the idea is that normal business expense are deductible.
in this case, your taxable income is $1.0M, and cash flow is $500k ($1.5M - $500k salaries - $500k taxes).
now you have to amoritize it over 5 years. so your taxable income is $1.4M ($1.5-500k*20%), taxes are 700k, and cash flow is $300k.
Uncle Sam just reduced your cash flows by 40% by a simple tax change. You eventually make up the difference, but for fast growing tech companies, that's a large shift in current flows and significantly changes their investment strategy.
in this case, your taxable income is $1.0M, and cash flow is $500k ($1.5M - $500k salaries - $500k taxes).
now you have to amoritize it over 5 years. so your taxable income is $1.4M ($1.5-500k*20%), taxes are 700k, and cash flow is $300k.
Uncle Sam just reduced your cash flows by 40% by a simple tax change. You eventually make up the difference, but for fast growing tech companies, that's a large shift in current flows and significantly changes their investment strategy.