What this change effectively did was make software developers significantly more expensive, without increasing the amount those developers get paid.
I think you're referring to Nordic countries which consistently rank as the happiest countries and also have relatively high tax rates (4 of 5 Nordic countries rank in the top 11 tax rates globally. Norway has oil.) The high taxes that "make everybody poorer" also fund extensive social services that contribute to happiness.
However, this conversation is about making (a class of) workers poorer by using tax policy that puts downward pressure on their salaries. Tax revenues will stay the same, so social services will not be increased. Economic inequality increases because the workers became poorer, the C-Suite and Board Members don't.
In the US, software is one of the few remaining ways to achieve the American dream. I came to this country to work hard and earn money.
EU has better societal benefits than the US (access to healthcare, education, mandated vacation time (often starting at 3-4 weeks).
The vast majority of people care about living a life without suffering. In the US this is only reserved for the rich it seems.
Exceptions are HCOL tech hubs, but comp in those places is much higher.
This is the sign of a broken economy.
Yes it sucks for developers, but does it make any difference for any other employee? Why does Joe’s plumbing have to pay those taxes, but Jane’s AdTech company doesn’t?
Sure, there are benefits to investing in R&D in general, and tech has fueled a lot of growth, so incentivizing it has likely paid off for the whole economy. But will that forever be true? Maybe?
Why do I, the hardworking tax payer, have to subsidize Joe Plumber, who already has a big house with a pool?
But with the change, the cost of R&D employees is now only partially deductible (right now, you can eventually deduct the full amount over the course of several years), and software development has to be considered R&D.
Either way, the total cost of employment is higher for the employer than the after-tax income of the employee.
If corporations were able to operate in a high trust fashion and actually take responsinility for their tax burden properly, instead of trying to shirk it, then this policing wouldnt be needed, but we dont live in that world
Now, there are other tax schemes that aren't based on how much an employee is paid, but that is a completely different matter.
And FWIW sales/vat tax is somewhat similar. It doesn't matter if the buyer or the seller pays the tax, either has the same effect on the total amount paid.
And why is this bad, exactly? Money will be spent and will go back into the economy. Amazon will have to use the funds to build new offices, datacenters, do research, whatever.
And even if execs give themselves $10^11 USD in bonuses, they will be taxed as personal income, at even higher rates than corporate income.
I’m not sure what the answer is. The former is likely to drive some innovation, which I’m sure varies by company. Where the latter could also unlock innovation by giving the bottom-quartile of earners a chance to improve their situation.
Growth has its own problems of course (I don't want to estimate the health impact of Coca Cola), but it's a prerequisite of a country not falling behind others.
Yes. Also, the salary will not go _only_ to highly-educated people. For example, if Amazon decides to build a new distribution center, it will employ blue-collar workers to build it, not software engineers.
> Or is it better for the money to go back into the economy through taxes, then disbursing the benefits to lower-income benefit programs?
No.
> I’m not sure what the answer is.
The answer is pretty clear: invest money into the private sector, rather than divert it into the Federal budget. Private actors are more efficient at allocating funds than the government.
I'm not against social spending, it's a necessary evil for any real state. Pure libertarianism leads to dystopian outcomes. But it should be understood that it's a very real artificial inefficiency that is imposed on the economy.
There are also situations where additional social spending is necessary, but they are VERY easy to detect: when your interest rate is near zero.
If you want a static economy that supports gradual decline (preferably with a mineral-based income stream), then a lot of state spending is fine.
State spending is not a panacea.
"on itself"???
You mean it would rather spend its profits on hiring more developers than sit on it? That sounds great, doesn't it?
The deal is that you can delay taxes by reinvesting (and either make the government more money at the end or lose it all if you were a fool, but you gain nothing by losing it all) but you cannot skip them when it comes to taking the profit out. The entire point of it was to promote investment into businesses which has kind of been a crucial factor in international competitiveness since the Industrial Revolution. Remember the fall of US Steel? That happened because they didn't reinvest.
Given the choice, Amazon would rather spend 100% of its profits on itself than allow any of its profits to be paid out in taxes. Section 174 was implemented without a minimum tax on corporate profits before voluntary deductions such as research. Therefore, it’s exploitable and all companies ought to hire and fire staff to ensure their profits show as 0%.
This tax code defect is now closed by accident, but could have been done much more intelligently than it was. Oh well.