Rich people don't pay much in taxes (now in CR) - ProPublica

[JimmyJames 12271]

12 hours ago, deadshank said:

I once had a girlfriend that thought Midnight Cowboy was going to be a John Wayne styled western.  
 

She was wrong just like you.  
 

 

And how am I wrong, just like her. 

[Sawbonz 27442]

The shining sucked. Movie and book

[safe sex 11685]

Physician, heal thyself

[deadshank 24651]

8 hours ago, JimmyJames said:

And how am I wrong, just like her. 

You probably picked up on this thought by watching Room 237.  
 

Room 237 had other thematic / allegory theories regarding Kubrick’s adaption meaning of the book which include The Minotaur, Apollo 11 and the Holocaust. 
 

They’re all BS thrown out by folks that are looking for things that aren’t there. 
 

People throw out crazy theories and others see what they want to see. 

[WhatTheBuck 28716]

10 hours ago, Sawbonz said:

The shining sucked. Movie and book

I never read the book but I finally got around to watching the movie start-to-finish for the first time in the past year and I was shocked by how lame it was. 

[Sawbonz 27442]

2 hours ago, trauma babe said:

Physician, heal thyself

English lit major and huge King fan. Tried to get one of my profs to add him to his modern short stories course.  Tried in high school, again in college, and once more as an adult to get through it and just couldn’t. It’s shit. 
 

I appreciate Kubrick and like much of his work. While I do think this is the only movie adaptation of a King novel that is better than the book, it is still  trash. Cujo is better

[WhatTheBuck 28716]

Scatman Crothers gets killed? OMG! Who could’ve seen that coming? LOL. 

[pearlandhorn 3269]

12 hours ago, softlynow said:

Why wouldn’t it be immediately taxed? It’s income in the tax year you receive it. 

Stock options to the beneficiary aren’t realized income until the options are exercised. The options literally sit there and have no value until they are exercised.

Now, do you want the beneficiary to be taxed based on the unrealized value as of 12/31? That would created a deferred tax liability that you have to carry forward to the next year (assuming the option is > 1 year in length). What happens if the stock price is less than the strike price of the option at the next year end? One would then need to reverse the deferred tax liability and take a credit on the next tax return. Point is: you can’t tax on unrealized gains without creating certain tax credits.

[pearlandhorn 3269]

12 hours ago, softlynow said:

Why wouldn’t it be immediately taxed? It’s income in the tax year you receive it.

Edited June 13, 2021 by pearlandhorn
Dp

[Baconboy 135]

14 hours ago, softlynow said:

5 tax brackets with no deductions, credits, adjustments … nothing (income levels and rates for examples sake only):

$0-$25,000: 0%
$25,001-$75,000: 18%
$75,001-$200,000: 23%
$200,001-$400,000: 27%
$400,001-$1,000,000: 34%
$1,000,001+: 40%

No cap gains pref rate, no tax-advantaged accounts, no carry forward losses,etc and the same goes for corporate taxes.

Agree on most points but there should be more brackets, particularly at the top end; no need to limit to 5. 

It's absolutely aggravating that ~$500K is currently the top bracket, and that Biden's plan does nothing to change this. While $500K is a lot of money, many of these earners aren't "wealthy" in that they aren't sitting on a pile of savings. Many are first time college graduates who have gone on to become doctors, lawyers, small business owners, etc. Why not add more brackets to capture more from those making $1M, $5M, $10M, and so on.

Corporate taxes are different (not sure if you were suggesting rates match personal income rates or simply saying to close the loopholes - I read it as corporate income tax rates should match personal income tax rates). Prior to Trump's plan, the US was taxing corporations at a much higher rate than most of our peers (35% vs ~22% average for EU countries). The reduction implemented by Trump was bigger than necessary and the pendulum swung too far, but its in the best interest of our country to keep this tax rate within striking distance of our peers to encourage companies to keep their corporate income tax dollars at home. I think matching corporate tax rates to personal income tax rates would result in more companies following Apple's example by stashing profits in places like Ireland and Jersey (the island, not the state).

Agree capital gains should be treated as income. My guess is Biden only proposed increasing cap gains tax on those making over $1M, and didn't propose cap gains tax rates match income tax rates because that would be frowned upon by his biggest, wealthiest donors (same for most politicians on both sides of the aisle). I see no logical reason why ones cap gains tax rate wouldn't matching ones income tax bracket, as cap gains ARE income. 

[Biff Tannen 45500]

Didn’t see the Stephen King/Kubrick turn coming in this thread. 

[Baconboy 135]

12 hours ago, softlynow said:

Why wouldn’t it be immediately taxed? It’s income in the tax year you receive it. 

Because it's only income once you sell the options and can actually spend the money. Before then it's value could still go to zero. As discussed above, there are ways to take out loans using your options (or any investment) as collateral. But now we're getting back into a discussion about a wealth tax. The two concepts (income tax vs wealth tax) continue to get conflated in articles like the one linked in the OP. Stock options simply aren't income.

[pearlandhorn 3269]

35 minutes ago, Baconboy said:

Because it's only income once you sell the options and can actually spend the money. Before then it's value could still go to zero. As discussed above, there are ways to take out loans using your options (or any investment) as collateral. But now we're getting back into a discussion about a wealth tax. The two concepts (income tax vs wealth tax) continue to get conflated in articles like the one linked in the OP. Stock options simply aren't income.

Elizabeth Warren thinks they are and should be taxed as such.

Edited June 13, 2021 by pearlandhorn

[Sawbonz 27442]

1 hour ago, pearlandhorn said:

Stock options to the beneficiary aren’t realized income until the options are exercised. The options literally sit there and have no value until they are exercised.

Now, do you want the beneficiary to be taxed based on the unrealized value as of 12/31? That would created a deferred tax liability that you have to carry forward to the next year (assuming the option is > 1 year in length). What happens if the stock price is less than the strike price of the option at the next year end? One would then need to reverse the deferred tax liability and take a credit on the next tax return. Point is: you can’t tax on unrealized gains without creating certain tax credits.

It’s phantom income. Tax it based on what it’s worth the day it’s acquired. If you later sell at a profit, tax the gain

[TwiceHorn 31299]

45 minutes ago, pearlandhorn said:

Elizabeth Warren thinks they are and should be taxed as such.

Warren understands perfectly well how stock options work.  You can disagree with her rationale for taxing them on receipt, but to imply that her position stems from ignorance is, well, ignorant.

If, in fact, she thinks stock options should be taxed as income upon receipt, I suspect her reasoning is to discourage them as a form of deferred and tax-deferred compensation.

Edited June 13, 2021 by TwiceHorn

[Nivek 16863]

On 6/11/2021 at 5:40 PM, JimmyJames said:

When I was young and dumb I would have agreed with your last paragraph so I can’t really criticize since I don’t know you. But I can say now that I’m older and wiser that last paragraph is completely 100 percent wrong. 

he is not all that wrong.  young black dudes apparently have easier access to free lead via the police that a similar white dude doesn't get.  

[Fudge Nuggets 19151]

7 hours ago, Baconboy said:

Because it's only income once you sell the options and can actually spend the money. Before then it's value could still go to zero. As discussed above, there are ways to take out loans using your options (or any investment) as collateral. But now we're getting back into a discussion about a wealth tax. The two concepts (income tax vs wealth tax) continue to get conflated in articles like the one linked in the OP. Stock options simply aren't income.

When I worked overseas I had to pay tax on benefits in kind.  That wasn’t money I could spend but it sure as fuck got taxed like it was.

[softlynow 1784]

9 hours ago, pearlandhorn said:

Stock options to the beneficiary aren’t realized income until the options are exercised. The options literally sit there and have no value until they are exercised.

Now, do you want the beneficiary to be taxed based on the unrealized value as of 12/31? That would created a deferred tax liability that you have to carry forward to the next year (assuming the option is > 1 year in length). What happens if the stock price is less than the strike price of the option at the next year end? One would then need to reverse the deferred tax liability and take a credit on the next tax return. Point is: you can’t tax on unrealized gains without creating certain tax credits.

 

8 hours ago, Baconboy said:

Because it's only income once you sell the options and can actually spend the money. Before then it's value could still go to zero. As discussed above, there are ways to take out loans using your options (or any investment) as collateral. But now we're getting back into a discussion about a wealth tax. The two concepts (income tax vs wealth tax) continue to get conflated in articles like the one linked in the OP. Stock options simply aren't income.

I understand tax issues pretty well. My plan would be to treat everything as income when received. No deductions, credits, etc. why would my plan allow such a loophole to exist? You’re given compensation of some sort this year? Then it’s taxed THIS YEAR.  Period. 

You say it’s not realized income this year? I say, my amendments to the IRC fixes that.

[Brew 3049]

9 hours ago, Baconboy said:

Because it's only income once you sell the options and can actually spend the money. Before then it's value could still go to zero. As discussed above, there are ways to take out loans using your options (or any investment) as collateral. But now we're getting back into a discussion about a wealth tax. The two concepts (income tax vs wealth tax) continue to get conflated in articles like the one linked in the OP. Stock options simply aren't income.

For RSO’s it is ordinary income when they are exercised, not when they are sold. People typically sell some portion to cover the tax on the exercise which is then capital gains. ISO’s are only taxable at the sale as capital gains. 

[Brew 3049]

6 minutes ago, softlynow said:

 

I understand tax issues pretty well. My plan would be to treat everything as income when received. No deductions, credits, etc. why would my plan allow such a loophole to exist? You’re given compensation of some sort this year? Then it’s taxed THIS YEAR.  Period. 

You say it’s not realized income this year? I say, my amendments to the IRC fixes that.

Options are not always exercised. I think they would have to be exercised to be included for it to work.

[softlynow 1784]

10 minutes ago, Brew said:

Options are not always exercised. I think they would have to be exercised to be included for it to work.

Or not. The point is to end a loophole. You’re given an option to pay $1 for a $10 stock? Great, pay taxes on the $9 of compensation. Oh, you failed to exercise the option you say? Sounds like you fucked up.

[Brew 3049]

3 minutes ago, softlynow said:

Or not. The point is to end a loophole. You’re given an option to pay $1 for a $10 stock? Great, pay taxes on the $9 of compensation. Oh, you failed to exercise the option you say? Sounds like you fucked up.

That makes zero sense just for the record. You don’t own anything until you have exercised the option, you just have a right to buy at a predetermined price. There are a number of reasons people don’t exercise options, most not related to a fuck up but some are.

Edited June 14, 2021 by Brew

[softlynow 1784]

11 minutes ago, Brew said:

That makes zero sense just for the record. You don’t own anything until you have exercised the option, you just have a right to buy at a predetermined price. There are a number of reasons people don’t exercise options, most not related to a fuck up but some are.

It makes zero sense to change the tax treatment of something you want to end from preferred to “why the fuck would agree to that over a higher salary?”

[Brew 3049]

1 hour ago, softlynow said:

It makes zero sense to change the tax treatment of something you want to end from preferred to “why the fuck would agree to that over a higher salary?”

No idea what you were going for there.

Options are used a lot of times in recruitment in early stage companies because cash isn’t available for high comp. There are a multitude of reasons why those options aren’t always exercised. Stocks don’t always go up and vesting issues and stock fluctuations can make the ordinary income part not worth exercising.

[WhatTheBuck 28716]

15 hours ago, Biff Tannen said:

Didn’t see the Stephen King/Kubrick turn coming in this thread. 

You probably didn’t see the Spanish Inquisition coming either. 

[Guest]

15 hours ago, Sawbonz said:

It’s phantom income. Tax it based on what it’s worth the day it’s acquired. If you later sell at a profit, tax the gain

It's only worth something when you exercise it and the price has increased.   Otherwise, it's just a locked in price for a share of stock, that you have to pay in order to own it.

It's interesting to me how many folks just want to tax the fuck out of everything.

Why?  We aren't hurting for revenue.  At all...

[Biff Tannen 45500]

5 hours ago, WhatTheBuck said:

You probably didn’t see the Spanish Inquisition coming either. 

Well yeah, but who does?

[wildcat09 29264]

5 hours ago, slorch said:

It's only worth something when you exercise it and the price has increased.   Otherwise, it's just a locked in price for a share of stock, that you have to pay in order to own it.

It's interesting to me how many folks just want to tax the fuck out of everything.

Why?  We aren't hurting for revenue.  At all...

It's interesting to me how, no matter how many times this discussion is had and how many interesting posts people make in it, you manage to learn absolutely nothing every time. Pretty much nothing brings out more substantive discussion or results in as much common ground as discussion of tax policy here, and every time you just pop in occasionally wearing a gimp suit with shit leaking out. It's the strangest humiliation fetish I've ever seen on the internet.

[Guest]

9 minutes ago, wildcat09 said:

It's interesting to me how, no matter how many times this discussion is had and how many interesting posts people make in it, you manage to learn absolutely nothing every time. Pretty much nothing brings out more substantive discussion or results in as much common ground as discussion of tax policy here, and every time you just pop in occasionally wearing a gimp suit with shit leaking out. It's the strangest humiliation fetish I've ever seen on the internet.

Imaginary victories aren't just excusive to aggy, eh?

 

Why do we need more taxation? I haven't been persuaded and that seems to bother you., nor have you answered the question.  LMAO.

 

We should be figuring out how to tax LESS!!!!!!!!!!!

Edited June 14, 2021 by slorch

[wildcat09 29264]

Why would anyone bother trying to persuade you that taxes are necessary? That'd be like trying to teach a chimp rocket science. 

[Dahobbs 17449]

12 hours ago, Brew said:

That makes zero sense just for the record. You don’t own anything until you have exercised the option, you just have a right to buy at a predetermined price. There are a number of reasons people don’t exercise options, most not related to a fuck up but some are.

 

5 hours ago, slorch said:

It's only worth something when you exercise it and the price has increased.   Otherwise, it's just a locked in price for a share of stock, that you have to pay in order to own it.

It's interesting to me how many folks just want to tax the fuck out of everything.

Why?  We aren't hurting for revenue.  At all...

Neither of those are true. You own the option (at least when it vests). And the option that you own has a value the moment it is granted (rather, the moment it is vested). People buy and sell options (I know the particular type of option you are discussing isn't generally transferable) all the time. Even if you're granted an out of the money option, it still has a nominal value (just like a lottery ticket). Now, a system that taxes it at the time it is received/vested gets interesting because if it is an out of the money option, it might only be worth a dollar when vested, but later become worth a lot more. The increase would apparently be tax free under this system. 

[Goredho 17349]

On 6/11/2021 at 4:43 PM, sheeeit said:

Lets discuss it then.  What ways do you think a poor white kid born in 2021 has more advantages than a poor black kid born in 2021?

For starters, he doesn’t have one of two political parties trying to suppress his vote.

[Guest]

24 minutes ago, Dahobbs said:

 

Neither of those are true. You own the option (at least when it vests). And the option that you own has a value the moment it is granted (rather, the moment it is vested). People buy and sell options (I know the particular type of option you are discussing isn't generally transferable) all the time. Even if you're granted an out of the money option, it still has a nominal value (just like a lottery ticket). Now, a system that taxes it at the time it is received/vested gets interesting because if it is an out of the money option, it might only be worth a dollar when vested, but later become worth a lot more. The increase would apparently be tax free under this system. 

If you are issued a 2021 Option for Widget INC at a share price of $25, what is the value of the OPTION in the year of issue?  All an option does is give the opportunity to purchase stock at a locked in price. Now, typically the value of shares goes up, and people engage in a cashless transaction, where they exercise the OPTION to buy and immediately sell at the higher price and the proceeds are absolutely taxed. We are so used to the growth, it has almost become the expectation; but it is certainly not guaranteed.

How can you tax an OPTION that isn't guaranteed to grow? It also has no real value until you exercise it, or purchase the shares associated with the option.

 

Edited June 14, 2021 by slorch

[hornmpa96 2598]

4 minutes ago, slorch said:

If you are issued a 2021 Option for Widget INC at a share price of $25, what is the value of the OPTION in the year of issue?  All an option does is give the opportunity to purchase stock at a locked in price. Now, typically the value of shares goes up, and people engage in a cashless transaction, where they exercise the OPTION to buy and immediately sell at the higher price and the proceeds are absolutely taxed.

How can you tax an OPTION that isn't guaranteed to grow?  We are so used to it, it has almost become the expectation; but it is certainly not guaranteed.

That option has a value when issued. Even deep out of the money options likely have some value. For accounting purposes, the company values the options when issued and generates an expense.

[Guest]

4 minutes ago, hornmpa96 said:

That option has a value when issued. Even deep out of the money options likely have some value. For accounting purposes, the company values the options when issued and generates an expense.

They are not treated as income for the employee, nor should they be.  Yes the employer must account for it as an expense, because the option could be exercised at any time after it is vested.

How much is that $25 option worth to me, come January 2022?  $0 until I exercise it.  It is basically profit sharing using the stock market, but you don't collect anything until you exercise it.  What happens if the stock price falls?

Edited June 14, 2021 by slorch

[Dahobbs 17449]

3 minutes ago, slorch said:

If you are issued a 2021 Option for Widget INC at a share price of $25, what is the value of the OPTION in the year of issue? 

 

I don't know, what is the value of Widget Inc. stock in the year of issue? If it is in-the-money, say, $30, then the option is worth $5 plus some small premium.  If the stock is worth $20, then then the option is only worth whatever small premium the market assigns it for the potential growth. 

Quote

 

All an option does is give the opportunity to purchase stock at a locked in price. Now, typically the value of shares goes up, and people engage in a cashless transaction, where they exercise the OPTION to buy and immediately sell at the higher price and the proceeds are absolutely taxed. We are so used to the growth, it has almost become the expectation; but it is certainly not guaranteed.

 

Did you even read my post? You can buy out-of-the-money call options right now. They have a value. The value is usually pretty nominal, but it exists and is connected to the likelihood that the underlying stock increases in prices. 

Quote

How can you tax an OPTION that isn't guaranteed to grow? It also has no real value until you exercise it, or purchase the shares associated with the option.

Well, it isn't my proposed system. But you could certainly tax it at the value when issued. In the example above, for the $30 dollar stock, that may be $5.15 for the option. For the $20 stock, it may just be taxed at $.15. Presumably, under this system, the potential gain in the option would be tax free. So, you could exercise your in the money option right away, and get the guaranteed income. Or, you could sit on it and bet the stock increases and that you could capture more growth tax free. Again, I think income taxes are stupid anyway. I would prefer a straight wealth tax (but at a lower percentage).  

 

[Dahobbs 17449]

2 minutes ago, slorch said:

They are not treated as income for the employee, nor should they be.  Yes the employer must account for it as an expense, because the option could be exercised at any time after it is vested.

How much is that $25 option worth to me, come January 2022?  $0 until I exercise it.  It is basically profit sharing using the stock market, but you don't collect anything until you exercise it.  What happens if the stock price falls?

Then you should have exercised it. You gambled and lost. Or maybe you just keep holding on to it and hopes the value goes back up. 

I think everyone agrees that in the current system they aren't treated as income. The original poster was proposing to change that. There are advantages and disadvantages to doing that, both from the perspective of the taxing entity and the taxed entity. 

[Guest]

2 minutes ago, Dahobbs said:

Then you should have exercised it. You gambled and lost. Or maybe you just keep holding on to it and hopes the value goes back up. 

I think everyone agrees that in the current system they aren't treated as income. The original poster was proposing to change that. There are advantages and disadvantages to doing that, both from the perspective of the taxing entity and the taxed entity. 

So you prefer that part of my compensation not only has risk, but that I should also have a tax levied on said risk, regardless of outcome?

I could not disagree more.  The current system is relatively 'fair.'  Whatever people are proposing as new solutions related to options aren't because they want to make it better for the individual.

Edited June 14, 2021 by slorch

[Dahobbs 17449]

5 minutes ago, slorch said:

So you prefer that part of my compensation not only has risk, but that I should also have a tax levied on said risk, regardless of outcome?

I could not disagree more.

I prefer? Again, it isn't my proposal. I'm just explaining the potential results of implementing it. 

Under that system, if you don't want the risk, either don't accept the option or exercise it immediately. You do see the potential benefit if the stock price increases, right? You could be issued a deep out of the money option, so you're taxed essentially nothing. If the stock price increases and you exercise, you've now captured a large gain, tax free. 

Edited June 14, 2021 by Dahobbs

[Neonmoon 38127]

Maybe you should ask for compensation that isn’t risk based 

[workswithseed 2037]

Should we talk about sales tax then? That money just going to be hoarded forever?

[Brew 3049]

1 hour ago, Dahobbs said:

 

Neither of those are true. You own the option (at least when it vests). And the option that you own has a value the moment it is granted (rather, the moment it is vested). People buy and sell options (I know the particular type of option you are discussing isn't generally transferable) all the time. Even if you're granted an out of the money option, it still has a nominal value (just like a lottery ticket). Now, a system that taxes it at the time it is received/vested gets interesting because if it is an out of the money option, it might only be worth a dollar when vested, but later become worth a lot more. The increase would apparently be tax free under this system. 

This is where everything gets convoluted and is why the system is a cluster. When I am talking about options, I’m talking about the ones that aren’t typically transferable. They are use it or lose it.

[Brew 3049]

20 minutes ago, Neonmoon said:

Maybe you should ask for compensation that isn’t risk based 

Most startups especially in biotech and tech use options to be able to offer additional benefits they can’t afford and also vest that individual in the potential growth of the startup.

Edited June 14, 2021 by Brew

[Dahobbs 17449]

12 minutes ago, Brew said:

This is where everything gets convoluted and is why the system is a cluster. When I am talking about options, I’m talking about the ones that aren’t typically transferable. They are use it or lose it.

I understand that. It still has a value. Determining the value with those sorts of options is more difficult because there is no market. But the value still exists.  That there is a value should be obvious because if there was no value to the option, no one would accept it as a form of compensation.  

Edited June 14, 2021 by Dahobbs

[Dahobbs 17449]

12 minutes ago, workswithseed said:

Should we talk about sales tax then? That money just going to be hoarded forever?

What are you talking about?

For like 99% of your posts I'm left wondering if half the post got deleted. You need to be explicit about what assumptions or premises you have. We aren't mind readers. 

[Brew 3049]

34 minutes ago, Dahobbs said:

I prefer? Again, it isn't my proposal. I'm just explaining the potential results of implementing it. 

Under that system, if you don't want the risk, either don't accept the option or exercise it immediately. You do see the potential benefit if the stock price increases, right? You could be issued a deep out of the money option, so you're taxed essentially nothing. If the stock price increases and you exercise, you've now captured a large gain, tax free. 

Then just change the system to where income is generated when the option is exercised at the current price not the strike price.

[Neonmoon 38127]

21 minutes ago, Brew said:

Most startups especially in biotech and tech use options to be able to offer additional benefits they can’t afford and also vest that individual in the potential growth of the startup.

I’m aware. But we shouldn’t tailor our tax system around businesses that need to offer things they can’t afford. 

[Dahobbs 17449]

5 minutes ago, Brew said:

Then just change the system to where income is generated when the option is exercised at the current price not the strike price.

I must be misunderstanding you. That would be a worthless option except I guess when you normally couldn't purchase the stock at all. But I'm not sure what problem you're suggesting this solves.  

[Brew 3049]

23 minutes ago, Dahobbs said:

I understand that. It still has a value. Determining the value with those sorts of options is more difficult because there is no market. But the value still exists.  That there is a value should be obvious because if there was no value to the option, no one would accept it as a form of compensation.  

We’re going in circles, but from my side there is only value if exercised. If they are never exercised, it will always be zero. I’ve seen a lot of options not get exercised because the start up never takes off, the value is never there, etc. If the stock price goes up, they always get exercised and tax is paid. Most people exercise them as soon as they are eligible, so again just tax the spread at exercise and be done with it. 

In 20+ years of dealing with people’s taxes, I’ve only seen one instance of an individual just carrying the options. I have a lady I’m working with right now that is getting ready to retire and instead of exercising the options she thought it was better to hold them. Now she’s dealing with several million in options on a company that went public and took off to the tune of a 40x return of her option price, so it definitely happens. However, she’s also about to pay more tax than she probably would have exercising them annually like she should have. I think it’s just a discussion on the vast minority of option holders at this point.

[Brew 3049]

10 minutes ago, Dahobbs said:

I must be misunderstanding you. That would be a worthless option except I guess when you normally couldn't purchase the stock at all. But I'm not sure what problem you're suggesting this solves.  

I’m back on RSU’s and ISO’s not necessarily generic stock options, it’s what I think of when discussing these because it’s typically where the bigger money is.

Edited June 14, 2021 by Brew