[pcai]

imagine in year 1 you grossed 100k, spent 200k on salaries, but the new irs rules say you owe taxes on 60k of profits.

To slightly simplify: it forces startups to pay taxes on profits that only exist on paper, with cash that is now much more scarce

[koolba]

> imagine in year 1 you grossed 100k, spent 200k on salaries, but the new irs rules say you owe taxes on 60k of profits.

For a clearer picture on this it’s helpful to include the actual tax amount. With a corporate rate of 21%, the tax would be about $12K.

Now that’s not zero, but it better shows the actual cost born in year one under this plan.

The later years are important as well. As profits continue to flow in, the rest of the cost can be deducted from it. So it doesn’t disappear.

Though you do lose a bit from the nature of present nominal being inherently worth more than future nominal amount. With todays higher rates, that’s an even larger factor.

[eropple]

Right, this is exactly why I'm confused about the all-is-lost framing of this. $12K isn't nothing. It's a pretty shitty thing to have drop on you and I think it should revert. But if you're starting a software business that isn't a solo shop--so you have hundreds of thousands of dollars in payroll--I would expect a $12K difference to not be the needle-mover between "start a business" and "don't"; we're not talking a hot dog stand here.

[pcai]

I understand where you’re coming from but the thing to understand is: most startups are incredibly marginal to begin with. If you tilt the field such that the entire distribution is now ~5-6% lower expected value for any given outcome, you can easily wipe out 80%+ of the startups that might’ve been “worth trying” but don’t make any sense now on a risk-adjusted basis. The entire asset class can become unfundable because the same money taking the same level of risk simply generates more returns elsewhere

[eropple]

Are we talking "startups" or "small businesses" here? I could see this blowing up startups for sure, but the conversation was about small businesses and I'm not sure I see the connection there. In my conception of the universe, you're not rolling out multiple hundreds of thousands of salary when you're hanging out your small-business shingle. You might grow to it, but that'll be over a long period of time.

[NerdiDotOrg]

Not quite. Plenty of startups pull 6-7 figures. We did 6 figure revenue on year 1 of our dev agency startup in past.

[eropple]

I assume you meant "plenty of small businesses". On what margin?