Comment by gorkish
3 years ago
There are means to offset, defer, and reduce tax burden that you also get from doing R&D, so honestly the change in the way the salary is treated is somewhat balancing these other tax benefits that startups are also taking. It's a balancing change to a larger system, not a targeted change to screw startups. A comparison over just Year #1 is disingenuous.
Let's say you have to pay 30% tax on 800,000 of profit, so now you're 240k in the hole. That's your year one! If you don't survive to take the future deductions it's kinda moot right?
Even worse for companies in high tax states like California, overall tax rate is closer to 40%.
Only a small portion of activities count as R&D for R&D tax credit purposes. R&E is a much bigger category and where the problem lies. This write up has a good graphic showing the magnitude (scroll halfway) https://www.striketax.com/journal/tcja-and-the-resulting-tax...