A shift in the tax code during Donald Trump's presidency is largely to blame for significant layoffs in the tech sector. Following the 2017 Tax Cuts and Jobs Act, companies can no longer deduct all R&D spending immediately, as they must now amortize deductions over several years instead. This change, rooted in Section 174, has imposed heavier financial burdens on tech firms and is believed to be the major contributing factor to the over 500,000 job losses reported since 2023. The lack of awareness about this tax amendment contrasts starkly with the narrative around layoffs related to AI and pandemic hiring practices.
A little-known change to the tax code during Donald Trump's presidency has drastically affected research and development write-offs, contributing significantly to tech layoffs.
The 2017 Tax Cuts and Jobs Act dismantled a key provision enabling 100% deduction of R&D expenses, forcing companies to amortize costs instead.
The change led to the loss of more than 500,000 tech jobs since 2023, as companies are now burdened with upfront salary costs.
Despite its significance, the alteration to Section 174 of the tax code had minimal public awareness, overshadowed by AI trends and pandemic-related hiring.
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