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Don’t Tax Options and RSUs Upon Vesting

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Re: Don’t Tax Options and RSUs Upon Vesting

#91

Post by trothamel »

t_fatus wrote: post #51
trothamel wrote: post #41

Isn'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…

Options and RSUs gain value the day you pay for the underlying stocks, not the day you're allowed to buy a stock which could later in time become worthless. don't forget they're aimed at employees so they can share the value created by the company they work within, and that these employees will pay taxes in time when they extract any value from their companies

Don't they gain value at both times? I mean, stock options are something people pay for.

Re: Don’t Tax Options and RSUs Upon Vesting

#92

Post by ddlatham »

ransom1538 wrote: post #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…

I doubt that it's that simple. For tax rules, it's likely more about the notion of when the employee has the effective right to it. If the employee has the right to it, via being able to write a letter requesting it, then it's already vested from the perspective of the IRS, regardless of what word games you play.

Re: Don’t Tax Options and RSUs Upon Vesting

#93

Post by JonFish85 »

bnjmn wrote: post #76

Here's the statement I plan to read to my representatives: I live in Greenpoint, Brooklyn. I work for a small startup of less than 30 employees. Three years ago I left a large, publicly traded tech company to take this job, because of the potential I saw in the work the startup was doing. I took a significant pay cut when I joined the startup, a decision that was justifiable only because of the distant future value o…

It may be an interesting exercise to think of how this can be turned "against" you. If you wanted to play armchair politics, you could spin this:

- Highly paid engineer walked away from a 6 figure salary

- Takes a job at a small company where he gets equity that could potentially be worth millions.

- Complains that he may have to pay taxes on a significant portion of his compensation.

Put those together, and you have someone probably still making more than double the national median wage complaining that his favorite tax loophole is being closed. Meanwhile the local plumber / school teacher / single mom is struggling to make ends meet; why shouldn't you pay your fair share so that they can get a tax break?

FWIW, this is just an exercise, I'm not saying this is true. Just something to keep in mind though, that many (most?) of the people on HN are being paid significantly higher than most Americans, and complaining that their stock is being taxed differently isn't going to garner much support.

Re: Don’t Tax Options and RSUs Upon Vesting

#94

Post by panic »

saas_co_de wrote: post #27
ajmurmann wrote: post #13

Earlier quoted context omitted.

I can't overstate how sad it would be if the goal of this change was plainly to stick to to Democrat states. It there is truly do much disdain that didn't boat well for the future as a united country.

The entire tax bill seems to be sticking it to Democrat states, in particular New York and California, but it is really about urban vs. rural politics. Democrats have become too concentrated as a party in urban areas and so rural voters have gotten enough political power to attempt to address what they view as economic inequities in the current urban/rural income distribution. Republican have also flipped the script…

This narrative isn't consistent with what the actual tax bill does, which is a massive redistribution of wealth to the very richest Americans. For example, what part of repealing the estate tax for inheritances above $5.5 million will help this urban middle class?

Re: Don’t Tax Options and RSUs Upon Vesting

#95

Post by kolbe »

Serious question here. My impression is that Silicon Valley leans heavily liberal, and as such most people there believe in a progressive tax structure and generally lean towards wanting the government to receive more revenue than conservatives. If my impression is wrong, then please correct me.

With this in-mind, why is there such outrage about taxing option and RSU income? It's still income. And the current situation could not be described as anything but a tax break for the "wealthy," at least insofar as Obama liked to define people as wealthy. It's an asset that you receive in connection with your labor. It's income. And you don't have to pay income tax on it (iirc, it's mostly cap gains when exercised). And it's mostly given to people who already make $150k+ a year anyway.

I cannot reconcile this outrage over still having a tax dodge (but not as good of one) with the political leanings of SV.

Re: Don’t Tax Options and RSUs Upon Vesting

#96

Post by hatred »

ransom1538 wrote: post #75
seattle_spring wrote: post #72

Earlier quoted context omitted.

Why would someone from a large publicly traded company panic? Shares already are taxed upon vest there.

Yep. That isn't about publicly traded companies. The only people that would panic is if you are in a startup that cannot exercise.

Yeah, mostly applies to pre-IPO companies offering stock options/RSU's.

Re: Don’t Tax Options and RSUs Upon Vesting

#97

Post by mercutio2 »

saas_co_de wrote: post #27
ajmurmann wrote: post #13

Earlier quoted context omitted.

I can't overstate how sad it would be if the goal of this change was plainly to stick to to Democrat states. It there is truly do much disdain that didn't boat well for the future as a united country.

The entire tax bill seems to be sticking it to Democrat states, in particular New York and California, but it is really about urban vs. rural politics. Democrats have become too concentrated as a party in urban areas and so rural voters have gotten enough political power to attempt to address what they view as economic inequities in the current urban/rural income distribution. Republican have also flipped the script…

Pro-redistribution people like me would be thrilled if we were removing distortionary tax expenditures from rich people to benefit the poor or even middle class.

What’s proposed is punishing the urban rich to benefit the megarich, with a tax increase after less than 10 years for the median household.

Which is very clever if your poor base is willing to go along with it, which appears is the case.

Who cares if all semblance of shared institutions dies in the process, the megarich get their tax cut!

Re: Don’t Tax Options and RSUs Upon Vesting

#98

Post by ransom1538 »

ddlatham wrote: post #92
ransom1538 wrote: post #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…

I doubt that it's that simple. For tax rules, it's likely more about the notion of when the employee has the effective right to it. If the employee has the right to it, via being able to write a letter requesting it, then it's already vested from the perspective of the IRS, regardless of what word games you play.

[deleted]

Re: Don’t Tax Options and RSUs Upon Vesting

#99

Post by jeffdavis »

The problem is taxing illiquid gains. If they are liquid, vesting time is the logical time to tax them.

Conversely, taxing at exercise time doesn't really make sense for illiquid gains and more than vesting time does. People have problems with this now.

The real challenge would be to fix this without creating an incentive to keep gains illiquid when they could be liquid.

Re: Don’t Tax Options and RSUs Upon Vesting

#100

Post by kolbe »

austenallred wrote: post #46
trothamel wrote: post #41

Isn'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…

The value associated with them is illiquid. I can’t necessarily sell my stock options for what they’re “worth,” so taxing them at that level makes them pretty much worthless. It’s already taxed when I sell them - when I get dollars that I can spend. Taxing before then is (I hope) an oversight.

Would you be cool if you got taxed on the income tax scale upon selling them?
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