The new tax law is a huge blow to the tech industry, as many companies are being taxed at a rate far higher than they were paying in the past.
The new corporate tax rate will hit companies with revenues in excess of $1 billion in 2016.
While it’s still unclear how the new rates will affect startups, analysts say they’re going to be much higher than the rates in the tax code.
“The big winners are the large tech companies,” said John Bogle, a professor at the University of Chicago Booth School of Business.
Bogle said the tax changes could lead to more tax breaks for corporations and encourage companies to move abroad.
“We’re going from a situation where the U.S. is the world’s biggest tax haven, to being the world leader in tax havens,” he said.
A lot of people are going to have to get out of the U!
Bogle expects that to cause a lot of job losses.
Many startups in Silicon Valley are also losing money.
Tech job losses are expected to be in the billions.
“What we’ve seen over the past decade is that companies have lost millions and millions of dollars to these tax havens and that’s really the reason why the tech sector is struggling,” Bogle told Business Insider.
“There’s a lot going on that we don’t know about.”
Bogle pointed to recent revelations that companies in the U, which have become so successful at using tax havens to avoid taxes, are now being hit with even more burdensome taxes.
“This is going to affect every sector of the economy, not just the tech,” he added.
“Every dollar that goes into these tax haven companies has to be taxed at somewhere between 5 and 10 percent.”
The new rules, if enacted, will mean that companies with revenue in excess and will face even greater challenges than they did before.
Companies that are in the middle of a growth cycle will have to find other ways to make money, and companies with growing revenues but low profitability could see their tax rates go up.
“It’s going to take some time to see whether this has a positive or negative impact on companies in general, but if you’re a small business that has revenues in the low $1 million range, this is going in the wrong direction,” Bogaert said.
Tech tax loopholes that are still open to some companies could be hit with massive tax hikes, too.
Bogaart said that tech companies have a number of loopholes that can allow them to pay far less than they’re allowed to, including those that allow for tax deductions for expenses, such as travel and meals.
Barger companies that are profitable will also be able to avoid some of the new taxes, as will companies that have been profitable for a while.
Bogelspan said the new rules will also make it easier for companies to shift production and capital from one location to another, but that doesn’t necessarily mean that they’re likely to move jobs.
“I think there’s going have to be some movement, but I don’t think that’s going be the biggest driver of job loss,” he explained.
Companies with profitable growth in the next three to five years may still see a boost from the new regulations, but they’ll likely be facing a bigger challenge to keep their workers and their businesses alive.
“Some people may just want to leave the country because they don’t have to pay taxes,” Bogel said.
“And they can.
But I think this is the first time that this is something that’s been applied to the whole industry.”