This entire tech-layoff wave is about more than AI or plummeting demand. It’s the delayed bomb Congress planted in Section 174 (a stealth tax that reclassified every developer’s salary as R&D amortized over years, not the quick write-off it used to be).
People inside big firms are collateral damage in a tax strategy. The policy also shoved engineers’ families onto the payroll chopping block. Until lawmakers reverse course, U.S. tech is bleeding talent - nail in coffin for innovation here while other countries scoop up the scraps.
I don't think you're likely to get much disagreement that we should do that also. But surely, both? Repairing a strong economy, adding jobs towards a stable middle class (or at very least not subtracting them), and broadly investing in the future rather than sacrificing all that for high income tax breaks... let's face it, it's not actually that hard for the wealthy to engage in a lot of tax mitigation strategies anyway, so policies that grow the economy should be thought of as rather more significantly valuable than ones that just help highly concentrated wealth positions. (And I say that having run a hedge fund!)
I worked at Google six years until I was laid off early this year. They started rolling random layoffs after the big layoff in 2023 and it absolutely cratered the culture, it became a culture of total obedience or else you’d be in the next rif round. They also shut down / neutered the internal annual survey (googlegeist) to a level where any upwards anonymous feedback was completely quashed. The one time a regional executive mistakenly enabled anonymous questions for an all-hands, he was shocked by the level of employee vitriol and distrust of leadership.
Undoubtedly. But that particular law is a lot more likely to see a lot of monkeying around with it by the current Congress, so it's a bit of a fool's errand to assume it's going to remain unchanged (in fact, it's already been changed a bit and there's various other things in the works to amend it) - it may be too much to expect prudence from very many people in Washington DC these days though. I may do a follow-on article on that, though; there seems to be good interest in this topic.
An alternative theory is that tech companies inflated their R&D spend to minimize taxes. In that scenario, all the laid off employees were battery hens laying tax evasion eggs; the moment those eggs became worthless they killed the hens.
Even if this theory isn’t true, nobody can argue that Microsoft or Google doesn’t have enough cash in the bank to pay employees until the heat death of the universe.
It’s worth taking a moment to see if we’re analyzing company finances through the lens of personal economics. “Oh they must have done X lest they run out of $”. When talking about companies with effectively unlimited $ a different lens is required.
(this isn’t a direct refutation of this post or some shit, just ideas that occurred to me while reading. Great post!)
Worth noting that marketing & sales expenses are generally considered as expensible in current year, rather than required to be capitalized. There are exceptions, but if you run an ad campaign or hire & pay a new sales rep, you'll probably be able to deduct those costs as incurred, even though the ad campaign may have an impact that extends long-term and the sales rep may take a few years to fully develop his territory or industry.
This is an eye-opening deep dive into the real drivers behind the 2023 tech layoffs. The interplay between tax policy changes—especially the Section 174 shift from immediate R&D expensing to mandatory amortization—and macroeconomic factors like rising interest rates and cost of capital is something too few are discussing in detail.
This entire tech-layoff wave is about more than AI or plummeting demand. It’s the delayed bomb Congress planted in Section 174 (a stealth tax that reclassified every developer’s salary as R&D amortized over years, not the quick write-off it used to be).
People inside big firms are collateral damage in a tax strategy. The policy also shoved engineers’ families onto the payroll chopping block. Until lawmakers reverse course, U.S. tech is bleeding talent - nail in coffin for innovation here while other countries scoop up the scraps.
This needs to be shouted from every rooftop. Everyone needs to write, call, and email their representatives and senators to address this issue.
In case you don't have their contact information readily at hand, it's an easy look-up for both House and Senate:
https://www.house.gov/representatives/find-your-representative
https://www.senate.gov/senators/senators-contact.htm
Ummm... maybe you should worry about saving your democracy first.
I don't think you're likely to get much disagreement that we should do that also. But surely, both? Repairing a strong economy, adding jobs towards a stable middle class (or at very least not subtracting them), and broadly investing in the future rather than sacrificing all that for high income tax breaks... let's face it, it's not actually that hard for the wealthy to engage in a lot of tax mitigation strategies anyway, so policies that grow the economy should be thought of as rather more significantly valuable than ones that just help highly concentrated wealth positions. (And I say that having run a hedge fund!)
Strikes me that the populist impulses of the Trump Reich have had some dire downstream effects. Makes one miss the more fiscally sound right of yore.
Great article!
Some populist tax policies that promote jobs and fit in a neat sound bite would really be Big and Beautiful right about now though
I worked at Google six years until I was laid off early this year. They started rolling random layoffs after the big layoff in 2023 and it absolutely cratered the culture, it became a culture of total obedience or else you’d be in the next rif round. They also shut down / neutered the internal annual survey (googlegeist) to a level where any upwards anonymous feedback was completely quashed. The one time a regional executive mistakenly enabled anonymous questions for an all-hands, he was shocked by the level of employee vitriol and distrust of leadership.
What did he expect 🤷♂️
Are there some parallels in regards to policy implemented by the Biden Admin.(Like the IRA) that's going to come into effect under Trump 2.0?
Undoubtedly. But that particular law is a lot more likely to see a lot of monkeying around with it by the current Congress, so it's a bit of a fool's errand to assume it's going to remain unchanged (in fact, it's already been changed a bit and there's various other things in the works to amend it) - it may be too much to expect prudence from very many people in Washington DC these days though. I may do a follow-on article on that, though; there seems to be good interest in this topic.
Wow. I never knew this.
Fascinating
An alternative theory is that tech companies inflated their R&D spend to minimize taxes. In that scenario, all the laid off employees were battery hens laying tax evasion eggs; the moment those eggs became worthless they killed the hens.
Even if this theory isn’t true, nobody can argue that Microsoft or Google doesn’t have enough cash in the bank to pay employees until the heat death of the universe.
It’s worth taking a moment to see if we’re analyzing company finances through the lens of personal economics. “Oh they must have done X lest they run out of $”. When talking about companies with effectively unlimited $ a different lens is required.
(this isn’t a direct refutation of this post or some shit, just ideas that occurred to me while reading. Great post!)
Worth noting that marketing & sales expenses are generally considered as expensible in current year, rather than required to be capitalized. There are exceptions, but if you run an ad campaign or hire & pay a new sales rep, you'll probably be able to deduct those costs as incurred, even though the ad campaign may have an impact that extends long-term and the sales rep may take a few years to fully develop his territory or industry.
This is an eye-opening deep dive into the real drivers behind the 2023 tech layoffs. The interplay between tax policy changes—especially the Section 174 shift from immediate R&D expensing to mandatory amortization—and macroeconomic factors like rising interest rates and cost of capital is something too few are discussing in detail.