It was a combination of factors: zero interest rate policies changed to fight inflation and the Tax Cut Jobs act of 2017 changes (section 174) requiring capitalization of everything softwsre development related except bug fixes went into effect for tax year 2022.
If software developer salaries cannot be expensed and it’s now 5 times more expensive to borrow money to expand, jobs will be lost.
Oh, and the TCJA was championed and signed into law by then President Trump.
>and the Tax Cut Jobs act of 2017 changes (section 174) requiring capitalization of everything softwsre development related except bug fixes went into effect for tax year 2022.
Seems like a stretch. "Software Development Job Postings on Indeed in the United States"[1] was up into the beginning of 2022. The tax changes were known in advance for years. If the tax code changes were a significant factor, why did companies hire a bunch of people in 2021, knowing that when 2022 rolled around there would be massive taxes?
> Seems like a stretch. "Software Development Job Postings on Indeed in the United States"[1] was up into the beginning of 2022. The tax changes were known in advance for years. If the tax code changes were a significant factor, why did companies hire a bunch of people in 2021, knowing that when 2022 rolled around there would be massive taxes?
Gruez... Income Taxes are paid the year after they're incurred. Tax Year 2022 is filed and paid in 2023. The effects wouldn't start being felt until March 2023 at the earliest.
Also, literally everyone involved in tax policy thought it would be repealed. Heck, the IRS had to scramble to release guidance because they thought it was going to be repealed. The IRS didn't release detailed guidance on Section 174 until September 2023 -- six months after tax filings were due (a number of businesses asked for an extension to file but still had to pay the taxes as if they had filed on time). https://www.cohnreznick.com/insights/additional-guidance-irs...
The Section 174 capitalization for software development was included in the TCJA as a way to 'pay' for the tax cuts, but no one seriously believed it would stay in the law. The problem is congress is very dysfunctional, so once it was signed into law you'd need a congress to get it out. It's no surprise the congress in 2023 was more dysfunctional than the one in 2017.
Also, in 2021 interest rates were historically low, and as I stated initially the dual loss of the ZIRP environment and the massive change to how software developer policies worked together to kill software development jobs.
>Gruez... Income Taxes are paid the year after they're incurred. Tax Year 2022 is filed and paid in 2023. The effects wouldn't start being felt until March 2023 at the earliest.
First off, 2022 taxes are not paid in 2023. Corporations have to pay taxes quarterly, not yearly.
Second, no CFO is going to going to accept "this year's engineering expenses might be 100% more expensive (because we can't deduct it), but it's only due next year so we can keep on hiring!". The whole point of accounting is modeling the company's books to reflect its financial situation as accurately as possible, not just looking at whatever the bank balance is. This includes modeling future tax obligations.
Gruez. You pay payroll and estimated taxes quarterly. As long as you hit 90% of your actual tax burden, there are no penalties. You file income tax yearly and that sets you up for both your remaining burden that you didn't pay in estimated taxes, and your future estimated taxes. The trick is when you go to file by March 15th, you may or may not have accounted for all of the vagaries of tax changes -- and in fact the IRS pushes out guidance throughout the year that will affect the filing process.
For companies that were expensing 100% of developer salaries (which was a lot of them -- capitalization is very cash intensive), having to now eat 80% of that salary as profit and only being able to deduct 20% is devastating.
1171(!) small software companies have come together to try to get congress to repeal their changes to Section 174. They haven't been successful yet, but here's hoping that by further education of folks like yourself, they will be. https://ssballiance.org/
Yeah. This is a thing lot of people don't understand or see . When they think of Software Developers - they tend to focus on SV companies or FANG. But most software devs work in corporate IT. In that world, IT is a cost center and rarely a profit center. So when cost of anything rises and they need to cut back to boast revenue numbers - it's always the cost center that takes the first hit. In this case, the cost of borrowing dramatically went up.
It is rather annoying that larger policy changes easily take 2-4 years to actually affect anything so current party always gets both blame and thanks for the changes made by the previous administration.
Democrats insisted on COVID restrictions that were more like religion than science and then they just stopped and everyone was fine. The medical outcomes good and bad still happened, some of them just delayed.
The length and intensity of the restrictions were unnecessary, and the economic consequences of giving away trillions of dollars during them are why we’re in this economic situation.
What would have changed if the restrictions were 6 or 12 months shorter? Nothing.
Not true, restrictive states had significantly lower mortality. Mask mandates being the most significant factor. The largest gaps in mortality occur in the latter half of 2020 and the latter half of 2021, during Delta.
This ended up being true but is easy to say retrospectively though! I was in (irrationally) mortal fear everyday.
Maybe if Democrats just played the republican card and refused to sign stimulus package just out of spite we would not be here. Same with the bank bailout in 2009.
That's survivorship bias and thus your comment is just an opinion and nothing more. During restrictions covid vaccines were rapidly handed out and improved upon - this undoubtedly halted the spread of a virus that ultimately killed 1,212,000 people. So please go ask those peoples family and those people themselves if 'everyone was fine'
>Democrats insisted on COVID restrictions that were more like religion than science and then they just stopped and everyone was fine.
You... You missed out on the whole vaccines part here. Amazing.
>What would have changed if the restrictions were 6 or 12 months shorter?
Everyone would get hit with COVID before vaccines became available.
The healthcare systems were on the verge of collapse as it was; this would ensure the collapse and mass deaths (and long term disabilities for many others).
>Nothing
The confidence with which you're saying nonsense based on absolutely nothing is admirable, but the bullshit you're spouting isn't.
Next time, don't ask questions if your answer is premade.
Well, if you remember the 2016 elections, Trump was saying that the economy was extremely bad and disastrous. Then, within his first month of presidency, suddenly, the same numbers were extremely good because of him.
During the Obama presidency, there had been a growth of 227000 jobs per month which became a growth of only 36000 jobs during the Trump years. During the last two years of Obama, the annual median household increased $4800, but only $1400 during the first two years of Trump. And then, under Biden the same annual median income was of $3250. And I could go on like that, except on the house prices which is the area where the pattern does not stand.
So there are two things here:
- Even if has been saying for the last months/years that the economy was a disaster,Trump will say within the first month of his presidency that the economy is already doing better immediately, while the numbers will be the very same at first. And when the economy will falter later on just like during his first term, his supporters won't mind because...
- This election was not at all about the economy. This argument is an excuse for the real reasons why many Americans vote: more and more are susceptible to the cult of personality and to the progression of the most radical right-wing extremism ideas.
Yeah. Unless a POTUS is in for 8 years they almost never get to experience the full results of their economic policies.
Biden inherited an inflation time bomb which has been handled. I expect Trump will claim he fixed inflation the first report that comes out after the inauguration.
A thousand times this. I don't know that Trump could have done a better job at economic sabotage when in office the first time. Printed trillions of dollars of undirected helicopter money when monetary velocity was low, which immediately went into asset inflation ("the stock market is great"). Then when things started moving again, it all started chasing goods and we got broad price inflation on top of acute shortages. The fact that the democrats just let the republicans hang Trump's economic destruction around their neck really shows how utterly inept they are at messaging. I shudder to think what inflation will be at in four years after a return to ZIRP corporate welfare and the next national emergency that's left to fester.
"inflation time bomb". I never saw that term before. What was the primary cause of simultaneous inflation in all highly advanced economies, and how was Trump responsible for the US component?
He wasn't responsible for all of it. COVID supply chain disruption obviously played a huge part, but it's like everyone has forgotten that Trump also sent out a huge amount of money[1]. We can debate if that was the wrong/right move, but it's annoying when people blame Biden for the inflation that inevitably came once the economy turned back around. Trump has as much if not more responsibility depending on how you look at it. Meanwhile, the Fed under a Biden administration has seemingly engineered a soft landing.
Trump also pressed SA to cut oil production to help prop up gas prices in the US [2]. So when the economy turned demand surged back pushing prices higher.
