Comment by x-complexity
3 years ago
The one thing I'm rarely seeing in this thread is any discussion with regards to the continued expansion of tax bureaucracies as these new tax bills are implemented. There are a few threads here that I can find close enough to such discussion:
https://news.ycombinator.com/item?id=35614968 ) but not discussed further, the tracking of such amortizations mean added accounting expenses for businesses where this would've otherwise been a straightforward deduction. This inevitably means that either additional people need to be brought in to track said expenses, or a business is increasingly reliant on an external service to manage their obligations, both of which are a net negative for the business compared to the straightforward 100% deduction model.
Whilst amortization is beneficial for purchases / investments that can wear down with use, the application of such accounting practices towards R&D in general only serves to increase the burdens on businesses (small or large) for performing such R&D. Arguably, it's an attempt by the government to kill R&D within the US, and to force more companies towards acquisitions & mergers, whether intentional or not.
Futurama's Central Bureaucracy is worryingly becoming a real thing.
It's interesting that no one sees this as it is: Killing the golden goose so that the IRS can get some meat.
This change, theoretically, doesn't "add" to your tax bill. You'll be paying the same amount of taxes. However, as in the example outlined in the first comment, you'll continually have a credit with the IRS due to the amortization. The questions are:
1. Is this credit recoverable?
2. Why is the IRS doing this anyway? Just for a quick cash/tax boost?
Because that's what failed states look like. The USSR is looking good in proportions...
The IRS isn't doing this. Congress did it, because it's an accounting trick that lets them say something costs less than it actually does, because all of Congress' budgeting is on decade-long horizons, and they factor in theoretical wage/revenue/profit growth, so them front-loading the same tax receipts allows them to very easily lie about the actual cost of programs. They can pull 80% of the tax receipts from made up figures a decade from now into their government revenue calculations.
They're doing it this way because in the public eye big startups that write off salaries as tax expense look like tax avaiders.
In reality it will just punish bootstrapped companies.
The public eye, as in the general public, has little idea of what's going on in the startup world and let alone specific issues like this one.
> that write off salaries as tax expense look like tax avaiders
This doesn't increase the tax burden. After 5 years, most companies will be back to paying what they are paying now. This gives you a cash boost for this year and next few ones. After that, you just killed bootstrapped companies.
I have seen a lot of rhetoric about tech companies avoiding taxes; none of it has been that salaries effect a tax dodge.