The games industry, while hugely profitable and bigger than TV, movies, and music combined, laid off tens of thousands of people. It's unmitigated greed is all it is.
According to the article, as long as the tech workers contribute to improving or creating a product (be it games or apps), they count as R&D cost.
This sort of thing appears to be self-reported; I don't know if it ever gets audited. I don't know if big tech lies or creatively interprets what counts and that has contributed to the issue. But this article sort of over-represents what qualifies as R&D for US tax purposes.
https://larsco.com/blog/section-174-updates-navigating-the-i...
The rule says if you pay someone $200k to develop software: then you now have a $200k asset that then devalues to value of $0 over 5 years (starting midyear). That's just plain weird.
For our example a depreciation table might look like:
Year, %Amortized, Amount
2025 10% $20,000
2026 20% $40,000
2027 20% $40,000
2028 20% $40,000
2029 20% $40,000
2030 10% $20,000
Understanding accounting and taxes are two absolutely essential skills if you ever wish to be a founder (and useful anyways).
Finding a solution to dealing with the valuation of assets is difficult. The historical solution of depreciation is broken for software, intellectual property and goodwill. In theory, taxes on dividends and capital gains taxation already deal with the issue (company taxation at x% kinda ends up at $0 because the shareholder pays y% and claims back the x% through imputation).
And remember that salaries are properly taxed.
If it turns out it's not useful, we could then allow companies publish the source and release it into the public domain to immediately "destroy" the asset (the copyright) and claim their deduction. So failed r&d projects would be deductible right away as long as the public gets them, and ones that result in a useful asset get depreciated based on how long they actually last, which is currently potentially multiple lifetimes.
Amortizing development cost over the useful life of the software is maybe a reasonable thing to do (I don't think it is, but let's for a minute say I agree), but determining "useful life" is not simple.
Software built by a business is a trade secret independent of its copyrightability. Even after the expiry of copyright a business can continue to exploit it as a proprietary asset.
By your logic, the salaries of technical writers should be amortized too, because theoretically the bank operations manual could also be a capital asset.
Which, I think is an overlooked part of this. They must constantly have gotten feedback that people were lying to them.
I bet they were classified as R&D for accounting purposes. Product development largely falls into R&D - it doesn't matter what the product being developed is for.
Every job I had at a megacorp was classified as R&D, and I know because I had to track hours against such.
It's not just that. Section 174 now explicitly calls out Software as always being an R&D expense:
> (3) Software development
> For purposes of this section, any amount paid or incurred in connection with the development of any software shall be treated as a research or experimental expenditure.
Even though it sounds unintuitive, that activity is considered R&D for tax purposes.
There is no justification for "cost cutting" when it hurts the larger economy. If the company were losing money, that would be different, but these mass layoffs are all from firms that make obscene, enviable levels of profit. It's greed.
There is no justification for "cost cutting" when it hurts the larger economy.
It is not good for the economy to have people doing work that doesn't produce value.
This is a political statement, not an economic one. What is or isn't good for the economy is up to the goals of that economy. In Japan, for example, they've more or less adopted the opposite principle as an important plank in their political system. Or perhaps it would be better to say that they've adopted the idea that people having jobs is more important than those jobs having a direct connection to some measure of productivity.
But they were making high profits for decades, and being greedy for decades. Then there were a lot of layoffs. What changed ?
But it's not "greed": it's the end of zero interest rate policies.
Wrote software, like, you know, "developed" it?