New tax law wreaks havoc on small tech businesses, demonstrating dysfunction in US Senate
Small software development companies across the United States are facing an existential threat due to a recent change in tax law. Previously, these companies could deduct the salaries of their software developers from their revenue, effectively paying no taxes on their income. However, a new law has changed the game, now making it mandatory for these companies to amortize (spread out over five years) R&D salaries, which significantly increases their taxable income. For many of them, this means an insurmountable tax bill that could force them out of business.
Analysts say that the change was expected to be fixed later, considering that it was not intended to happen, but this has not materialized due to the inability of Congress to agree on the legislation. Many experts blame the Senate Filibuster rule, which makes it much harder to get the 60 votes needed to close debate on a bill and move forward to a vote. This is further compounded by the ongoing byzantine dysfunction downstream of the Senate’s filibuster rule, making it difficult for small businesses to survive.
The dysfunction in the US Senate is now revealing its consequences, as its bipartisan system focuses on the interests of the political parties rather than the needs of its people. The lack of action in addressing the new tax law problem hinders small businesses and shows the limitations of the current political system. The polarizing political environment needs to devise a system that takes into account the needs of small businesses and citizens equally.
In the wake of the economic turmoil caused by the coronavirus pandemic, small businesses need stronger support mechanisms. Urgent intervention is needed from the government to help these companies withstand these unprecedented challenges.
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Author Eliza Ng