(This is a joke, I’m happy for this change, but also raising that it’s in the middle of a lot of other crappy stuff and I’m holding space for all of it).
I think this is the real reason for much of the layoffs.
The other reason is simply that the market isn't punishing layoffs. You get rewarded as a CEO for laying off employees and saying "It's because AI makes them obsolete"
But as pointed out in the article, US devs now have a tax advantage vs foreign devs. That may lead to some "nearshoring" especially from foreign markets where dev salaries have been jumping up (India, Europe, etc.)
Now that I write this, it's still a hard decision for big companies.
simple.
I think what we're seeing is the fossilization of the newest batch of mega tech companies looking to rest on their laurels and prioritize profits over innovation.
They won't die, they are just the next IBM.
It’ll also be interesting to watch to see if this has any side-effects on the job market. In my experience in big-tech, a lot of the overseas jobs were historically supporting roles and “keep the lights on” for legacy services. I can imagine these tasks aren’t valuable enough to pay Silicon Valley salaries, and that’s why lower cost talent was used. It’ll be interesting to see if these roles move to low-COL or remote American workers. I can totally imagine that a European or even Indian salary for a senior engineer in big tech would be livable in some parts of the US.
I think they will, Indian salaries for the top top eng are already comparable to decent eng from MCOL or LCOL US, so I could see this happening.
That's rarely the case, right?
I think this very much depends on how companies are "outsourcing"/hiring.
Like, if the devs you are outsourcing to are delivering you a "project-based app with ongoing support". Did you hire "developers" or are you doing business with a development company?
For many large tech cos, they also have local entities or PEOs, where people working for Facebook work for Facebook Ireland, or Facebook India.
So I'm not sure how much impact it has -- probably mostly for smaller shops that might hire 1 guy directly in a different country?
Yes and no. Obviously there are a million ways to do business and taxes are really complex, but the law doesn't revolve around actual salaries but "cost of software R&D" so this still applies to hiring contractors and other companies if the deliverable is software.
From the article:
> US companies making foreign software development-related expenditures like hiring staff, or paying for contracts abroad, are still mandated to be expensed over 15 years.
Old established ones can absorb long-term expensing and more likely to be in cost-savings mode anyway.
But if you're a startup you are more incentivized to keep your development local. And I have seen a lot of near-shore, in particular, shops adverting aimed startup/medium-sized companies recently, so that might be significant.
> 15-year amort rule hurts your tax deduction, but 50 %+ lower offshore wages more than make up for it.
I know a couple of tech CEOs (very small services companies), and they use offshore for all development. They don't have a single US engineer; only project managers.
But "and development" covers everything we do in software development. Whether you fix a bug or write some documentation you are developing the product in some small way.
I imagine some business will need to restructure so the US arm is paying a service contract to use the software, and the foreign arm will own and develop the software.
I am curious, is there ever a time you would want this? Maybe if you’re operating at a loss?
Typically businesses amortize large capital expenditures, and this allows the business to appear profitable even when they had a significant outbound cash flow. This is just something they're allowed to do with accounting in the US. There's an argument that you should take out a loan for situations like this, because then the cash flow events will more closely match the changing value of the business.
I would not try to make sense of it in terms of business accounting, there's no deeper understanding of business to be had. It's just politics; and it made it objectively harder for startups with revenue to survive and grow.
It's not just that the company is operating at a loss, but it has to be operating at a really big loss, such as a startup with a high burn rate.
ok I read it in https://blog.pragmaticengineer.com/section-174/ "Google: the tax change was minimal, because Google was voluntarily amortizing software development expenses for most staff, already."
Why was this done? Simple vengeance in 2022 for how high salaries got and how many silicon valley people were bragging about buying a second house by the slopes? Or was there a deeper policy reason?
The 2017 tax cuts were big cuts, but the way the government budget process works, they want to minimize the “appearance” of deficit spending across a decade window. To do this, added a cliff in 2023 that would raise the taxes on tech companies to help offset the cost of their cuts. Side effect is that the next administration gets shitty economic news. Dec 2022 and January 2023 had lots of crazy layoffs, right on schedule.
The reason it was tech companies specifically is that they’re super wealthy and could (ostensibly) afford it. If you’ll notice, the law exempted software development in oil and gas companies. It doesn’t hurt that tech companies and employees leaned strongly democrat in 2017. The conspiracy theorist in me thinks the tech companies accepted the 2022 hiring mania knowing layoffs were eminent.
"OBBB signed: Reinstates immediate expensing for U.S.-based R&D", 300+ comments, https://news.ycombinator.com/item?id=44469124
I'm having a hard time seeing the issue with this.
avbanks•2h ago
bsuvc•1h ago
Is there someplace I can find information about how section 174 aligns with the frequency and size of layoffs?
adamors•1h ago
enjo•34m ago
ch33zer•25m ago