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Facebook’s 99%: Later employees may pay almost double the tax rate

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Re: Facebook’s 99%: Later employees may pay almost double the tax rate

#21

Post by ef4 »

diogenescynic wrote: post #15
jdludlow wrote: post #5

Can we please knock off the nonsense of this "Buffett secretary" talking point? Debbie Bosanke is estimated to make north of $200k per year, while Buffet is paying capital gains rates. Of course her rate is higher.

"Labor is prior to, and independent of, capital. Capital is only the fruit of labor, and could never have existed if labor had not first existed. Labor is the superior of capital, and deserves much the higher consideration." - Abe Lincoln

Lincoln was just pandering.

If you want to see what labor looks like without access to capital, check out rural Africa.

In reality labor and capital are completely symbiotic. At least until the robots take over.

Re: Facebook’s 99%: Later employees may pay almost double the tax rate

#22

Post by shalmanese »

ck2 wrote: post #3

Meet Facebook's 1% http://news.ycombinator.com/item?id=3561273 Shows you how out of the loop I am about Facebook, I didn't even know who this was Dustin Moskovitz has a 5% stake in Facebook, which for an $85 billion company would equate to $4.25 billion. That's around $157 million for every year of his life. (if I understand it right, he only will pay 15% tax on that - and Forbes says he has 7.6% stake, not 5%)

In the movie, he was the guy trying to figure out if that chick was single or not, giving Zuckerberg the inspiration to add relationship status to Facebook.

Re: Facebook’s 99%: Later employees may pay almost double the tax rate

#23

Post by RyanGWU82 »

jpdoctor wrote: post #18

They almost certainly don't understand the story: It's more likely worse than they are mentioning. Most reporters have never heard of the 83B election. tl;dr = Zuck already paid the tax on his options for exercise, at par (0.001 $/share is typical.) The tax system is truly brain-damaged.

Isn't that the whole point of the story? Zuck paid income tax on the initial grant's value (which may be par value), and the stock's appreciation will only be taxed at the reduced capital gains rate?

Re: Facebook’s 99%: Later employees may pay almost double the tax rate

#24

Post by simplefish »

jshen wrote: post #17
revelation wrote: post #14

Earlier quoted context omitted.

I know you just want to make the case for a more differentiated view here, but what you are in fact doing is defending a higher tax rate on work than for capital gains through mere ownership.

Precisely. I inherited tens of millions, then invested it, should I pay a lower rate than a person that works for a living?

I have no idea if you should, but in the US, you probably will. Depending on what year you inherited the money, you'll have paid up to 55%.

Re: Facebook’s 99%: Later employees may pay almost double the tax rate

#25

Post by analyst74 »

jshen wrote: post #17
revelation wrote: post #14

Earlier quoted context omitted.

I know you just want to make the case for a more differentiated view here, but what you are in fact doing is defending a higher tax rate on work than for capital gains through mere ownership.

Precisely. I inherited tens of millions, then invested it, should I pay a lower rate than a person that works for a living?

In that case, the more "fair" solution is high inheritance tax (maybe it's already in place?).

Discouraging long-term investment through high capital gain is not a good solution.

Re: Facebook’s 99%: Later employees may pay almost double the tax rate

#26

Post by jpdoctor »

RyanGWU82 wrote: post #23
jpdoctor wrote: post #18

They almost certainly don't understand the story: It's more likely worse than they are mentioning. Most reporters have never heard of the 83B election. tl;dr = Zuck already paid the tax on his options for exercise, at par (0.001 $/share is typical.) The tax system is truly brain-damaged.

Isn't that the whole point of the story? Zuck paid income tax on the initial grant's value (which may be par value), and the stock's appreciation will only be taxed at the reduced capital gains rate?

> Isn't that the whole point of the story?

No, it is not. This sentence in bold tells you they do not understand: "Zuckerberg will be paying taxes on $5 billion in gains from exercising options." If you don't understand why that is different than my comment, then you don't understand the issues of the 83B election also.

Now, odds are you a smart person. And that is my point: It doesn't matter how smart you are; The vagaries of the tax law are so numerous and extreme and obscure that you can only come to the conclusion: The tax system is truly brain-damaged.

Re: Facebook’s 99%: Later employees may pay almost double the tax rate

#27

Post by simplefish »

jdludlow wrote: post #5

Can we please knock off the nonsense of this "Buffett secretary" talking point? Debbie Bosanke is estimated to make north of $200k per year, while Buffet is paying capital gains rates. Of course her rate is higher.

There's actually some serious questions about that. In interviews, Bosanke has claimed to be paying a 35.8% tax rate. She's been a little coy about her income, but in one interview she claimed to only make $60,000 a year.

Anyone with even a passing familiarity with the US tax code will quickly understand that this is not possible. Seriously. So we know that at least some of what she's claimed in wrong. And since Bosanke won't release her tax returns, that's really as far as we can go.

In short, the "Buffet secretary" talking point really has no evidentiary value for either side. We simply have no idea what she makes or what she pays; all we know is what she's publically claimed is wrong.

Re: Facebook’s 99%: Later employees may pay almost double the tax rate

#28

Post by lurker17 »

Is the article's bogeyman description of RSUs accurate at all? My understanding was that an RSU was equivalent an option priced at $0. The issue is the exercise date, not option-vs-RSU. Lots of public companies (Amazon, Google, etc give at RSUs). the issue, as jpdoctor mentions in this thread, is that you pay income tax on the value of stock (minus option price, if any) on the day you exercise, which is some time between vest date and sell date (option/stock-holder's choice).

RSUs are only expensive if they vest when the stock is expensive, exactly the same as with options.

In either case, the earlier they vest, the lower taxes are (due to capital gains tax rates)

The only way I can imagine the article making sense is if Facebook gave employees delayed vesting schedules beyond the usual 25%/yr, and so stock grants vested later (at higher market price) than they would otherwise.

Yes?

Re: Facebook’s 99%: Later employees may pay almost double the tax rate

#29

Post by aaronblohowiak »

walkon wrote: post #13
justincormack wrote: post #9

Earlier quoted context omitted.

Capital gains are not really double taxation. Sure he paid tax, but then he earned more. Many countries charge income and capital gains at exactly the same rate, eg the UK does now.

How are they not being taxed twice? A company (which has owners) pays income tax on their profits, so the company and therefore, owners, have less capital remaining. Then, if the owners want to cash out anything from the post-income-taxed margin, they'll have to pay capital gains as well.

That sounds like dividend taxes, not capital gains.

Re: Facebook’s 99%: Later employees may pay almost double the tax rate

#30

Post by MartinCron »

jdludlow wrote: post #8
jshen wrote: post #6

Earlier quoted context omitted.

"Of course her rate is higher." I think the vast majority of people would expect a billionaire to pay a higher tax rate than an upper middle class person. I wouldn't call that nonsense.

I'm sure that you're right, but then the vast majority of people are easily swayed by cheap political rhetoric. If they're playing by the same rules, which it appears that they are, then what's the problem? It's not like he hasn't already paid income tax on that money the first time he earned it, and his absolute tax bill is vastly larger than hers is. If not being jealous and covetous of those who make more than I d…

If they're playing by the same rules, which it appears that they are...

Of course they are playing by the same rules. Rich and poor alike get preferential tax rates on capital gains income the same way that rich and poor alike get tax breaks on private jet ownership depreciation. Anything else would be class warfare.

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