House Passes Employee Stock Options Bill Aimed at Startups • Hacker News Board

Re: House Passes Employee Stock Options Bill Aimed at Startups

#71

Post by tomjen3 » Fri, Sep 23, 2016, 2:57 PM UTC

brianwawok wrote: post #47

MichaelBurge wrote: post #41

Earlier quoted context omitted.

> The AMT is the perfect example of when you give someone an inch they take a mile, which is why some people fight so hard against the enactment of new taxes. When the politicians were first proposing the constitutional amendment that allowed income taxes, they were throwing numbers like 1% or 2% around. It took only 4 years from the ratification of the 16th amendment for the maximum tax rate to shoot up from 7% to 6…

So you cap income tax at 2%. Congratulations you just tripled property tax and made sales tax 20%. Taxes are like wackamole. You can't just limit 1 tiny piece and expect anything to change. Furthermore you can't just lower the total take unless you want to explain where the cut is coming from. Less school funding? Less roads? Less police? Less Army? More debt?

It would be better if the income tax was zero and we had a higher tax on consumption (allow a base deduction for poor people if you want) since what you tax you get less of, and we don't want less investment in human capital or physical capital, but less consumption is okay (though obviously still undesirable).

As for the rest, just cut all subsidies to companies and farms, as a start. Then cut the military down to what is needed to defend the US, not to waste money running an empire.

Re: House Passes Employee Stock Options Bill Aimed at Startups

#72

Post by harryh » Fri, Sep 23, 2016, 2:58 PM UTC

MichaelBurge wrote: post #62

brianwawok wrote: post #47

Earlier quoted context omitted.

So you cap income tax at 2%. Congratulations you just tripled property tax and made sales tax 20%. Taxes are like wackamole. You can't just limit 1 tiny piece and expect anything to change. Furthermore you can't just lower the total take unless you want to explain where the cut is coming from. Less school funding? Less roads? Less police? Less Army? More debt?

My understanding is that the federal government cannot impose a property tax, without just distributing it to the states by population. My reading of the commerce clause is that they couldn't impose a sales tax on in-state commerce. So it's not like these went away after they gained the power to assess an income tax: they were never an option. As a general rule, you could remove any government agency created with the…

As a general rule, you could remove any government agency created with the increase in wartime tax revenue after the war is over. That should get you back to the pre-war tax rate.

Pre war federal spending was ~10% of GDP. Currently we're at about 25%. So you want to cut federal spending by about 60%.

Medicare is about 15% of the fed budget. Social Security is about 25%. That's the 40% you get to keep right there. You think we should cut literally everything else?

Your assessment about what it would take to achieve the cuts you propose is not based in reality.

Re: House Passes Employee Stock Options Bill Aimed at Startups

#73

Post by dwaltrip » Fri, Sep 23, 2016, 2:59 PM UTC

stustein wrote: post #69

jnordwick wrote: post #10

Most employees get hit by the AMT and the step up in basis when exercising their incentive employee stock options, and from just skimming the bill, I don't see how that is prevented.

If the income is deferred, I would imagine that it wouldn't apply to AMT calculations. It'd be nice for that language to be explicit though. Regardless, the Obama Administration "strongly opposes" the bill in its current form since it would "increase the Federal deficit by $1 billion over the next 10 years." https://www.whitehouse.gov/sites/default/files/omb/legislati... I wonder how often bills with this "strong opp…

The federal budget was $3.8 trillion (with a "t") last year, and the deficit was $438 billion. Increasing the annual deficit by $100 million[1], or 0.02%, seems like a non-issue.

[1] $1 billion over 10 years is $100 million per year.

Re: House Passes Employee Stock Options Bill Aimed at Startups

#74

Post by ng12 » Fri, Sep 23, 2016, 2:59 PM UTC

bofia wrote: post #70

asah wrote: post #9

Can someone explain: if you exercise and hold the shares (eg leave the company) do you owe tax after year seven, even if the shares remain illiquid? That's the core issue: the IRS is taxing individuals on truly illiquid assets.

The liquidity of startup shares has gotten better in recent times. I'm an engineer at http://www.equityzen.com , a marketplace for pre-IPO shares, and I believe more shareholders are starting to see that selling before an exit is a viable option for faster liquidity. We helped lobby and push for this bill and I'm glad to see it making progress in providing better options for startup employees.

The second market is a bandaid. In addition to sub-par prices there's a huge bottleneck in the demand for shares, which is extremely volatile. And if cofounder X decides to offload 10% of his shares it'll wipe out any demand there is.

Equity is awful for a lot of reasons, but I'll never be convinced second-market selling is the panacea.

Re: House Passes Employee Stock Options Bill Aimed at Startups

#75

Post by tomjen3 » Fri, Sep 23, 2016, 3:01 PM UTC

losvedir wrote: post #53

revo13 wrote: post #46

More evidence as to why the income tax should be replaced with a consumption tax. Just let people make their dammed money already and apply a simple tax when they spend it. Windfalls wouldn't be "dangerous" or punitive in that model, and savers would be rewarded. --Of course I oversimplify the consumption tax, and safeguard would need to be in place on that to ensure it is not regressive with respect to necessities..…

Totally agree! A consumption tax with a tax prebate (aka basic income guarantee) makes it progressive. To head off the argument that it's regressive because wealthier people spend a smaller fraction of their income: true for a snapshot in time, but not over the course of their lives. Spending a fraction of your income = saving = spending later. So in retirement they could have an effective >100% income tax rate. Also…

It doesn't have to be BI, simply have a card that you can charge ST (and only ST) to, up to some amount, the same way SNAP works.

Re: House Passes Employee Stock Options Bill Aimed at Startups

#76

Post by Cyclone_ » Fri, Sep 23, 2016, 3:08 PM UTC

matt_wulfeck wrote: post #57

> Only startups offering stock options to at least 80 percent of their workforce would be eligible for tax deferrals, and a company’s highest-paid executives would not be able to defer taxes on their stock under the legislation. I understand the desire to avoid a regressive taxation system, but why is it that every tax rule we create comes with 2x the amount of caveats and rules? Our tax system is becoming a mess. At…

It's good to incentivize companies to look after their employees. This rule doesn't seem to complicate the system very much.

Re: House Passes Employee Stock Options Bill Aimed at Startups

#77

Post by MichaelBurge » Fri, Sep 23, 2016, 3:11 PM UTC

harryh wrote: post #72

MichaelBurge wrote: post #62

Earlier quoted context omitted.

My understanding is that the federal government cannot impose a property tax, without just distributing it to the states by population. My reading of the commerce clause is that they couldn't impose a sales tax on in-state commerce. So it's not like these went away after they gained the power to assess an income tax: they were never an option. As a general rule, you could remove any government agency created with the…

As a general rule, you could remove any government agency created with the increase in wartime tax revenue after the war is over. That should get you back to the pre-war tax rate. Pre war federal spending was ~10% of GDP. Currently we're at about 25%. So you want to cut federal spending by about 60%. Medicare is about 15% of the fed budget. Social Security is about 25%. That's the 40% you get to keep right there. You…

I would cut Medicare and Social Security entirely.

Re: House Passes Employee Stock Options Bill Aimed at Startups

#78

Post by hx87 » Fri, Sep 23, 2016, 3:19 PM UTC

matt_wulfeck wrote: post #57

> Only startups offering stock options to at least 80 percent of their workforce would be eligible for tax deferrals, and a company’s highest-paid executives would not be able to defer taxes on their stock under the legislation. I understand the desire to avoid a regressive taxation system, but why is it that every tax rule we create comes with 2x the amount of caveats and rules? Our tax system is becoming a mess. At…

A complicated tax system is perfectly fine if its control logic is algorithmic and its parameters are easily found by the taxpayer. That's already somewhat true, since tax law is written by lawyers and accounts, who make excellent programmers if given appropriate training. Unfortunately, for me at least, legal English is 1000x harder to parse and understand than any nonesoteric programming language.

Re: House Passes Employee Stock Options Bill Aimed at Startups

#79

Post by pc86 » Fri, Sep 23, 2016, 3:22 PM UTC

shados wrote: post #65

matt_wulfeck wrote: post #57

> Only startups offering stock options to at least 80 percent of their workforce would be eligible for tax deferrals, and a company’s highest-paid executives would not be able to defer taxes on their stock under the legislation. I understand the desire to avoid a regressive taxation system, but why is it that every tax rule we create comes with 2x the amount of caveats and rules? Our tax system is becoming a mess. At…

the US is in a weird position where the federal government actually has very little power. But it has tax power. So they just use taxes as a way to manipulate things in the way they want. But as far as I understand, the US tax system is also one of the 2-3 most complicated in the world... Being an permanent resident and not being used to this from my home country, Im making a lot of suboptimal financial decisions pur…

The cost of a CPA is many orders of magnitude less than whatever "suboptimal financial decisions" you are making. Not consulting to make your taxes easier is borderline idiotic at standard 1099 developer rates. Two or three hours in a year pays for the CPA and all the overhead.

Re: House Passes Employee Stock Options Bill Aimed at Startups

#80

Post by LastZactionHero » Fri, Sep 23, 2016, 3:23 PM UTC

shados wrote: post #65

matt_wulfeck wrote: post #57

> Only startups offering stock options to at least 80 percent of their workforce would be eligible for tax deferrals, and a company’s highest-paid executives would not be able to defer taxes on their stock under the legislation. I understand the desire to avoid a regressive taxation system, but why is it that every tax rule we create comes with 2x the amount of caveats and rules? Our tax system is becoming a mess. At…

the US is in a weird position where the federal government actually has very little power. But it has tax power. So they just use taxes as a way to manipulate things in the way they want. But as far as I understand, the US tax system is also one of the 2-3 most complicated in the world... Being an permanent resident and not being used to this from my home country, Im making a lot of suboptimal financial decisions pur…

You could find an accountant to do your taxes. It would probably cost much less than you'd make consulting, and sometimes they can find ways to save you more money than you paid.