Clojurians Log v2

@v1nc3ntpull1ng "software development was a tax writeoff before" -- not all software development, no. It was only "R&D", and that is still a write-off today. The change was that it now has to be amortized over several years, whereas before it could all be accounted for in the year the expense was incurred. In effect, startups got "free money" for their initial product build, whereas for a lot of company expenditures, depreciation meant amortized write-offs over several years. For large companies, they already have so many tax loopholes and pay so little US tax that I think it was considered a way to claw some of that back. But, as I said, this was all R&D -- not just software development -- so it affected manufacturing/engineering companies too. As Ben says, when you have effectively "free money", you get over-hiring, followed by "market correction" when it runs out...

Also worth considering how these different factors influence different sized firms in different stages. Publicly traded, large firms were impacted more heavily by the end of ZIRP, while small stage start ups by S174

I think interest rates might have played a role

https://www.kelseywilliamsgold.com/fed-interest-rate-policy-2008-1929-and-now/

software development was a tax writeoff before

These are both free money problems. Whenever you have free money you'll see indiscriminate hiring. When the free lunch is over, down sizing will follow

Still the effects of ZIRP are deeper and wider than increases to tax liability

You're talking about the Section 174 change in the 2017 Tax Cuts & Jobs Act, I assume.

It looks like that took effect in 2022 (so companies had five years' notice). HR 7024 would have partially repealed that but after passing the House in January '24, it failed in the Senate in August '24, as far as I can tell.

https://www.thomsonreuters.com/en-us/posts/tax-and-accounting/section-174-expenditures/

See also https://www.cbh.com/insights/articles/rd-capitalization-tax-reform-explained/

This covers various factors that contributed to layoffs (incl. Section 174 reform): https://remotebase.com/blog/section-174-the-reason-behind-tech-layoffs-in-us-companies

In particular, note that it affected all R&D capitalization, not just software, so it's a bit of a conspiracy theory to blame that one tax change for all the tech layoffs: tech companies massively over-hired and then there was a market correction. The same thing happened with the dot-com bubble bursting (but a lot of folks are too young to remember that now 🙂 ).

I knew about this, but thought it was Calfornia-specific, not US-federal. Interesting.