Here is a more detailed analysis of these parts of the proposed tax bill: http://bakerxchange.com/rv/ff0034eed7a7d447f644f491d94caddcb...
Don’t Tax Options and RSUs Upon Vesting
61–70 of 388 posts
Re: Don’t Tax Options and RSUs Upon Vesting
#62Earlier quoted context omitted.
That’s the point of options though - most of the time that “cash” doesn’t exist to be paid out in bonuses. Options are a bet that it will exist in the future. Why do startups pay lower salaries than Facebook? Because Facebook throws around $200-300k salaries and doesn’t care. Startups can’t do that, so it promises a piece of the pie if the company becomes big and successful instead.
At this point, unless you're C-suite, most startups are a really bad bet compared to the BigCos paying out anywhere from $250K-$1M annually depending on your skill set and experience. What's happening now IMO is that the hot talent has figured this out and they have accepted positions at Tesla, Salesforce, Google, Facebook, Apple, or Amazon. That said, I know someone who walked away from a $10M package over 4 years t…
The other problem is cryptocurrencies have created a ton of new companies that are paying big for talent. I actually think this is a good thing. Too many people were working on dumb startups back then. I want more engineers at Tesla.
Re: Don’t Tax Options and RSUs Upon Vesting
#63> That should be a clear enough example to the lawmakers that vesting should not be a taxable event. Vesting has the unique property that before it occurs the shares are not yours and after it occurs, they clearly are (and can't be clawed back). If you don't tax vesting, are you going to instead wait until the shares are sold to tax them? That would be very easy to abuse. > If this provision becomes law, startup and…
> I really doubt that. The talent pool, networks, and legal infrastructure in the USA are second to none. That's not going to suddenly shift because of minute changes to tax law. Working for a startup is already immensely risky. If there was a practically guaranteed bankruptcy risk as a result of appreciating stock options, no sane employee would work for a startup anymore-- they would all go work for the big compani…
Or startups could pay, you know, salary + bonus like the rest of the world?
Re: Don’t Tax Options and RSUs Upon Vesting
#64I think the way we do options in startups needs a more fundamental rethink. I wouldn't be too sad if the current system falls on its face. I like Buffett's proposal from a few years ago. They don't grant stock, they simply pay cash (bonuses) and if employees want to buy in, it's their money, after all. What's really needed is a way some group of insiders in a company can transfer shares among themselves or outsiders.…
The main problem i see with the equity system is that its absolutely intransparent in terms of cap tables and preferred shares.
To the very least, if companies were forced to give out cap tables, or at least, a calculator that gives you your payout based on the company sell out cases, you would be able to measure it.
Right now, the calculation is complicated and obsfucated for employees. Lets say you have 1% of stock and the company sells at 100m. You are most likely not going to get 1m because of preferred shares. Preferred shares are truly a cancer on the system.
Re: Don’t Tax Options and RSUs Upon Vesting
#65Isn't this a change that makes the tax code fairer? It seems like options and RSUs have value associated with them. At the very least, the person who is receiving them considers them to have value. Stock options are traded on markets, and priced some how. Part of the new tax plan seems to be trying to lower the tax brackets, in exchange for preventing people from avoiding taxes. That's why it seems to be doing things…
> and the free food some companies supply their employees. This is a long standing question. Are costs of benefits like these one not taxed in the US? The implications of not taxing that is huge.
Free food is taxed unless it meets certain qualifications, the biggest one being that it is for the convenience of the employer.
Re: Don’t Tax Options and RSUs Upon Vesting
#66So we need to split this issue between companies that are public (or otherwise have liquid equity) and those that don't. For the big companies it's pretty easy. They're largely RSU based. Shares are vested/released. Many companies allow full autosale. Easy. Even in the case of selling enough shares to cover withholding your still left with something very liquid. Options in public companies are in basically the same b…
> I do think it's a reasonable complaint to get taxed on something you can't liquidate. One way to sidestep this would be to force the taxing authority to take some of the options as payment, rather than cash. You've been granted 100 options at a value of $x each and the tax rate is 20%? Just give them 20 options. That way it doesn't matter what x is or whether the market is liquid!
Smart!
Re: Don’t Tax Options and RSUs Upon Vesting
#67The importance of this change can’t be understated; this effectively kills compensation at startups in the form of equity, and would make startups completely unable to compete with incumbents. Anyone that has options at a company that grows quickly would be paying tens or hundreds of thousands in taxes to keep their equity, which is still effectively a very risky bet that a company will end up huge. No one would want…
I think the way to look at this is as yet another attempt by dying but deep-pocketed industries to buy themselves a few more years of oxygen whilst their executives either retire and GTFO or they desperately pivot to the scary new age of Tech and AI that is already upon us. IMO it's not partisan, it's just business. further, this already happened once with AMT and Dotcom 1.0, leaving a bunch of rank and files with hu…
no new money millionaires disrupting the status quo, please.
Re: Don’t Tax Options and RSUs Upon Vesting
#68The importance of this change can’t be understated; this effectively kills compensation at startups in the form of equity, and would make startups completely unable to compete with incumbents. Anyone that has options at a company that grows quickly would be paying tens or hundreds of thousands in taxes to keep their equity, which is still effectively a very risky bet that a company will end up huge. No one would want…
I think the way to look at this is as yet another attempt by dying but deep-pocketed industries to buy themselves a few more years of oxygen whilst their executives either retire and GTFO or they desperately pivot to the scary new age of Tech and AI that is already upon us. IMO it's not partisan, it's just business. further, this already happened once with AMT and Dotcom 1.0, leaving a bunch of rank and files with hu…
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Re: Don’t Tax Options and RSUs Upon Vesting
#69"The current draft of the Senate Tax Reform Bill would tax stock options and RSUs upon vesting."
Ok. I wouldn't panic here. Calm down.
How shares are vested is up to the board. So, if this were to pass I would just walk into the CEO's office with a few employees and ask to change how shares vest to: "Upon the vesting schedule AND a written letter from the employee requesting vesting. If the letter isn't submitted the shares are not vested." So, if I don't send a letter to the board the shares do not vest. If I want to vest 12 months and leave, I would just submit the letter. Problem solved. How shares are vested is totally made up. You could have them vest when you wear a purple shirt on tuesdays.
Re: Don’t Tax Options and RSUs Upon Vesting
#70The importance of this change can’t be understated; this effectively kills compensation at startups in the form of equity, and would make startups completely unable to compete with incumbents. Anyone that has options at a company that grows quickly would be paying tens or hundreds of thousands in taxes to keep their equity, which is still effectively a very risky bet that a company will end up huge. No one would want…
Can I give back my options if this bill passes? I'm literally sick now reading this. What I thought was a great part of my compensation package is literally going to bankrupt my family.