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How a little-known tax change sparked a tech layoff surge
For nearly seventy years, US companies could immediately deduct the full cost of their research and development activities, from engineering salaries to software development and contractor fees....
The big picture: A subtle but far-reaching shift in US tax law has upended the financial foundation of the technology industry, accelerating a wave of layoffs and reshaping how companies approach innovation. While headlines have pointed to over-hiring, economic volatility, and the rise of artificial intelligence as causes for the mass job losses in tech, a less visible factor has quietly played a pivotal role: a change to Section 174 of the tax code that dramatically altered how research and development costs are treated. Meta reduced its workforce by nearly a quarter, Microsoft trimmed about 7 percent, and Amazon, Alphabet, and Salesforce all eliminated thousands of positions, often in product development and engineering – the very teams most affected by the loss of immediate R&D deductions.
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