The amended U.S. tax regulations are causing technology firms to fork out substantially more taxes on research and development (R&D), which has resulted in widespread job cuts and could have far-reaching implications for technological advancement. For instance, projects such as Mark Zuckerberg’s augmented reality glasses, a possible evolution from smartphones, or his forays into military technology defense might experience repercussions. This scenario may account for the extensive layoffs observed at Meta during the period spanning 2022 to 2024.
Why tech companies are cutting back on R&D
Beginning in 2022, a change from the 2017 Tax Cuts and Jobs Act has taken effect, affecting companies’ R&D expenses: instead of being able to deduct these costs (salaries, materials, rent) immediately, they now need to be spread out over a period of five years (or 15 years if incurred abroad). This shift is expected to result in larger initial tax bills, as reported by ABGI.
In the past, tech companies could offer high salaries and signing bonuses upfront to lure top talent and deduct these costs immediately. This approach made it more cost-effective when competing for skilled workers. However, with these expenses now being spread over a period of time, budgets have become stricter, so the competition is intensifying.
This is because firms such as Google and Meta have been reducing expenses. Now, Mark Zuckerberg’s notorious 2023 “Efficiency Year” seems much clearer – and it likely sheds light on why he has lately become stricter with employee evaluations.
However, these repercussions could extend beyond the initial impact. Given that the United States is growing costlier for Research and Development (R&D), there’s a possibility that businesses may gradually transfer a larger portion of their innovative endeavors to foreign territories.
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2025-06-11 19:31