IMO the effects of Section 174 are way overstated. Time will tell, but my bet is that the market for software engineers continues to decline indefinitely. Maybe super low interest rates could mitigate the trend but other than that we're probably not going back to the days of high demand software engineering roles.
Why? A dozen different reasons. Of course LLMs are one facet, there's also the commodification of software and infrastructure which means buying something off the shelf is far cheaper than running an engineering org in-house, there's also the fact that the market is extremely oversaturated with software engineers with hundreds of thousands laid off over the last few years, then there's the aggregate effect of advancements in PL and software system design which makes it a lot easier to do more with less, the broader homogenization of runtime systems with modern browsers and mature cross-platform toolkits... and many many other factors. All these trends are converging on downward pressure for demand, and I personally don't see any reason why the trend will reverse.
I don't fundamentally disagree but I feel there's a selection bias at work here. I'm not an economist, but: maybe the things that could have a market bolstering effect are - by nature - harder to identify because they represent growth opportunities that haven't been captured yet? The sector-reinvigorating innovations over the horizon wouldn't be innovations if they were easy to anticipate.
A coincidental combination of economical conditions happened before the layoffs, and I know correlation doesn't imply causation, but these conditions look like a big cause:
* Companies hired like crazy in Covid
* Section 174 got disabled
* Interest rates rose
This made money much more expensive, and employees became a much higher cost due to the fact you hired like crazy, so you have a ton more, and you can't amortize them, also combined with fears of recession in 2023.
In a very short term, this cocktail of conditions made operating a company much more expensive, thus the layoffs and reorgs as an attempt to cut costs.
What you are saying is also true, but I see that taking effect over a longer period of time.
When companies were hiring like crazy, were they really not expecting interest rates to rise in the future? Just how deep was the faith in MMT that printing all that stimulus wouldn't cause inflation? Personally I was surprised it took as long as it did.
In my experience the higher up you get on the corporate ladder, the less you’re going to be held accountable for anything. Executives only stick around until they get bored or can cash out. Five years down the line it might as well be a totally different company.
I feel like we'll get a good feel for this if hiring domestic engineers picks back up without an influx of foreign folks who are not receiving the positive tax treatment.
It seems like this reversion is being paired with changes to 41(d)(1)(A) and 280C(c)(1)
> The domestic research or experimental expenditures . . . otherwise taken into account as a deduction or charged to capital account under this chapter shall be reduced by the amount of the credit allowed under section 41(a). Read in conjunction with Section 41(d)(1)(A), discussed above, it seems that all taxpayers claiming a research tax credit will necessarily have costs which are treated under Section 174A and thus subject to the reduction specified under amended Section 280C(c)(1).
> To our knowledge, many taxpayers have interpreted this language to mean that there is a reduction under 280C(c)(1) only to the extent the research credit exceeds the amortization allowed under Section 174, generally 10% in the year the expense is incurred under the applicable half-year convention. In that case, there would typically be little or no reduction to deductions and capitalized amounts, and correspondingly no reason to elect a reduced credit in lieu of a nonexistent or minimal reduction.
If you think layoffs were bad the last few years then just wait until the costs for all the ai hardware, massively overpriced talent, and acquisitions hit the books for these companies. It's going to be a bloodbath.
Given the wage difference ... what does it matter? You make 200%-300% after tax in the US what you make in high cost areas of Europe (despite that the pre-tax difference is closer to 75% to maybe 125%). Normal US pay is comparable to tax-haven pay elsewhere: Europe (London, Luxembourg), Middle East (UAE), Asia (Singapore).
So in "a few years" (let's say 2-3 years) you'd be able to make between 5 and 10 years' worth of European net pay. If you don't raise your spending, that will easily cover your living expenses during the next recession, even if you spend all of it unemployed.
And that's if you start now. If you've been doing this for 10 years already ... wow.
Without getting into the differences about the benefits you get in many European countries compared to the US, I think it's pretty naive to think you could realistically save enough from a salary alone to live for an extended period of time (something like 1-2+ years) in the US simply because the net salary is higher. Expenses are high, and when you become unemployed they become higher (e.g. you have to pay out of pocket for your health insurance, either from the ACA exchanges or from COBRA), and if you end up having an unexpected expense it could cause a lot of issues since you don't have a regular stream of money coming in. If you're lucky it could be okay, but it's luck dependent.
Besides that, if we assume AI will take many jobs in the coming years, what are you to do if you suddenly become unemployable with your current skill set and need to, for example, go back to school, or find an entry level job in another field with a potentially significantly lower salary? Live off of your savings?
