- your tax bill will be higher for the next four years, and
- these higher taxes will be totally offset by lower taxes far in the future
How would this affect the optimal hiring/firing decisions of big tech companies? Would they keep fewer engineers to save on current year's taxes, even though they have useful work for them to do?
Also, this penalizes companies for hiring doesn’t it?
How so? Hiring for non-R&D roles is unaffected. If you hire sales and customer service people, you'll still write off their cost right away.
Hiring R&D folks will be treated the same way as other forms of capital investment, so it seems like the playing field will be leveled (between hiring and other forms of capital investment).
The claim was “if your headcount is stable.” If it’s not stable in the upward direction, you’ll get penalized relative to the situation before, because it’ll take five years to ramp up on your tax write offs.
I’m not sure what you mean by saying that hiring r&d will be treated as other forms of capital investment. Isn’t this whole discussion about how r&d is not treated the same as it used to be?
> - these higher taxes will be totally offset by lower taxes far in the future
I think the article addresses this by stating that companies don’t run with five years’ worth of money sitting around ready to be spent on this.
I’m not sure what you mean by saying that hiring r&d will be treated as other forms of capital investment.
I'm countering your point about 'hiring being penalized'. I'm saying, no, it's just being treated consistently (from a cost recognition perspective) as all other types of cost.
I think the article addresses this by stating that companies don’t run with five years’ worth of money sitting around ready to be spent on this.
Google's net cash flow from operating activities is $300bn/year. Its total R&D expenditure is $50bn/year. It has $100bn cash on hand.
- your tax bill will be higher for the next four years, and
- these higher taxes will be totally offset by lower taxes far in the future
How would this affect the optimal hiring/firing decisions of big tech companies? Would they keep fewer engineers to save on current year's taxes, even though they have useful work for them to do?
How so? Hiring for non-R&D roles is unaffected. If you hire sales and customer service people, you'll still write off their cost right away.Hiring R&D folks will be treated the same way as other forms of capital investment, so it seems like the playing field will be leveled (between hiring and other forms of capital investment).