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The good times in Silicon Valley are over—at least as far as the current generation of coders is concerned. The software industry is shrinking and, since 2023, the tech industry has been hemorrhaging jobs at an astounding rate. Workers who would’ve been secure several years ago are now out on their asses. While the reasons for this are diverse (AI is often discussed as a potential culprit and the overall economy has had its ups and downs over the past several years), one potential driver could also be the tax cuts that Trump passed in 2017.

The good times in Silicon Valley are over—at least as far as the current generation of coders is concerned. The software industry is shrinking and, since 2023, the tech industry has been hemorrhaging jobs at an astounding rate. Workers who would’ve been secure several years ago are now out on their asses. While the reasons for this are diverse (AI is often discussed as a potential culprit and the overall economy has had its ups and downs over the past several years), one potential driver could also be the tax cuts that Trump passed in 2017.

It turns out that a little-known provision of the Tax Cuts and Jobs Act (TCJA) of 2017 altered a longstanding loophole, known as Section 174, that allowed the tech industry to offload the cost of its research and development operations onto the federal government. Prior to the TCJA, tech companies could deduct 100 percent of the costs of R&D, allowing tech businesses the freedom to commit significant resources towards innovation. Bloomberg reports that, as Congress sought to find a way to offset the cost of giving big tax cuts to billionaires, one place where they discovered fat to trim was the tech industry’s R&D funding.

2017’s bill shifted the deduction from a full write-off to funding that would have to be parsed out over a period of several years. The provision that pared back the funding did not kick in until 2022, however. Not long after it went into effect, the tech industry began shedding jobs like nobody’s business.

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