No one talks about the real reason driving the ~500k tech layoffs. Section 174 in the 2017 tax cuts turned engineer salaries from an instant tax deduction into a 5yr write off, causing billions in tax bills. It even incentivizes offshoring R&D, which has a 15yr write off! 1/4
The numbers are staggering: — Microsoft: Paid extra $4.8 BILLION in taxes, fired 16,000+ workers — Meta: Cut 21,000 employees (25% of workforce) after "material" tax increases — Amazon: 27,000 layoffs concentrated in R&D teams — Google: 12,000 cuts despite record profits 2/4
A software company with $1M revenue and $1M in engineer salaries suddenly owed $189,000 in taxes on ZERO profit. Small, low margin companies got crushed the worst. 3/4
Tech companies are now incentivized to — Hire more offshore, taking jobs away from the US — Buy vs build when it comes to 3rd party SaaS — Spend less on R&D: layoffs. This is death by accounting. 4/4
This has been around since 2022 and isn’t new. Thought it was worth pointing out since it really isn’t talked about enough. A lot of the narrative on layoffs goes to “AI taking our jobs” and not (a) slowing top line growth (b) over hiring in the pandemic (c) this tax burden