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0 pointsyesfitz9mo ago0 comments

If you look at the time value of money[1], a $1,00,000 deduction this year is worth more than $200,000 deductions over the next 5 years.

But more importantly, the article claims it was used as a tax shield to grow.

"Basically, as long as spending counted as R&D, companies could report losses to investors while owing almost nothing to the IRS."

"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."

1: https://www.investopedia.com/terms/t/timevalueofmoney.asp

0 comments

potato37328429mo ago

Sure, but that doesn't account for the allegedly apocalyptic layoffs from companies that don't fit into the "real taxes on imaginary gains" mold.

I get that this is bad for the VC monopoly bucks scene, but they were already down for the most part. If the changes are as the article alleges than all these big tech companies that are posting huge layoffs should mostly be fine because it's not a serious change from status quo for them.

TheTaytay9mo ago

My company was affected. The amount of money paid in taxes more than quadrupled from one year to the next.

It hurt small businesses that were slightly profitable. No one else. VC shops aren’t profitable anyway, so no taxes to pay. Microsoft took a 4 or 5 billion dollar write off, but they can literally write a 5 billion dollar check.

The issue is that the IRS wants you to pay them today on profits and cash that literally don’t exist. You make $1M in revenue and pay 5 developers 200k/year? You have no money left at the end of the year, but you pay taxes as if you profited about 900k.

ec1096859mo ago

Yes, but you are still talking about a loan. That 1M in write offs are guaranteed to come over a five year period.

1 more reply

JamesBarney9mo ago

Interest rates are bigger motivator of the layoffs than these changes. When interest rates are high that means investors far more heavily prioritize profits today over profits tomorrow.

This tax change just made it worse.

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