It’s Not You, It’s US Tax Code Section 174

For the last few years, I have been an unofficial grief counsellor of UX, consoling designers and researchers through countless Slack threads and coffee chats about the tech industry’s sudden personality change. Everyone’s exhausted, either from job hunting, constant reorgs, or just “Making do with less.” Cutbacks are intended to be a temporary measure in work management, not a way of life. 

Like so many relationships, things were great until they weren’t. 2021 really felt like UX was getting that long-desired seat at the table… until 2022 ended. Miley Cyrus says it best in her Grammy-winning song Flowers:

We were good, we were gold
Kinda dream that can’t be sold
We were right ’til we weren’t
Built a home and watched it burn

Microsoft’s July 2nd layoffs, affecting 4% of its workforce, have triggered a fresh wave of #OpentoWork posts. LinkedIn is already filled with the chorus of “I’ve been looking for [insert shockingly long timeframe], what’s wrong with me?”

Usually, I lurk in these conversations, but I’m always tempted to channel my inner rom-com protagonist with a twist on the classic “it’s not you, it’s me” line. Except in this case, it really isn’t you: it’s tech leadership’s collective freak-out over Section 174 of the US tax code.

Nothing Quite Like a Breakup After Love Bombing

Sure, there was a hiring spree in UX during 2021-2022. But the dramatic drop in hiring and sudden layoffs from late 2022 to mid-2025 weren’t some natural market correction due to oversaturation in design and research hiring. They were a panicked response to new tax rules that hit like a surprise audit. 

I don’t understand why so few people have been discussing this: perhaps not everyone is a strong non-linear thinker interested in the systemic effects of obscure tax changes. I also tend to undervalue my own opinions, assuming what I see is obvious, so everyone must understand it, right? Wrong, as my friend Alison pointed out over brunch, saying I should write this article.

The 2017 Tax Cuts and Jobs Act altered how tech companies account for research and development (R&D) costs under Section 174, although the change was not widely understood until 2022, when it actually took effect. Previously, companies could deduct all their R&D expenses immediately, including those high salaries for engineers, product managers, designers, and researchers. When the provision took effect at the end of 2022, companies were required to spread these deductions over five years for domestic R&D and fifteen years for foreign R&D.

If you want to know more, this article does an excellent job of explaining the changes and their impact on tech companies. The article argues that the code changes fundamentally broke the incentive structure that built the modern US tech economy.

This arcane tax change hit tech like a poorly timed system update just before a key presentation. Software development had always been classified as R&D, so companies suddenly needed significantly more cash on hand to cover the exact same development costs. Add inflation eating cash reserves, and climbing interest rates, and you get the perfect storm of “let’s cut our most expensive line item: humans.”

Some of the layoffs read like breakup horror stories that make a “Dear John, I’ve left you and taken the kids” note sound mature. The people at Google who discovered that their badges had been deactivated upon entering the NYC office, or the two Amazon employees I heard about who were shut out of their devices while on a client site visit. They couldn’t even check in to their flights to get home from the Las Vegas business trip. 

These layoffs weren’t just about downsizing: they fundamentally restructured how companies approached development. Projects that might have been given time to breathe were now evaluated for immediate ROI. Tech firms optimised for quick extraction over long-term sustainability, like those mining companies that figured out water cannons could fast-track erosion in hydraulic mining.

Section 174 Got Me Dumped

I felt this shift firsthand at the end of 2022. I was excited about a six-month stint at Point A, Atlassian’s internal incubator, working as strategic design lead for Project Daisy (a thrilling new product spin-up). I had a team I was pumped to work with, and it would let me step back from management to IC work as a trial run.

I overlapped my Trello role with the new gig for a month, and on my final transition day (also my birthday, because the universe has a sense of humour), I got blindsided: Project Daisy was cancelled. Boomerang time, right back to my old role. A few weeks later, all of Point A was shut down.

Luckily, my compulsive need not to burn bridges worked out in my favour. Everyone was genuinely happy to have me back, and I still had a job, but that disorienting whiplash was the first drop on what became a nauseating rollercoaster of role changes and a half dozen reorgs across Trello, Jira, and Confluence. In February 2023, I survived layoffs, but I watched as the user research department was halved and subsequently moved out of the design organisation entirely. That’s when I first read about Section 174 and started connecting the dots.

It isn’t a coincidence that Meta’s “Year of Efficiency” announcement immediately followed Section 174 taking effect. Chef’s kiss for timing. They cut nearly 25% of their workforce, concentrated in roles that qualified as R&D expenses under the new tax rules. And the dumping never really stopped. Check out the most recent layoffs on Crunchbase.

UX Got Ghosted on an Epic Scale

While people across all specialities were affected, UX and user research professionals were disproportionately impacted compared to previous economic downturns. UX research job postings decreased by 71% from 2022 to 2023, while UX design positions declined by 70%; these declines far exceeded their relative representation in tech workforces.

This shift reflected broader changes in organisational priorities during the cash flow crisis. Companies adopted “lean-UX” approaches, which were as painful to watch as they sound for the high-empathy design and research teams hired to solve problems, not just launch half-baked solutions. Growth teams poured gasoline on the dumpster fire, revealing the dark side of design systems when leveraged for unethical patterns: you don’t even need a designer to throw together some existing components and get hacking. Why spend time actually engaging with users when you can get AI to dummy up a report and A/B test your way to Q4 profits?

Plot Twist: Couples Therapy Actually Worked

Here’s where the story gets interesting. The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, permanently restored the immediate deductibility of domestic R&D expenses, effective with the 2025 tax year, and provided retroactive relief for small businesses back to 2022. I’m not commenting on how I feel about anything else in that bill; I have trouble just saying that terrible name.

The Pragmatic Engineer does a great job of breaking this down: the legislative process revealed just how freaked out the industry was about Section 174. The US R&D Coalition, comprising Amazon, Microsoft, Intel, Ford, and Lockheed Martin, argued that the changes made the US tax system “unlike any other in the industrialised world.” 

When Congress acts to permanently reverse a policy despite significant fiscal costs, you know something was seriously broken, or I guess, lobbyists work? The above article also outlines how Section 174 disproportionately affected small businesses and startups. It also outlines why amortising software over the long term is actually a reasonable action for some organisations, like Google. 

The bipartisan effort to reverse Section 174 through OBBBA suggests that employment in R&D-intensive roles, including UX and user research, may actually recover as immediate expense deductibility returns. However, the industry’s newfound obsession with business-focused approaches to UX work will likely persist even as the underlying tax constraints disappear, like a bad habit that outlasts its original trigger.

We Have a Dating Pool Problem

Over the last few years, I’ve watched UX leadership shift its hiring strategy, opting to prioritise senior and lead designers over juniors. This felt like whiplash after 2021-2022, when senior design leaders I worked with actually limited the number of seniors we could hire. The argument was sound: you need the right organisational strata. Too many seniors and not enough entry-level designers break the promotion pipeline, limiting mentorship opportunities.

However, once Section 174 took effect, the pipeline tap was completely turned off. New graduate programs were paused or cancelled permanently, often because recruiters and people operations teams were also being laid off. My senior design manager peers and I were encouraged (and, in some cases, mandated) to level everyone up, skewing the ratios heavily toward leads and seniors, with fewer to no juniors.

Those choices helped UX orgs navigate the rough years, but now the funding taps are turning back on, and the talent pool is empty on the shallow end. Yes, more people are graduating every year, but organisations are not structured to provide new graduates with the onboarding experience they need and deserve. At the top, we have a thick layer of seniors seeking promotion to too few new lead roles, just as the ratios get scrambled yet again.

The tech industry is still experiencing its most significant employment disruption since its inception, driven by AI automation, generational shifts, and new work models that fundamentally alter the nature of the employment relationship. I don’t know precisely where OBBBA’s changes to Section 174 will take tech hiring in the next year, but I’m cautiously optimistic.

Are Design and Tech getting back together?

Again, say it with Miley...

I can buy myself flowers (uh-huh) 
Write my name in the sand 
Talk to myself for hours (yeah) 
Say things you don’t understand (you never will)

Well, UX professionals have been doing the career equivalent of buying themselves flowers for the past few years, taking care of themselves while the industry worked through its own issues.

I don’t think we’re headed straight back to where we were before 2022. Some aspects have undergone fundamental changes in how metrics drive UX work. As “The State of UX in 2025” describes, designers are experiencing “The Great Design Handoff”; losing control of their craft to AI tools, growth teams prioritising revenue over users, algorithms replacing human empathy in design decisions, premature product launches justified by “fail fast” mentalities, organisational politics overshadowing actual design work, job insecurity driving performative social media presence, and large corporations controlling design discourse through their conferences.

Despite these challenges, design as a discipline is evolving, as it always has throughout history. The authors encourage designers to either pivot strategically into new roles (such as leadership, psychology, or accessibility), return to foundational craft work, or apply their design thinking skills in entirely new fields.

The line that stood out to me was “Building meaning and stories with data is a big sought-after leadership skill these days.” That’s my sweet spot: the overlap of what I care about with what I’m good at. I stepped down from my role as UX leader (at least for now) when I left GitLab this month. Come September, I start my MSc at the University of Edinburgh in Narrative Futures: Art, Data, and Society. I’ve always viewed stories as the human operating system, and now I get to use them for the greater good.

My Post-Break-up Pep Talk

As true or trite as “it isn’t you, it’s me” might be, it leads to my favourite saying, this time from Epictetus: It’s not what happens to you, but how you react to it that matters.

Are you in senior leadership? Start cosying up to your business teams or whoever holds the budget and ask what they plan to do with all the cash they won’t be using to pay against Section 174 in 2026. Start planning now and consider how you can shape your organisation for balance, as well as identify the strategic priorities that should be on the funding horizon. 

Are you a designer or researcher? Have you been treated poorly over the last few years, told to make do and buck up? This might be a nice time to start polishing your portfolio in case better opportunities arise over the next year.

Has tech made your soul tired? Pivoting is always challenging, but I bet you’ve helped products do it. Why not put all that design energy into building a life where you truly thrive, rather than focusing on OKRs?

I’ve joked with coworkers that I have Cassandra vibes, but I’m no oracle. I’m not an economist, and I certainly don’t offer financial advice. But I will say Section 174 changed things behind the scenes in ways none of us could have controlled.

So the next time someone in your network posts another “I’ve been looking for eight months, what’s wrong with me?” just remember: it really isn’t them. It’s a wonky tax code provision that sent an entire industry into panic mode. 

Think of it this way: you know that person who gets dumped and immediately assumes they’re fundamentally unlovable? (Hi, waving at past me.) Meanwhile, their ex was actually just freaking out about their own commitment issues and student loan debt. That’s basically what happened to UX professionals and Section 174. The industry didn’t fall out of love with design and research: it just had a financial panic attack and made highly suspect decisions. Now that the underlying anxiety is getting treated, don’t be surprised if tech comes crawling back with flowers and promises to do better.

But here’s the thing: will it actually change? Should we even want it to? There are a lot of nice industries out there that may not pay as well, but they are more likely to respect your boundaries, offer opportunities to create meaning, and, well, are not shitty partners who broke our trust because they weren’t paying attention to their finances. 

We’re valuable as design professionals, whether or not we’re adding value to a tech corporation’s portfolio. Sometimes the healthiest response to a dysfunctional relationship is realising you don’t need their validation to thrive. You really can buy yourself flowers.