reason to say yes.
> I believe you but maybe float a question to your neighbors - "If prices don't come down would you vote Democrat in 2027?"
The fact that you're assuming people should align with one party or the other is the problem.
Who gives a shit what letter is next to a candidates name? What matters is what the candidate stands for, what matters to them, and whether you believe they'll stuck to their guns when the political machine that is DC fights back.
> 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.
My claim wasn't whether trump is responsible, of course his tariffs are having a very real impact. My point was that one should never expect a politician to admit that, at best they dodge claiming responsibility but more often than not they point at someone else, often the last person in office.
If you'd like to say my claim is uninformed that's fine, but I ask again for examples when a politician directly owned their failure or apologized for it.
> My point was that one should never expect a politician to admit that, (...)
That's the problem with your false dichotomy: Trump already admitted tarrifs create economic problems.
https://fortune.com/2025/02/02/trump-tariffs-americans-some-...
Trump blaming predecessors for the problems created by his tarrifs policy goes way beyond your run-of-the-mill predecessor blaming. Trump is simultaneously warning his tarrifs policy will cause economic damage and that the economic damage created by his policies were caused by someone else.
By _heimdall 2025-06-0821:01 To be clear, this is the quote that article references.
> “WILL THERE BE SOME PAIN? YES, MAYBE (AND MAYBE NOT!),” Trump said in a social media post. “BUT WE WILL MAKE AMERICA GREAT AGAIN, AND IT WILL ALL BE WORTH THE PRICE THAT MUST BE PAID.”
That doesn't read to me as Trump claiming responsibility for any pain that we might see, and it isn't an apology. Even better, he ultimately doubles down on the tariffs and claims the end result will be worth any of the pain that he doesn't directly acknowledge he will have caused.
I would suppose that the Democrats would remove the policy regardless of who was in charge.
By happyopossum 2025-06-0713:501 reply But they didn’t, so that supposition is bunk
By devmor 2025-06-0715:59 When did they have control of the senate without a BD being the lynchpin?
By Braxton1980 2025-06-074:271 reply How?
But Republicans put it in. The proposed. They were the vast majority of the votes for it. It was signed by Trump. It was their baby.
By Braxton1980 2025-06-080:30 2020 - Trump goes after tiktok https://www.bloomberg.com/news/articles/2020-07-31/trump-to-...
In 2024 two bills (merged later) went through the Republican controlled House with a bipartisan vote (350+ for) [1] then the Democrat controlled Senate [2] with another bipartisan vote (79-18, attached to an Israeli funding bill) basically following whatTrump wanted.
Late 2024 - Trump then offered to save the service when the Public turned against the ban and used it as a campaign item.
2025 - His supporters were all over Tiktok praising him, including the CEO of Tiktok when he put a pause on the required sale. He's also extended the deadline multiple times now.
----------------------------
Republicans might start using this tactic more now that it's been shown to work. It's similar to the "Fuck the next admin" tax bill that he put in his first term.
[1] https://www.reuters.com/technology/us-house-vote-force-byted... [2] https://apnews.com/article/tiktok-ban-congress-bill-1c48466d...
By riehwvfbk 2025-06-076:21 [flagged]
This civic control correlation can simply have more to do with the most-white-supremacist Democrats switching to the GOP en masse and also simultaneously leaving multiethnic cities and school districts en masse after the 1960s. That self-selection left Republicans not a competitive amount of credibility or voter pool behind to work with. Your implication that policy dysfunction has ensued on that account rather than because of fiscal drain -- that's a separate topic. Individual states and individual cities have too many fiscal policy similarities and differences, overlapping, to responsibly compare in any online discussion.
> That self-selection left Republicans not a competitive amount of credibility or voter pool behind to work with.
So by your logic New York is a better governed state than Florida? Net internal migration would seem to disagree.
By jacobolus 2025-06-0718:10 > New York is a better governed state than Florida
Yes, New York is significantly more successful than Florida in almost every way: Better education, better healthcare, longer life expectancy, less pollution, lower crime, more productivity, higher wages, more amenities, better transportation infrastructure, less poverty, happier residents, and so on.
By const_cast 2025-06-0821:19 > So by your logic New York is a better governed state than Florida? Net internal migration would seem to disagree.
Yes, and it's not even close. Choose just about any metric and NY is running laps around Florida.
And, not just Florida, but red states in general. If you look at the metrics, they typically are some of the poorest states with the worst outcomes. Bad infrastructure, bad education, not a lot of job opportunities, horribly impoverished, under-developed.
It's just that nobody cares. Nobody expects Louisiana or Florida to be decent places to live. But since California is the economic powerhouse of the US, people do expect it to be decent. That's the issue, the blue states are essentially carrying the economy of everything else on their back, so they now get a new, unfair set of standards.
There's some exceptions here, mainly Texas.
Is it your opinion that the only factor relevant for those deciding what state to move to is quality of government?
I'm surprised that things like the job market wouldn't come into play, for example.
I think quality of governance is a major reason, yes. When my parents immigrated to this country, they moved to a deep red state (Virginia) instead of the deep blue state next door (Maryland). Why? A focus on good schools, low crime, and low taxes, instead of a focus on economic redistribution.
I may have misunderstood, when you said internal migration in the earlier comment I assumed that was referring to people moving from one state to another rather than immigrating from another country.
> A focus on good schools, low crime, and low taxes, instead of a focus on economic redistribution.
That's also interesting. I wouldn't have rolled that up to quality of governance, but I could see why you would. To me that falls more into a sign of long standing culture, I could see a place with existing policies that match now having a terrible administration in charge.
By rayiner 2025-06-082:07 > may have misunderstood, when you said internal migration in the earlier comment I assumed that was referring to people moving from one state to another rather than immigrating from another country.
I was just giving an example—people moving within the U.S. make the same choice. When I was growing up, Virginia was like Florida is today: a red state with a booming economy, low taxes, and a good business climate. Why did AOL start in the farmland of Loudon County instead of the farmland of eastern PG County (which is closer to DC)?
> That's also interesting. I wouldn't have rolled that up to quality of governance, but I could see why you would.
It’s a cultural trait that strongly affects governance. The government can focus its energies on making things better for middle class people and businesses, as Virginia long did, or it can focus on poor people and minorities, as Maryland long did. And the resulting differences in governance are quite apparent. Virginia has better schools, ore employment, and has grown faster than Maryland over the last 50 years.
By shadowgovt 2025-06-082:41 To be clear: if they moved to Virginia, they did not move to a deep red state.
Maryland is a deep-blue state. Virginia is about as red as Pennsylvania.
By hollerith 2025-06-0715:04 The two are related: bad governmental policy can make employers leave a state and make employers that choose to stay less prosperous.
By PaulDavisThe1st 2025-06-0715:461 reply ... because nobody moves to Florida for (what they perceive of) the weather, right? Especially not retirees tired of the idea of one more winter in NY.
By shadowgovt 2025-06-082:44 Exactly. If I'm looking for an explanation of Florida immigration / New York emigration, "an aging populace" is where I'd start.
By Braxton1980 2025-06-074:261 reply What makes California's government dysfunctional?
What about Detroit?
A government that runs the richest city in the country (SF trades this spot with NY every few years) and makes it look the way it does is the definition of dysfunction.
And Detroit... well, I guess now that they've bulldozed all the abandoned buildings it looks less like a post apocalyptic hellscape and more just abandoned. An improvement I suppose.
You are all over this thread treating HN like reddit or twitter. Please go.
By riehwvfbk 2025-06-0715:25 [flagged]
California also has easily solvable housing, education, transportation and mental health crises that are entirely driven by mismanagement by the state government. They haven’t done anything meaningful to address these issues in 25-40 years depending on the issue.
Heck, they ignored the water crisis for twenty years, and what they’re doing now for aquifer replenishment is still less than what makes sense.
I say they are easily addressed because simply reverting to California’s policies from ~ 1975 would greatly improve the current situation.
By jacobolus 2025-06-0718:13 The biggest root problem with California governmental structure is harmful constitutional features added by public referendum, especially Proposition 13 (1978). I guess you can blame "government" for that, but it doesn't seem like quite the right target.
The water crisis is a difficult problem because water rights are complicated and central valley farmers are an influential political group very focused on short-term preservation of water access and not as concerned with long-term sustainability.
> easily solvable housing, education, transportation and mental health crises
I submit that these are much less "easily solvable" than you claim. (What have you personally done to work on these problems, if they are so "easy"?) Legislators don't get to wave a magic wand, but need support of a wide variety of stakeholders who have contradictory demands and expectations (some of which are fairly unrealistic, but anyway..).
Education for example has competing goals of local funding vs. inter-city equity. Should the wealthiest towns get to spend arbitrarily much local property tax money on their own children's public schools while the poorer town next door is running out of toilet paper, or should the state try to equalize funding between schools to give every child the best opportunity? There's not really a "correct" answer to this, and every possible choice has some serious disadvantages.
By kenjackson 2025-06-070:521 reply No. It’s after re-election. Bad news late in your second term isn’t that big of a deal, unless you care about legacy.
Most presidents care about legacy, at least to me it seems like trump holds that as a higher priority than most.
By paulryanrogers 2025-06-073:371 reply Trump seems to care what people think today, every day. He doesn't seem like someone who puts a lot of thought into the future.
You know, I wonder if that's a sad but valuable trait for a politician.
Public opinion can change daily, and external events can appear with no warning. These things can make a prior path of action vanish, or even make it madness to pursue.
If you try to plan everything long term, I bet you hit a lot of disappoint as a politician. If you only see today, then you're not fighting for things that are now not possible.
I imagine one would be far less stressed as a result. And maybe more popular than otherwise.
By paulryanrogers 2025-06-0712:31 Some problems require years or even decades to address. Consider how quickly a COVID vaccine was developed, yet it depended upon many years of quietly studying SARS and R&D around MRNA. Or consider trying to address developing or maintaining infrastructure.
A chaotic politican whose mind is changed by the last person they spoke with won't do well facing serious long term problems.
It gets worse if the only things they consistently stand for is their own power, personal wealth, their sycophants, and their grade-school-level (mis)understanding of complex matters.
By Braxton1980 2025-06-074:281 reply >me it seems like trump holds that as a higher priority than most
Why?
He seems to care immensely about being viewed as the "winner" and the "best" at everything.
I also have to assume that anyone interested in slapping their name in big gold letters on as many buildings as possible is interested in the perception of legacy.
By Braxton1980 2025-06-0723:571 reply I misinterpreted your original comment. I thought you meant he would act as the ideal benevolent leader to obtain this perception
By _heimdall 2025-06-080:49 Hah, oh yeah I could see reading it that way being very confusing! Trump and benevolent don't belong in the same dictionary.
This is just wrong. It was passed in 2017 (during Trump’s presidency). It was to go into effect in 2020 (a presidential election year during Trump’s presidency). He hoped to be re-elected.
By demosthanos 2025-06-074:041 reply No. It went into effect in 2022 [0], which means the timeline absolutely does track with OP's theory. That gives a hypothetical Trump term 2 a full year to fix it but also imposes enough of a time crunch that they could plan on sabotaging attempts to fix it by another party.
I'm not saying it's the actual story, but the timeline does track.
[0] Page 60, Sec 1306(e) sets the date: https://www.congress.gov/115/bills/hr1/BILLS-115hr1enr.pdf
I don’t think it really changes the narrative. 2020 was also a congressional election year, even had Trump won (as he appeared to want desperately) he could not have been assured of a Republican congress.
My argument is simple: Occam’s Razor
The Republicans in congress put the provision in solely as a gimmick to get past the CBO.
Frankly I don’t think legislators in either party are competent enough to have foreseen the consequences and even if they had been they wouldn’t have put a bomb like this in that would be more likely than not to backfire and affect them.
I just think that too often people interpret incompetence as malice, especially nowadays when things are so polarized that it’s fashionable to hate people who differ with one’s political opinions.
By throwaway173738 2025-06-0713:591 reply I think you’re wrong that legislators are incompetent. They’re human, and they’ve spent much of their lives learning how to get votes, but they’re not incompetent. A lot of them aren’t malicious, but there seems to be a small group of people outside of the legislative branch who are hell bent on taking control at all costs. And if you want to keep the votes rolling in you have to work with those people or get primaried. The dysfunction follows from fear more than incompetence these days.
By efitz 2025-06-084:23 I think legislators are skilled politicians and many are lawyers of varying competence. I would not expect them to deeply understand the negative downstream economic consequences of changing an obscure provision of the tax code. Maybe some of them could but would those have even been in the room? I get the impression most legislation is written by staffers (polysci or lawyers) and particularly spending legislation is tightly controlled in committee; only a handful of lawmakers ever saw the actual legislation before it was passed.
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 as a “special case.”
E.g. If a whiskey maker pays to build a distillation system, it can’t deduct that cost immediately. Because that’s a capital asset that generates recurring revenue. Software is properly treated the same way.
By demosthanos 2025-06-0723:33 Historically, Section 174 allowed everyone to opt in or out of R&D amortization. That amortization is required from anyone for R&D is new.
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".
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 :)
By malshe 2025-06-070:32 > Amortization makes sense for things that have some inherent value. Like a microscope or computer.
I am nitpicking but since a microscope or a computer is a tangible asset, the correct term is depreciation. Amortization applies to intangible assets.
The software that companies make is sold off in bankruptcy all the time.
I have a few friends who specialize in it with 2 ongoing contracts for splitting off pieces of software.
By tomrod 2025-06-072:16 The value is far less than the amount being amortized for its development.
By Supermancho 2025-06-0623:122 reply > Selling you code, lol -- code is more of a liability really :)
It's important to consider that lawmakers (who are not well informed or downright stupid) might think code has intrinsic value because of media married with a lack of real-world experience.
By bonoboTP 2025-06-0714:48 Lawmaker is a misleading word. The people who actually make the law and lobby for it probably know quite a bit. The representatives are law voters not makers. They don't design the laws literally. They vote because they are told to.
Continuing your observation, this presumes they read and think deeply about the bills they vote on. They do not.
By Supermancho 2025-06-073:061 reply I remember the day I mentioned this in my high school^ honors sociology class and the eventual valedictorian exclaimed that I was stupid to think that. The system has been broken for longer than I have been alive, but the indoctrination has been working to make up for it.
This was a Blue Ribbon School 1992-1993 yup. https://www.ed.gov/sites/ed/files/programs/nclbbrs/list-2003...
By sigwinch 2025-06-0821:50 Reading all bills that reach the Senate is like reading two Bibles per year. The swing vote legislator? Maybe. But the partisan extremes?
By jppope 2025-06-0723:14 Realistically that says more about the quality of software that we build than the concept of software as an asset
By ndesaulniers 2025-06-091:06 > code is more of a liability really :)
Mine DEFINITELY is!
Amortization is bad policy, period. If cost is actually incurred, it should be fully deductible immediately. No matter if it's a piece of equipment or software.
By dsauerbrun 2025-06-0713:191 reply i'd disagree heavily with that... let's say you have an expense of an insurance policy that covers you for the next 10 years. You're paying for 10 years of service, that should be amortized over 10 years.
Yeah but if the insurance policy requires me to pay upfront, I'm out the entire ten years' worth of insurance premium. Amortization forces it to be divorced from actual cash flow.
By charlieyu1 2025-06-0722:091 reply Amortisation is for accounting/tax purposes. A large negative on the first year does not make sense. It should be divorced from actual cash flow, because cash flow doesn’t tell you the full picture of the company, while assets/profits do
By kccqzy 2025-06-090:44 I also didn't like the conventional definition of profit based on earnings. I'd rather look like free cash flow instead.
By timewizard 2025-06-0621:149 reply Is US software dominance because of our startups? Or because of the giant trillion dollar monopolies we have?
Didn't AAPL, GOOG and FB all create products _before_ they had any taxable income? Would this change have had any actual impact on their foundings?
By 9rx 2025-06-0622:14 > Is US software dominance because of our startups? Or because of the giant trillion dollar monopolies we have?
Most likely neither: It is its massive trade deficit, the one it strangely wants to get rid of now, that has allowed US consumers to consume more than they produce (i.e. you can take something with no real expectation of having to give anything back in return). Which, as it relates to tech, has enabled offering services for what is effectively free to dominate the market. Nobody else in the world can compete with that.
> Didn't AAPL, GOOG and FB all create products _before_ they had any taxable income?
Wouldn't you say they had no taxable income because of it? If Facebook brought in $100,000, and paid $100,000 to developers, then there would be no taxable income under normal regimes. But if the developers were not tax deductible, then that $100,000 in revenue would be taxable, even though the bank account is empty. This isn't nearly so simple, but it has changed the calculus in a similar way. The business models of old no longer work because of it.
It's worth noting that FB was quite possibly being secretly funded with taxpayer money by national intelligence interests at inception, which would have substantially reduced or eliminated commercial pressure early on.
DARPA was working on Project LifeLog starting in 2003, was to be "an ontology-based (sub)system that captures, stores, and makes accessible the flow of one person's experience in and interactions with the world in order to support a broad spectrum of associates/assistants and other system capabilities". The objective of the LifeLog concept was "to be able to trace the 'threads' of an individual's life in terms of events, states, and relationships", and it has the ability to "take in all of a subject's experience, from phone numbers dialed and e-mail messages viewed to every breath taken, step made and place gone".
The program, at least officially and publicly, was cancelled on February 4th, 2004, the exact same day that Facebook was founded.
https://en.m.wikipedia.org/wiki/DARPA_LifeLog
https://en.m.wikipedia.org/wiki/Facebook
You can call it a coincidence if you want, I just tend to be very skeptical of "coincidences" where massive, powerful, unaccountable, immoral, unethical institutions like the US intelligence community get exactly what they want at the expense of our civil liberties.
I often wonder if national intelligence interests are behind or have taken control of major corporate players like Microsoft, Google and Apple. There was an article [0] back in 2015 that brought forth the proposition that google was created by the CIA. It would explain the current enshitification of these companies and the lengths they are going to take away choice.
[0]: https://medium.com/insurge-intelligence/how-the-cia-made-goo...
By cjbgkagh 2025-06-0622:08 Ever wonder why Microsoft bought Skype?
By hackandthink 2025-06-074:34 Google Is Not What It Seems
Well, presumably the claim would be that a factor in their not having taxable income was the fact that they didn't have to amortize their development cost.
By joshuanapoli 2025-06-0621:431 reply Yeah; start-ups will start paying tax much sooner since salaries are the main expense in software development, and only a fraction can be deducted per year. The tax change must make things marginally more difficult for young companies that have some revenue, aren't cash-flow positive, and have a short horizon.
By tomrod 2025-06-0621:48 It's not marginal. It significantly impacts sub-$10MM companies.
By madaxe_again 2025-06-0621:56 I don’t know how it works in the U.S., but we had HMRC in the U.K. write us a cheque every year, as if you have a greater R&D claim than your tax bill, you get a rebate.
By hackernoops 2025-06-071:52 It started with small and nimble innovators. Then it was shifted to Big Tech with the squeeze of patent trolling in the 2000's applied. It was capturing massive created value into the hands of few, connected, corrupt shitbags.
By shrubble 2025-06-0623:51 I’m not familiar enough with the very early days of Apple which started out as a hardware company to rebut you; but perhaps you mean the current Apple that has re-invented itself?
By tomrod 2025-06-0621:46 This impacts deductable expenses, not profits directly. The labor you pay for internally owned IP related to software must be amortorized. This screwed up an enormous number of business plans because software has more risk than many other endeavors. For small businesses, you basically can't do your own software.
It applies to things like configuring your internal tools too. Good luck at audit time.
By CactusRocket 2025-06-077:411 reply Hi, I'm just really curious about something. Why write AAPL, GOOG, and FB, and not Apple, Google/Alphabet, and Facebook/Meta?
By tomrod 2025-06-0715:49 Stock tickers are common and more readable than FAANG
By typeofhuman 2025-06-0621:29 HN has taken a sad turn over the last few years where we see genuine curiosity - such as your reply - met with downvotes instead of replies.
I don't have an answer for you. But I support your intrigue.
> end of US software dominance.
What is that? Software sold by companies that have HQ in the US? Or software created by someone in the US? Because if it is only the first, good riddance.
By tempestn 2025-06-083:00 Based on the Shopify example in the article, it's the latter.
By luckylion 2025-06-0712:35 Does a machine guarantee steady income during the period of its depreciation?
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 would've been a huge uproar if this was done for cost of goods. Why are employee salary expenses any different?
By altairprime 2025-06-0619:326 reply 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 profits show as 0%.
This tax code defect is now closed by accident, but could have been done much more intelligently than it was. Oh well.
(EDIT: My first sentence is potentially confusing when I reread it later. To restate: section 174 was defective as implemented due to the uncapped 100% deduction, but the concept of a significant research exemption is still excellent. Just need to close the effective 0% corporate tax rate loophole.)
The company already pays payroll taxes on those salaries, and the employees pay income taxes. And the people hurt by this aren't the shareholders or top executives, it's the rank and file workers getting laid off, losing benefits, and being asked to work more for the same pay.
What this change effectively did was make software developers significantly more expensive, without increasing the amount those developers get paid.
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.
It matters alot. Both the employee and employer are benefitting from government spending, the employee shouldnt have to foot the whole bill. That is dytopian
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
By thayne 2025-06-082:42 Suppose amount of money an employer is willing to pay for an employee is $100,000. For the employer, if there is a $20,000 payroll tax, then the employer would only pay the employee $80,000 to keep the total cost at $100,000. If the employee pays the tax, then the employer will pay the employee $100,000, then the employee pays $20,000 and has $80,000 after taxes. Either way the employer pays $100,000 and the employee gets $80,000. It doesn't matter which party is paying the government $20,000*.
Now, there are other tax schemes that aren't based on how much an employee is paid, but that is a completely different matter.
And FWIW sales/vat tax is somewhat similar. It doesn't matter if the buyer or the seller pays the tax, either has the same effect on the total amount paid.
By myroon5 2025-06-085:39 For anyone wanting to read more on the topic:
By bix6 2025-06-0712:28 It’s split but the company pays more. Both pay SS and Medicare. Company also pays unemployment.
By warkdarrior 2025-06-0620:163 reply Software developers are already too expensive in US, so this applies some downward pressure on those salaries. Frankly the economy will be much better off when tech salaries equalize across geos, thus avoiding the deep whole US manufacturing is in (for example, manufacturing wages in Vietname are one tenth of US manufacturing wages, and thus it is better to open new plants there).
By systemf_omega 2025-06-0712:253 reply If you want equalized poverty, feel free to move to the EU. Say goodbye to owning a nice house, or building any kind of wealth - that's reserved for the old money class.
In the US, software is one of the few remaining ways to achieve the American dream. I came to this country to work hard and earn money.
Weird, I live in the USA make $180k yet still can’t own a house and building wealth is extremely hard.
EU has better societal benefits than the US (access to healthcare, education, mandated vacation time (often starting at 3-4 weeks).
The vast majority of people care about living a life without suffering. In the US this is only reserved for the rich it seems.
By systemf_omega 2025-06-0916:291 reply What part of the country and what is your take home? Monthly expenses? $180k can be a lot depending on your location.
Exceptions are HCOL tech hubs, but comp in those places is much higher.
By azemetre 2025-06-1116:49 I live in Boston where I make double(-ish) the household median income ($80k to $100k). For individual median incomes, I make $140k more. I'm able to save over half my monthly income and it's still not enough. I absolutely can't imagine living in this city on anything less and I don't exactly live a life of exuberance here.
This is the sign of a broken economy.
By ciberado 2025-06-0821:10 I don't think we share the same definition of poverty.
By OvbiousError 2025-06-1012:14 I'm in the EU. You have no idea what you're talking about.
By bboygravity 2025-06-0620:271 reply Yeah, make everybody equally poor. That'll solve things.
By altairprime 2025-06-0621:491 reply If you look at happiness and indexes versus taxation rates - yes, making everybody poorer does tend to solve things. Not too soon in the growth curve - but certainly not never.
By mattmillr 2025-06-073:39 Those two scenarios are only comparable if you isolate happiness and taxation and completely ignore things like social services and inequality.
I think you're referring to Nordic countries which consistently rank as the happiest countries and also have relatively high tax rates (4 of 5 Nordic countries rank in the top 11 tax rates globally. Norway has oil.) The high taxes that "make everybody poorer" also fund extensive social services that contribute to happiness.
However, this conversation is about making (a class of) workers poorer by using tax policy that puts downward pressure on their salaries. Tax revenues will stay the same, so social services will not be increased. Economic inequality increases because the workers became poorer, the C-Suite and Board Members don't.
By bloomingeek 2025-06-0620:37 [flagged]
By californical 2025-06-0620:212 reply Don’t forget the other stakeholder - the general public.
Yes it sucks for developers, but does it make any difference for any other employee? Why does Joe’s plumbing have to pay those taxes, but Jane’s AdTech company doesn’t?
Sure, there are benefits to investing in R&D in general, and tech has fueled a lot of growth, so incentivizing it has likely paid off for the whole economy. But will that forever be true? Maybe?
If Joe's plumbing hires an assistant plumber, they get to fully deduct the assistant's salary.
Why do I, the hardworking tax payer, have to subsidize Joe Plumber, who already has a big house with a pool?
By jay_kyburz 2025-06-0621:321 reply In some parts of the world we have a sales tax which is a form of minimum tax on business outputs. The consumers of plumbing and software pay 10% regardless on a businesses profitability.
By altairprime 2025-06-0621:341 reply Yeah, VAT would help tremendously in alternative here, but for gestures at United States sociopolitics reasons the existing U.S. taxation methods can’t keep up and won’t be repaired any time soon. I could boil the ocean on this down to bedrock (citizens should be taxed on [redacted] in excess of threshold, services and goods should be VATed) but I stand by “section 174 with a sub-100% cap” as what at minimum would have balanced research and taxation.
By thayne 2025-06-072:02 In many parts of the US there are sales taxes, but they are state or local taxes, not federal taxes.
By thayne 2025-06-072:25 Joe's plumbing doesn't have to pay those taxes. Operational costs, including paying employees for normal operations, is deductable.
But with the change, the cost of R&D employees is now only partially deductible (right now, you can eventually deduct the full amount over the course of several years), and software development has to be considered R&D.
> Given the choice, Amazon would rather spend 100% of its profits on itself
And why is this bad, exactly? Money will be spent and will go back into the economy. Amazon will have to use the funds to build new offices, datacenters, do research, whatever.
And even if execs give themselves $10^11 USD in bonuses, they will be taxed as personal income, at even higher rates than corporate income.
By californical 2025-06-0620:274 reply 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? Or is it better for the money to go back into the economy through taxes, then disbursing the benefits to lower-income benefit programs?
I’m not sure what the answer is. The former is likely to drive some innovation, which I’m sure varies by company. Where the latter could also unlock innovation by giving the bottom-quartile of earners a chance to improve their situation.
By zdragnar 2025-06-0621:31 Those salaries are also taxed, and at the highest tax brackets. The government may end up getting more revenue that way.
By xiphias2 2025-06-0621:52 The answer is simple: it's the biggest growth generator in USA.
Growth has its own problems of course (I don't want to estimate the health impact of Coca Cola), but it's a prerequisite of a country not falling behind others.
At that point, do we need to fundamentally rethink political donations by companies (outright ban them) and SuperPACs? No representation without taxation.
By cyberax 2025-06-0723:10 Absolutely, companies should not be involved in politics. It's impossible to _fully_ get them out of politics, but we can at least minimize it.
> 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 taxes, then disbursing the benefits to lower-income benefit programs?
No.
> I’m not sure what the answer is.
The answer is pretty clear: invest money into the private sector, rather than divert it into the Federal budget. Private actors are more efficient at allocating funds than the government.
I'm not against social spending, it's a necessary evil for any real state. Pure libertarianism leads to dystopian outcomes. But it should be understood that it's a very real artificial inefficiency that is imposed on the economy.
There are also situations where additional social spending is necessary, but they are VERY easy to detect: when your interest rate is near zero.
Jesus man, how can you look at the economic history of the past 30 years and still think neoliberalism is the way to go?
By GuinansEyebrows 2025-06-0622:55 because a high percentage people on HN fall into the group that benefits more from neoliberal economics than the larger group of people within those economies who don't benefit.
By tomrod 2025-06-0716:02 Same as the communists, in that it hasn't been truly implemented anywhere?
By Nasrudith 2025-06-089:28 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.
I used to think like you, until I saw what the lack of neoliberalism does to countries. And before I witnessed the magic of market economy that adapts to changes far, far, far better than anything else.
If you want a static economy that supports gradual decline (preferably with a mineral-based income stream), then a lot of state spending is fine.
By shafyy 2025-06-1013:57 Being opposed to neoliberalism does not mean being opposed to free markets in general.
Real neoliberalism (with land value tax and pigouvian tax) has never been tried.
By kfkdjajgjic 2025-06-076:201 reply By tomrod 2025-06-0716:03 Then you misunderstand, the markets and economies of the past 5 decades have been two children playing Candyland. Saying it's not is a No True Scotsman fallacy, because clearly since I labeled it as Candyland economy it must be so.
By phatskat 2025-06-097:18 Sure, and you could argue that we haven’t actually tried communism, or that US democracy is so gerrymandered and neutered (eg Citizens United), etc about any political system. I don’t think we’d be where we are in the US if we had a “pure” democracy, I don’t think Russia would be where it is if they had actually gotten to communism. South America might be a much different place if the US hadn’t looked at the budding socialist movements and said “no way, buddy”.
By shigawire 2025-06-0710:59 The brand of neoliberalism where the fox sets up shop in the henhouse does not work.
State spending is not a panacea.
Mostly, Amazon will do stock buybacks, so that its investor can invest into other top stocks.
By cyberax 2025-06-0622:02 Funds for the stock buybacks are not R&D, they'll be taxed.
By runeks 2025-06-085:54 > 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.
"on itself"???
You mean it would rather spend its profits on hiring more developers than sit on it? That sounds great, doesn't it?
By Nasrudith 2025-06-089:24 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.
after 5 years then every year is deducting a whole year's worth of R&D - as long as that investment is not too lumpy from year to year you are back where you started
By masterjack 2025-06-074:381 reply Which is fine for steady companies, but perpetually drags down any rapidly growing company
By vpribish 2025-06-0816:41 exactly. so this policy which was ostensibly about closing a loophole used by big tech is actually a benefit to big tech because it keeps disruptive new competitors from arising. regulatory capture strikes again.
By jwlake 2025-06-071:07 In this theory you should tax revenue and not profit. Welcome to VAT.
By UncleMeat 2025-06-0510:18 There are other expenses that are also amortized.
Employee salary cost isn't always 100% an expense.
Imagine you are BigCarCo, you make cars. The salary for your factory workers that build cars to be sold is an expense, incurred in that year, to be matched against the revenues earned by selling those cars. But the cost to build the factory needs to be amortized over the lifetime of the factory - and that's true whether you buy a factory from BigFactoryCo or hire a bunch of people to build it.
Now, I'd argue that a) most software dev work is closer to the factory worker than the factory builder and b) the lifetime for most software is less than 5 years, but the idea that some cost of developing software should be amortizable is pretty reasonable.
By jillesvangurp 2025-06-077:41 Actually, if the company isn't selling the software they build, what their software devs do is closer to building a factory rather than working in it.
Mostly developing software is about automating things that are expensive and slow to do manually. So, to stick with the factory analogy, it makes the factory a bit better and more efficient. If you stop doing that because it is too expensive, you fall behind with your factory.
Of course the whole issue in the US is that it outsourced much of what happens in factories to China and software has become one of the main things the country runs on.
Now imagine that a restaurant buys 100 tables, 500 chairs, kitchen equipment, cutlery for 800 people, signage, a security system, and does a remodeling before opening. (Or an airline buys an airplane. Or a hotel chain builds a hotel.)
Should they be able to expense all of those items that provide value for multiple years in a single year?
Does software development provide value exclusively in the year it's done? Or over multiple years?
By demosthanos 2025-06-0619:345 reply The reason that we require you to deduct an expense over years for some things is because they have a resale value that needs to be accounted for. It's not a pure expense because you have an asset with real value that came out of the purchase. Employee time has no resale value. Once used it's gone, so employee salaries are expenses, not investments.
The only possible justification for the Section 174 R&D changes is that employees working in R&D theoretically are producing something which does have a resale value, so there's a small tax dodge enabled by direct-expensing your R&D costs but then ending up with an infinitely-copyable asset that came out of it.
If that's what you're saying, then I'd reply to that argument by saying that paying humans to design new things has historically been a business strategy that the government has wanted to incentivize in a way that buying and holding physical assets has not been. I've seen no justification for the government deciding that from 2022 on we should actively discourage R&D, it just seems to be a mistake.
Software is like Art, it doesn't have value until sold or can be used. If they sell services based on the software, they are generating revenue and then taxation on that revenue can occur.
Same as if they sell the software, either as a copy or ownership.
But not being able to take salary as a business expense seems like as thing that would happen if software in and of itself has value, which is largely does not.
By thaumasiotes 2025-06-0620:21 > But not being able to take salary as a business expense seems like as thing that would happen if software in and of itself has value, which is largely does not.
To me it seems like a thing that just wouldn't happen. Forget software.
Say you own a McDonald's, and as part of your operations you have some people on staff to take orders, prepare food, and clean the bathrooms. Why are their wages not a deductible business expense?
If the answer is "they are, don't be stupid", then... what exactly was the R&D tax break?
By jay_kyburz 2025-06-0621:35 The software itself has no value, it's the licence to use the software.
> I've seen no justification for the government deciding that from 2022 on we should actively discourage R&D, it just seems to be a mistake.
Removing a specific tax exemption to create a level playing field isn’t discouraging R&D.
That’s the thing, every year such exemptions exist the US taxpayers are handing out money. Just because we subsidize say EV’s or Corn doesn’t mean that’s the baseline forever more.
> Removing a specific tax exemption to create a level playing field isn’t discouraging R&D.
If the end result of removing this exemption is that there is less R&D done in the US, then yes, empirically, removing the exemption discourages R&D. Assuming the mass layoffs were indeed fueled by the removal of this exemption (I don't know if the article is correct or not), then it is reasonable to assert that it is true that removing the exemption has reduced the amount of R&D done.
Or, you could also say that the "default state" is some low level of R&D, and the tax exemption encouraged and incentivized more of it.
Either way you slice it, though, the status quo prior to 2022 was some level of encouraged/incentivized R&D. That status quo changed to encourage/incentivize less R&D, and companies have followed these lack of incentives and have fired a lot of their R&D staff. Is that a good thing for the US? I can't see how it could be.
> empirically, removing the exemption discourages R&D.
Not clearing a road means fewer people use it, but you not going out with a shovel to clear a public roads isn’t you discouraging their use nor is you canceling your plans to clear said roads.
Having zero subsidies is the default situation.
It didn’t create a level playing field, it just discouraged a very specific type of R&D while ignoring all others. All other types of employee salaries follow certain rules and some can optionally follow R&D rules. Software is now the only one required to follow 5 year R&D amortization so the deck is now stacked against software.
By Retric 2025-06-0621:45 Software is an asset. If you pay people to build a building you don’t get to deduct their salaries as an operating expense.
The default situation is whatever was yesterday. I’d be astonished to learn that even a single significant civilization functioned without subsidies or patronage of priorities held by a society’s leaders.
> The default situation is whatever was yesterday.
If Amazon delivered you a TV yesterday that doesn’t suddenly become the default where you can expect another one today and every day after that.
The US government does a new budget every year, making every year a new ballgame.
No but if a TV was in my house yesterday I’d bet that it’ll be there today.
And my point about there being no natural state of subsidies is more important.
Those subsidies lasted a long time, but just as with a TV they didn’t last forever.
So if your argument is some subsidy will probably happen next year sure, but individual subsidies change over time. No specific subsidy is the default.
This doesn’t seem connected at all to your previous claim. You said that the default is an absence of subsidies?
By Retric 2025-06-0623:24 There’s no contradiction between saying:
For any specific situation the default is no subsidy.
With millions of situations some of them are not going to be at the default.
In 500 years will some specific things be subsidized? Vs in 500 years will something be subsidized?
By demosthanos 2025-06-0619:431 reply Level playing field for whom? Who does incentivizing R&D disadvantage?
Restaurants weren't competing with R&D-heavy corporations in any way. R&D-heavy corporations competed with each other, on a level playing field where all of them can build new stuff without having to pay taxes on negative income in their early years.
The only change this has made is un-level the playing field in favor of old, established corporations that already have the revenue streams in place to fund their new R&D projects.
> Who does incentivizing R&D disadvantage?
Taxpayers who end up with the bill and every company is competing for workers, office space, etc. Incentives across decades shift what people study, what business get created, etc. R&D sounds great abstractly, but it’s not some panacea where unlimited funding results in pure gains.
The economy is generally more efficient without central planning, and dumping money into anything that can be classified as R&D is simply inefficient.
By demosthanos 2025-06-0619:561 reply > every company is competing for workers, office space, etc
My company is all-remote and none of us would work for a company that isn't doing R&D. Most of an entire profession now has to be amortized over 5 years.
> The economy is generally more efficient without central planning
The old tax code isn't "central planning", it just had the very reasonable property that the government wouldn't force you to pay taxes on a loss.
This scenario [0] is now possible. It wasn't before. That is a catastrophic level of stupidity, and you can't justify it with invisible-hand nonsense.
> none of us would work for a company that isn't doing R&D
So you’d just be unemployed for the rest of your lives? That’s a possible edge case not worth adjusting the tax code for, but it seems unlikely.
> wouldn't force you to pay taxes on a loss.
R&D is an investment, you only pay taxes if the rest of the company is profitable.
If your company is spending 1M / year on R&D and not adding 800k in long term value then in theory you’d be correct. But at that point you either aren’t doing R&D, or are doing such a poor job of it that the government shouldn’t be encouraging that activity.
The problem here is that all software development (excepting that done for hire) is classified as R&D. The software developer working on your Wordpress or Magento site (and arguably the accountant building a spreadsheet, to take the statute at face value) isn't an operational expense, they're now an R&D expense that has to be amortized and can't be taken as an expense against revenue. Previously, this was an optional choice (and many large and mature companies were amortizing anyway), but under the current tax treatment it's required, which essentially turns early-stage startups into cash bonfires, given how many small companies don't make it to year five.
> Early-tags startups into cash bond fires
As a practical measure it’s really not. The transition is difficult for existing companies, but a future startup is going to be minimally impacted.
Year 0 you’re unlikely to have any profits, future years you have multiple years of R&D to offset with.
But let’s assume the worst case. Taxes are 21% of profits and at minimum deduction 20% of R&D so the theoretical maximum distribution is 0.8 * 0.21 = 16.8% increase in R&D expenses if profits = R&D year 0. But that maximum case is only year 0, you’d be able to fund R&D with those same profits and easily be profitable after that.
If profits where say 40% of R&D in year 0 you’d have to pay 16.8% of 40% so an increase is only 6.72% hardly likely to tank the business if it’s already generating that kind of income year 0, and again after that point you’ll deduct for multiple years.
More realistic numbers are going to be really low multiples here, more importantly they represent significant investments not operating expenses.
By demosthanos 2025-06-0623:181 reply > Year 0 you’re unlikely to have any profits, future years you have multiple years of R&D to offset with.
You're only unlikely to have no profits if you have no revenue. And you only get to break even 5 years in, which most startups will never reach.
In practice what is likely going to happen is that we'll see more and more startups deliberately avoid revenue in the early days. More and more free tiers followed by rug pulls when revenue actually becomes an asset rather than a liability.
There is no unplanned economy, only different outcomes from better or worse plans. And I'm having a hard time imagining a worse plan than one that intentionally disincentivizes businesses from adopting a sustainable business model early in their lifetime.
By Retric 2025-06-0623:31 > unlikely to have no profits if you have no revenue.
It’s much easier to have revenue than profits, set the price lower and suddenly zero profit. Some company avoiding profits because of the 21% tax on profit like that would be mathematically dumb.
> There is no unplanned economy, only different outcomes from better or worse plans. And I'm having a hard time imagining a worse plan than one that intentionally disincentivizes businesses from adopting a sustainable business model early in their lifetime.
There’s zero advantage to avoiding revenue or profit here. You’re tilting at windmills.
You simply need less investor money for R&D when other parts of the company are profitable. As to central panning, the mistake you just made is mitigated when many people are all independently making plans. Governments always need to get it right, the market is fine if some people get it right and therefore can reinvest in their success.
It sounds like you’re talking about government funding of research? This is about private companies funding the costs of making product ideas into actual sellable products.
Money is fungible there’s zero difference between a tax break for 100$ and handing out 100$ directly.
Are you asserting that software and other labor-heavy startups should raise additional private capital so that they can pay taxes before they’ve established themselves in the marketplace? I’m not sure what you mean to say exactly.
I’m saying investers should pay the full cost of R&D without assistance from taxpayers.
When the non R&D portion of the business is profitable they should start paying taxes. Assuming a company isn’t miss classifying operations as R&D it shouldn’t be a major issue.
Thanks for clarifying.
This will of course discourage “riskier” startups and dampen innovation and give more power to profitable incumbents who will have less incentive to innovate. (Perhaps the result of this looks like Europe?)
Risky startups with multiple years of R&D before revenue would be the least impacted.
You’re only paying taxes if the business is profitable ignoring investments like R&D spending.
You seem extremely confused.
Section 174 specifically made those R&D costs “ignorable” from a tax standpoint. When it ended R&D costs could no longer be used to offset income.
What specifically do you disagree with? That R&D is an investment? I mean outside of the tax code that’s what it means to do R&D.
As to my other point, the highest risk category of startup has zero customers for years they also have zero revenue, zero profit, and zero taxes to pay here. On the 5th year they can deduct R&D from each of those years making the net effect on them minimal vs a startup with profits on year 0.
> The economy is generally more efficient without central planning
Big fat "citation needed" there. I know you chose the term "central planning" to try to invoke the communism boogeyman, but overall, free markets do not exist, and have never existed. Governments constantly use various levers (taxation being one of them) to encourage or discourage certain kinds of business activity. This is nothing new, and I find it laughable to suggest that this kind of thing should be done away with entirely.
By Retric 2025-06-0620:27 There’s a lot of evidence for this outside of communism. Housing markets for example are a clear example of economic inefficiency created by subsides. But you also see problems with farm subsidies, flood insurance, and a host of other related issues.
Markets operate on revealed preferences, which is just a massive advantage in terms of giving people what they want. There’s definitely a role for governments in economies around information asymmetry, safety, etc, but allocation of resources specifically doesn’t work well.
What about construction worker and other labor time to build a factory? That’s the analogy being made here by the tax code: Software whose development is a capital expense with value returned over time.
By demosthanos 2025-06-0619:502 reply From a quick search it appears to me like construction labor is deductible as an expense in the year it is incurred. Do you have evidence that says otherwise?
By sokoloff 2025-06-0620:15 My reading of § 1.263A-1 is that construction labor must be capitalized.
§ 1.263A-1.a.3.A indicates that it's in scope: Real property and tangible personal property produced by the taxpayer
§ 1.263A-1.e.2 specifies that Direct Costs are subject to capitalization: Producers. Producers must capitalize direct material costs and direct labor costs.
(I'm just a taxpayer, not a tax lawyer or even an EA or CPA.)
What tax code references or treasury regulations did you find to support your belief that construction labor can be expensed in the year performed?
> Dear ChatGPT, is construction labor deductible as an expense in the year it is incurred according to GAAP? Please answer in a few lines.
Under GAAP, construction labor is not immediately deductible as an expense in the year it is incurred if it relates to the construction of a long-term asset (like a building). Instead, it is capitalized as part of the asset's cost and then expensed over time through depreciation. Only labor costs not tied to asset creation (e.g., routine maintenance) are expensed as incurred.
Though your answer is correct for the tax code as well as GAAP, Generally Accepted Accounting Principles are not necessarily followed by the tax code.
By twoodfin 2025-06-0621:23 Unfortunately my understanding of the R&D expensing rule is that it is lifted directly from GAAP, which means private companies have to adhere to those (heavyweight) rules to comply.
By kgwgk 2025-06-0621:44 Fair point. I changed the question to "according to the tax code" and it told me that
Construction labor is generally not deductible as an expense in the year incurred if it is related to the construction or improvement of a capital asset (like a building). Instead, under the U.S. tax code (IRC §263A), these costs must usually be capitalized and recovered through depreciation over time. Exceptions may apply for certain small taxpayers or repairs.
But the employee time that had a one time use was turned into software. That software is the thing that has value longer than "right now"
By demosthanos 2025-06-0622:16 And the value of that software will be taxed if and when it starts to draw cash.
By nickfromseattle 2025-06-099:38 > I've seen no justification for the government deciding that from 2022 on we should actively discourage R&D, it just seems to be a mistake.
My understanding is that this was done in order to balance the tax bill passed by the Trump admin due to a requirement to be budget neutral. Cut tax revenue here, increase tax revenue there.
By londons_explore 2025-06-0619:271 reply It's only shifting what year the government gets its revenue. The government should simply let the company choose how to do it, but if they choose anything other than year 1 interest will be payable at government bond rates.
By warkdarrior 2025-06-0620:23 It's also massively shifting the companies' cash flows. The company paid $X for R&D this year, but for tax purposes 80% of that $X expense is moved to next four years. So for this year's tax purposes, the company R&D expenses are much lower than what the company paid.
By polotics 2025-06-0620:22 I have seen a lot of software development where what's been done has been changed beyond recognition over the course of less than a year.
By bravesoul2 2025-06-0622:49 Ironically I think they would want to claim that over multiple years unless they have other profitable operations under the same company. E.g. other restaurants.
By tomrod 2025-06-0716:05 They should have the choice.
If software lasted longer than 18 months or was otherwise tangible, this could also make sense.
By gamblor956 2025-06-074:46 The appropriate analogy is:
Imagine a restaurant spends money on employees to build 100 tables, 500 chairs, etc. Those tangible goods would be capital assets, so the labor costs of building them would also be capitalized.
This change to the tax code is just bringing the tax treatment of software development in line with how every other industry is treated. IOW, it was closing a loophole. A very valuable loophole, whose beneficiaries used it to get filthy rich, and bragged about how their industry was so much more valuable than everything else, even though a lot of that value was due to the exception software was getting in the tax code.
Notably, in the current version of the budget as of 6/6, the loophole is temporarily coming back, though given the Musk-Trump feud, it's very possible it will get pulled again to try to mollify the hardline deficit caucus.
If the restaurant buys e.g. a fancy oven or a delivery truck, it can't expense 100% of that cost in year 1, it has to spread that cost over the lifetime of the oven or truck.
Labor that operates the business day-to-day would be an expense, labor that creates a capital asset is more complicated.
I happen to think most employee time in software dev is more on the day-to-day operation side, and should be expensed, but I can see an argument that some should (or could) be amortized.
By DSMan195276 2025-06-0717:28 > If the restaurant buys e.g. a fancy oven or a delivery truck, it can't expense 100% of that cost in year 1, it has to spread that cost over the lifetime of the oven or truck.
The difference of course is that you'll have a truck or oven that can be sold. If you could count the full value in the first year then you could sell and buy one each year to reduce your taxes without actually changing anything.
Thus if we want to go that route for software the salary of the R&D employees should be counted against the value of the software they created (As in, the value were it to be sold wholesale to another company). The time spent by the employees is not an asset, once you pay the employees for their time it's gone even if they generated nothing of value. The actual value is that of the software, but that's obviously not easily assigned a value.
By rpeden 2025-06-080:25 It's a lot easier to get financing for a tangible asset like an oven or a delivery truck, which mitigates the cash flow issue.
Sure, you can only deduct a certain percentage of the asset's value as an expense each year, but your cash expenditures to pay for it are also spread over a multi year period.
By mountainriver 2025-06-0622:41 It was literally just a shot at California and New York, that’s all it was. “Own the libs” ya know
“if we aren’t rich then no one else will be”
It’s the same for movies, other intangible assets that are valuable and produce income over several years. And it’s done for many tangible goods, like servers in a datacenter, the kitchen equipment in a restaurant.
By Schiendelman 2025-06-0710:231 reply 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
By rpeden 2025-06-080:29 For the tangible ones, it's often relatively easy to get financing that lets you spread the payment over the asset's useful life, which solves most of the cash flow issues you get if you pay in cash up front but have to spread the expense over many years.
By Schiendelman 2025-06-087:181 reply 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!
Valuable assets includes both tangible and intagible, it applies to both
By Schiendelman 2025-06-106:01 Can you help me understand what you're arguing?
