Egypt's economics and the US's
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Getting stock as compensation is income. US law just doesn't see it that way. Selling it or cashing it in just turns it into money which can be taxed. I don't agree with stock as compensation because it is a tax evasion technique employed by company executives.
ahmed zahmed wrote:
Your statement belies your ignorance of how stock options work.
I'm not ignorant. I just don't care how it turns into money. It's compensation that is income. I already know about capital gains tax. The starting value was never taxed and taking a difference isn't enough. It's a pittance in comparison to actually taxing the starting price. They got income at the beginning and income again when it went up when the person sells it. I'd call it a sales tax of sorts.
That's called seagull management (or sometimes pigeon management)... Fly in, flap your arms and squawk a lot, crap all over everything and fly out again... by _Damian S_
wolfbinary wrote:
I just don't care how it turns into money.
Perhaps you don't understand as much as you think. A stock option is an agreement between two parties that one may buy something from the other at such and such a price some time in the future. It is never taxed because it has no value, it is simply a contract agreeing to a price. When you sign your name on a credit card, you are also signing a contract to pay for goods to be delivered at a mutually agreed upon time. (Ethical merchants never charge your card until they deliver the goods, so the contract can be for some time in the future just like a stock option.) You are not taxed because you signed it and neither is the person who has agreed to accept your money. If you were, you could be taxed on a stock option that you never exercised. Capital gains has nothing really to do with stock options. It has to do with buying and then selling certain classes of things that appreciate in value.
“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.” ~ H.L. Mencken
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Getting stock as compensation is income. US law just doesn't see it that way. Selling it or cashing it in just turns it into money which can be taxed. I don't agree with stock as compensation because it is a tax evasion technique employed by company executives.
ahmed zahmed wrote:
Your statement belies your ignorance of how stock options work.
I'm not ignorant. I just don't care how it turns into money. It's compensation that is income. I already know about capital gains tax. The starting value was never taxed and taking a difference isn't enough. It's a pittance in comparison to actually taxing the starting price. They got income at the beginning and income again when it went up when the person sells it. I'd call it a sales tax of sorts.
That's called seagull management (or sometimes pigeon management)... Fly in, flap your arms and squawk a lot, crap all over everything and fly out again... by _Damian S_
wolfbinary wrote:
I don't agree with stock as compensation because it is a tax evasion technique employed by company executives.
Bit of a nitpick... The main point of stock options isn't to evade taxes (I'm not saying it doesn't do that... Just saying that's not the primary goal)... Well, the two main points... They are: 1) Motivate the employees by linking their profits to the company's profits. They have a reason to work harder, because if the company makes more money, their stock becomes more valuable. 2) Discourage employees from leaving. I don't know if this is primarily a wall street thing, or if it's universal, but the stock compensation I've seen always has a vesting period of 3-5 years... If you leave the company before it vests, you forfeit it (If they downsize you, it generally vests immediately - It only gets left behind if you choose to resign). And you can't sell it until it's fully vested. It's a nasty trick, that last part... If you're being compensated in stock, then you're basically giving up 3-5 years of pay if you decide to change jobs. Makes me glad I'm just a geek, not a trader, as we little guys generally get paid in 100% cash instead of stock.
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
wolfbinary wrote:
I just don't care how it turns into money.
Perhaps you don't understand as much as you think. A stock option is an agreement between two parties that one may buy something from the other at such and such a price some time in the future. It is never taxed because it has no value, it is simply a contract agreeing to a price. When you sign your name on a credit card, you are also signing a contract to pay for goods to be delivered at a mutually agreed upon time. (Ethical merchants never charge your card until they deliver the goods, so the contract can be for some time in the future just like a stock option.) You are not taxed because you signed it and neither is the person who has agreed to accept your money. If you were, you could be taxed on a stock option that you never exercised. Capital gains has nothing really to do with stock options. It has to do with buying and then selling certain classes of things that appreciate in value.
“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.” ~ H.L. Mencken
I think he's just mixing up "stock" and "stock options", either of which can be given as compensation... One is an actual transaction, the other is just a contract, as you said.
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels) -
I think he's just mixing up "stock" and "stock options", either of which can be given as compensation... One is an actual transaction, the other is just a contract, as you said.
Proud to have finally moved to the A-Ark. Which one are you in?
Author of the Guardians Saga (Sci-Fi/Fantasy novels)Ian Shlasko wrote:
I think he's just mixing up "stock" and "stock options", either of which can be given as compensation... One is an actual transaction, the other is just a contract, as you said.
You're almost assuredly right, but I suspect that he further is confused about receiving stock as compensation, since the law requires that tax be withheld from your paycheck at the time you receive the stock at the same rate that you would if you received the stock's value in cash. In other words, the perceived inequity doesn't exist, never existed, and is unlikely to ever exist in the future.
“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.” ~ H.L. Mencken
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fat_boy wrote:
Tax evasion
I think you mean tax avoidance which isn't illegal the way tax evasion is. It may be true in the UK, but this has been shown to be a myth in the U.S. The percentage of income paid in taxes by the very rich and the rich is higher than that of the middle class.
fat_boy wrote:
unequal burden on the poor
I remember reading that, like the US, almost 50% of the people living in England pay no income tax at all. The burden, I would guess, if there is one, would fall in the middle class. The problem with your VAT is it is a snowball. The same product gets taxed over and over again - leading to Britain having gas prices that are twice what America has.
“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.” ~ H.L. Mencken
Oakman wrote:
The problem with your VAT is it is a snowball. The same product gets taxed over and over again
Not quite. The tax paid by the consumer is (theoretically) the same whether a Sales Tax or VAT is in imposed. Sales Tax 10%: * The manufacturer pays $1.00 for raw materials and adds a gross margin of $0.20. * The retailer pays $1.20 for the product and adds a gross margin of $0.30. * The consumer pays $1.65 for the product ($1.50 + $0.15 tax) * The retailer pays the government $0.15. VAT 10%: * The manufacturer pays $1.10 for the raw materials ($1.00 + $0.10 tax). * The seller of the raw materials pays the government $0.10. * The retailer pays $1.32 for the product ($1.20 + $0.12 tax). * The manufacturer pays the government $0.02 ($0.12 tax collected - $0.10 tax paid). * The consumer pays $1.65 for the product ($1.50 + $0.15 tax). * The retailer pays the government $0.03 ($0.15 tax collected - $0.12 tax paid). * The manufacturer's gross margin remains $0.20 ($1.32 sale - $1.10 cost - $0.02 tax). * The retailer's gross margin remains $0.30 ($1.65 sale - $1.32 cost - $0.03 tax). As you see, VAT is not subjected to VAT at each stage. Full discussion at Wikipedia.[^] The high cost of fuel in the UK is due to Fuel Duty (about half the price at the pump, I understand). However, VAT is then charged on (Fuel + Duty), so in this case, a double whammy indeed.
2011 - Our best hope is that things will be frightening and dangerous rather than desperate and horrific. Jesse's Café Américain
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Oakman wrote:
The problem with your VAT is it is a snowball. The same product gets taxed over and over again
Not quite. The tax paid by the consumer is (theoretically) the same whether a Sales Tax or VAT is in imposed. Sales Tax 10%: * The manufacturer pays $1.00 for raw materials and adds a gross margin of $0.20. * The retailer pays $1.20 for the product and adds a gross margin of $0.30. * The consumer pays $1.65 for the product ($1.50 + $0.15 tax) * The retailer pays the government $0.15. VAT 10%: * The manufacturer pays $1.10 for the raw materials ($1.00 + $0.10 tax). * The seller of the raw materials pays the government $0.10. * The retailer pays $1.32 for the product ($1.20 + $0.12 tax). * The manufacturer pays the government $0.02 ($0.12 tax collected - $0.10 tax paid). * The consumer pays $1.65 for the product ($1.50 + $0.15 tax). * The retailer pays the government $0.03 ($0.15 tax collected - $0.12 tax paid). * The manufacturer's gross margin remains $0.20 ($1.32 sale - $1.10 cost - $0.02 tax). * The retailer's gross margin remains $0.30 ($1.65 sale - $1.32 cost - $0.03 tax). As you see, VAT is not subjected to VAT at each stage. Full discussion at Wikipedia.[^] The high cost of fuel in the UK is due to Fuel Duty (about half the price at the pump, I understand). However, VAT is then charged on (Fuel + Duty), so in this case, a double whammy indeed.
2011 - Our best hope is that things will be frightening and dangerous rather than desperate and horrific. Jesse's Café Américain
OK, that's the theory - which means that the only reason to do it that way is to hide the fact that the taxation is much greater than it seems?
“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.” ~ H.L. Mencken
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Getting stock as compensation is income. US law just doesn't see it that way. Selling it or cashing it in just turns it into money which can be taxed. I don't agree with stock as compensation because it is a tax evasion technique employed by company executives.
ahmed zahmed wrote:
Your statement belies your ignorance of how stock options work.
I'm not ignorant. I just don't care how it turns into money. It's compensation that is income. I already know about capital gains tax. The starting value was never taxed and taking a difference isn't enough. It's a pittance in comparison to actually taxing the starting price. They got income at the beginning and income again when it went up when the person sells it. I'd call it a sales tax of sorts.
That's called seagull management (or sometimes pigeon management)... Fly in, flap your arms and squawk a lot, crap all over everything and fly out again... by _Damian S_
I don't agree that it's income, it's just a promise to let you buy at some future date the stock at a given price, nothing actually changes hands until you buy it. And because you have to buy it, at the stated strike price, why should it be taxed? If you tax it when the stock option is awarded, the the receiver should then get a tax credit when he buys the stock option. Since that would be the case, then why go through the effort. Oftentimes the stock options end up being worthless (the actual stock price goes below the strike price). If you tax it at the strike price when the option is awarded, then you should get a tax credit once the price moves below the strike price.
"If your actions inspire others to dream more, learn more, do more and become more, you are a leader." - John Quincy Adams "Let me get this straight. You know her. She knows you. But she wants to eat him. And everybody's okay with this?"
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ahmed zahmed wrote:
Your statement belies your ignorance of how stock options work.
And yours demonstrates your lack of understanding of the English language. Unless you meant that his statement shows that he is not ignorant of how stock options work.
“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.” ~ H.L. Mencken
lol. you're right. it may have been better to have said, "belies your true understanding"
"If your actions inspire others to dream more, learn more, do more and become more, you are a leader." - John Quincy Adams "Let me get this straight. You know her. She knows you. But she wants to eat him. And everybody's okay with this?"
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OK, that's the theory - which means that the only reason to do it that way is to hide the fact that the taxation is much greater than it seems?
“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.” ~ H.L. Mencken
Oakman wrote:
OK, that's the theory - which means that the only reason to do it that way is to hide the fact that the taxation is much greater than it seems?
In these simple examples the consumer paid $0.15 tax and the government received that $0.15 for both the Sales Tax and the VAT. The difference is the need to perform a VAT calculation and pay the net VAT at each stage (in this case: Supplier $0.10, Manufacturer $0.02, Retailer $0.03). In the real world there are generally more suppliers and manufacturers in the production of a finished good - introducing many more stages at which VAT is calculated and paid, and thus more scope for mistakes. Hence my '(theoretically)' - GIGO is always with us. (Or did I misunderstand your point? If so, my apologies.)
2011 - Our best hope is that things will be frightening and dangerous rather than desperate and horrific. Jesse's Café Américain
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Oakman wrote:
OK, that's the theory - which means that the only reason to do it that way is to hide the fact that the taxation is much greater than it seems?
In these simple examples the consumer paid $0.15 tax and the government received that $0.15 for both the Sales Tax and the VAT. The difference is the need to perform a VAT calculation and pay the net VAT at each stage (in this case: Supplier $0.10, Manufacturer $0.02, Retailer $0.03). In the real world there are generally more suppliers and manufacturers in the production of a finished good - introducing many more stages at which VAT is calculated and paid, and thus more scope for mistakes. Hence my '(theoretically)' - GIGO is always with us. (Or did I misunderstand your point? If so, my apologies.)
2011 - Our best hope is that things will be frightening and dangerous rather than desperate and horrific. Jesse's Café Américain
You may have misunderstood mine which was that a VAT hides most of it takings from the consumer by having it rolled over into the cost. So that the final transaction simply shows a higher price from the item which hides the manufacturer's .02 and the Supplier's 0.10 and detailing only the retailer's .03 But your point is a good one.
“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.” ~ H.L. Mencken
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You may have misunderstood mine which was that a VAT hides most of it takings from the consumer by having it rolled over into the cost. So that the final transaction simply shows a higher price from the item which hides the manufacturer's .02 and the Supplier's 0.10 and detailing only the retailer's .03 But your point is a good one.
“The whole aim of practical politics is to keep the populace alarmed (and hence clamorous to be led to safety) by menacing it with an endless series of hobgoblins, all of them imaginary.” ~ H.L. Mencken
Oakman wrote:
the final transaction simply shows a higher price from the item which hides the manufacturer's .02 and the Supplier's 0.10 and detailing only the retailer's .03
I see where you are coming from. No, the retailer's VAT Receipt or Invoice would show the VAT as 10%, because that is what has been collected on behalf of the government: $1.50 goods + $0.15 VAT = $1.65. ** The retailer then pays the government the $0.15 collected from the customer, and reclaims from the government the $0.12 paid to the manufacturer, a net payment of $0.03. ** Having said that, there is no requirement for a retailer's till receipt show an analysis of the cost of goods and the VAT charged - although many do. However, if a customer wished to reclaim VAT, the retailer would have to provide a detailed VAT Receipt or Invoice.
2011 - Our best hope is that things will be frightening and dangerous rather than desperate and horrific. Jesse's Café Américain