7 ms·

> 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 wo

> 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 this rate soon nobody will be able to file their own taxes without an accountant to sort through the muck. And complicated to systems tend to benefit the wealthy.

Cyclone_ 10y ago
It's good to incentivize companies to look after their employees. This rule doesn't seem to complicate the system very much.
jlarocco 10y ago
The tax system has always been a mess and there are exceptions and loopholes for everything. I don't disagree that it's bad, but I don't know why you'd expect it to change all of the sudden with these rules. And those two specific exceptions don't seem particularly bad, IMO.
shados 10y ago
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 purely to avoid complicating my taxes... eg: I avoid consulting like plague, even when I have a worthwhile opportunity to do so.
- pc86 10y ago
  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.
- LastZactionHero 10y ago
  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.
  - nojvek 10y ago
    That's right. I always use an accountant who is a family friend. She charges about $200-$300 but manages to usually get back multiple magnitudes of that back. Plus she's always there to answer any questions about what options I have and what should be my best strategy.
- TDL 10y ago
  I wouldn't avoid opportunities because of the complexity of the tax system. Ask around for good accountants, they won't be as expensive as you think. Consider paying an accountant as a necessary cost of doing business.
- cloudjacker 10y ago
  Odd because the complications create the opportunities I pursue certain characterizations of income Ie. If I know my employer withheld too much social security tax then I'll consult because no money is withheld and not worry about paying taxes on it because it will balance out Or I'll pursue a compensation structure that can be characterized as capital gains instead of self employment income And more
- jasonjei 10y ago
  I actually don't believe the federal government has very little power. The Supremacy Calause, the Civil War, erosions of the 10th amendment (the US code is intense!), having a court called the "Supreme" court, regulating interstate commerce, adjudicating disputes between states, raising an army, and of course taxing citizens in any state should provide ample support to the federal government's power. And yes, they also control individual states by proxy using fund distributions as a carrot (road standards, national speed limit). They control immigration into the US; no individual state has the power to invite a foreign citizen into a US state.
pm24601 10y ago
This is to stop people from gaming the system. For example: a company founder started offering stock options but only to their children. This would allow a parent to pass their company to their children avoiding estate taxes.
hx87 10y ago
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.
- maratd 10y ago
  > A complicated tax system is perfectly fine if its control logic is algorithmic and its parameters are easily found by the taxpayer. Expecting a normal human being to navigate anything complex in unreasonable. Complex is a relative term. By definition, if something is complex, it is difficult for an average person to navigate. I know where you're going with this, if something is consistently coherent we can use computers to manage the task and to some extent, things like Turbo Tax help. But ... there's no reason we can't have a simple tax system. None at all.
  - bjt 10y ago
    > But ... there's no reason we can't have a simple tax system. None at all. Most quirks and exceptions in our current system have their own constituencies who are willing to send lobbyists to defend the status quo. Those constituencies represent the thousands of reasons why we can't have a simple system. There is no comparably powerful constituency for making taxes simpler. Most people just don't care that much.
    - utternerd 10y ago
      And thus, death by a thousand cuts. If an entity is getting 20k in tax breaks or "handouts" it's in their best interest to defend that. To the taxpayer however, the $1.78 you're paying (or whatever the minuscule number is) to cover that annually is nothing to you, and certainly not worth your time to fight against.
__jal 10y ago
> At this rate soon nobody will be able to file their own taxes without an accountant to sort through the muck. And complicated to systems tend to benefit the wealthy. It also heavily benefits Quicken. Along with HR Block, they heavily lobby against any effort that simplifies the tax code. Capitalism, American-style.
- tyleraldrich 10y ago
  Intuit is a pretty funny company. They try to make TurboTax as simple as possible for the average American (most Americans can fill out a 1040EZ and be done in minutes), but at the same time try to make taxes as complicated as possible so that they can sell services around that. It's both smart and infuriating .
  - arrosenberg 10y ago
    Intuit's position isn't necessarily pro-complexity, they'd actually prefer the tax code simplified somewhat, because they'd need far fewer employees to update the tax code information in the software every year. The lobbying is to keep the IRS from A) releasing free 1040EZ/A software and B) keep the IRS from simplifying even further and just sending you a bill, like HMRC does.
    - nostrademons 10y ago
      It's somewhat infuriating that the IRS doesn't just send you a bill. It has full data on every form you put into TurboTax. It runs its own calculations independently and checks them against your return. It has full knowledge of the tax code. If you disagree with it, the IRS just tacks on penalties & interest and eventually garnishes your wages. Why not just send a bill?
      - liquidise 10y ago
        > the IRS just tacks on penalties & interest I believe you answered your own question.
    - deleted 10y ago
iaw 10y ago
I agree that there's too much added complexity in the tax-code but do you really feel that this requirement is that onerous? The likely motivation being being in line with those around 401k account requirements: if a company uses this, it should be to the benefits of the employees and not just the executive staff.
- edoceo 10y ago
  It's complicated but this one rule is OK. Repeat * 100000 = Mess!
- ericd 10y ago
  401k plans are very annoying to administer, much more so than, say, a SEP IRA.
- SilasX 10y ago
  401ks are itself a convoluted mess. They should just say, "hey, if you work, you can invest it tax-deductible and tax-deferred". The current system is, "if you work, then you should be able to participate in your caricatured, mustache-twirling, ultra-rich boss's tax-deferred plan, in accordance with all these rules and exceptions that clumsily try to make him share his bottomless wealth with you."
  - st3v3r 10y ago
    "They should just say, "hey, if you work, you can invest it tax-deductible and tax-deferred"." That's called an IRA.
    - SilasX 10y ago
      Except that, if your employer offers a 401k at all, you lose the tax deduction benefits (if income over 70k). And the contribution limits are much lower. http://www.fool.com/retirement/ira-vs-401k-which-is-better-for-you.aspx http://www.fool.com/retirement/ira-vs-401k-which-is-better-f...
- harryh 10y ago
throwaway2016a 10y ago
> a company’s highest-paid executives would not be able to defer taxes on their stock under the legislation. Where is the line drawn on this? I am a companies highest paid executive... I make a whopping $100k. Some of the others have no pay check at all. Exersizing would net a $40k tax bill for me. 40% of my pre-tax take-home pay. But as the highest paid executive am I exempt from deferring? Edit: to answer my own questions... > who has been for any of the 10 preceding taxable years one of the 4 highest compensated officers of such corporation determined with respect to each such taxable year on the basis of the shareholder disclosure rules for compensation under the Securities Exchange Act of 1934 Translation... I guess this doesn't benefit me, then.
- st3v3r 10y ago
  To be honest, if they can afford to work without being paid, they're probably fairly well off already.
  - throwaway2016a 10y ago
    Well based on this bill unless they are the CIO or CEO they can defer their taxes. Whereas I can't. Yet I have much less wealth than the other people. So the bill doesn't really help in my case. And being an early stage employee having an executive title is very common.

Cyclone_ 10y ago

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

jlarocco 10y ago

The tax system has always been a mess and there are exceptions and loopholes for everything. I don't disagree that it's bad, but I don't know why you'd expect it to change all of the sudden with these rules. And those two specific exceptions don't seem particularly bad, IMO.

shados 10y ago

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 purely to avoid complicating my taxes... eg: I avoid consulting like plague, even when I have a worthwhile opportunity to do so.

pc86 10y ago
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.
LastZactionHero 10y ago
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.
- nojvek 10y ago
  That's right. I always use an accountant who is a family friend. She charges about $200-$300 but manages to usually get back multiple magnitudes of that back. Plus she's always there to answer any questions about what options I have and what should be my best strategy.
TDL 10y ago
I wouldn't avoid opportunities because of the complexity of the tax system. Ask around for good accountants, they won't be as expensive as you think. Consider paying an accountant as a necessary cost of doing business.
cloudjacker 10y ago
Odd because the complications create the opportunities I pursue certain characterizations of income Ie. If I know my employer withheld too much social security tax then I'll consult because no money is withheld and not worry about paying taxes on it because it will balance out Or I'll pursue a compensation structure that can be characterized as capital gains instead of self employment income And more
jasonjei 10y ago
I actually don't believe the federal government has very little power. The Supremacy Calause, the Civil War, erosions of the 10th amendment (the US code is intense!), having a court called the "Supreme" court, regulating interstate commerce, adjudicating disputes between states, raising an army, and of course taxing citizens in any state should provide ample support to the federal government's power. And yes, they also control individual states by proxy using fund distributions as a carrot (road standards, national speed limit). They control immigration into the US; no individual state has the power to invite a foreign citizen into a US state.

pm24601 10y ago

This is to stop people from gaming the system. For example: a company founder started offering stock options but only to their children. This would allow a parent to pass their company to their children avoiding estate taxes.

hx87 10y ago

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.

maratd 10y ago
> A complicated tax system is perfectly fine if its control logic is algorithmic and its parameters are easily found by the taxpayer. Expecting a normal human being to navigate anything complex in unreasonable. Complex is a relative term. By definition, if something is complex, it is difficult for an average person to navigate. I know where you're going with this, if something is consistently coherent we can use computers to manage the task and to some extent, things like Turbo Tax help. But ... there's no reason we can't have a simple tax system. None at all.
- bjt 10y ago
  > But ... there's no reason we can't have a simple tax system. None at all. Most quirks and exceptions in our current system have their own constituencies who are willing to send lobbyists to defend the status quo. Those constituencies represent the thousands of reasons why we can't have a simple system. There is no comparably powerful constituency for making taxes simpler. Most people just don't care that much.
  - utternerd 10y ago
    And thus, death by a thousand cuts. If an entity is getting 20k in tax breaks or "handouts" it's in their best interest to defend that. To the taxpayer however, the $1.78 you're paying (or whatever the minuscule number is) to cover that annually is nothing to you, and certainly not worth your time to fight against.

__jal 10y ago

> At this rate soon nobody will be able to file their own taxes without an accountant to sort through the muck. And complicated to systems tend to benefit the wealthy. It also heavily benefits Quicken. Along with HR Block, they heavily lobby against any effort that simplifies the tax code. Capitalism, American-style.

tyleraldrich 10y ago
Intuit is a pretty funny company. They try to make TurboTax as simple as possible for the average American (most Americans can fill out a 1040EZ and be done in minutes), but at the same time try to make taxes as complicated as possible so that they can sell services around that. It's both smart and infuriating .
- arrosenberg 10y ago
  Intuit's position isn't necessarily pro-complexity, they'd actually prefer the tax code simplified somewhat, because they'd need far fewer employees to update the tax code information in the software every year. The lobbying is to keep the IRS from A) releasing free 1040EZ/A software and B) keep the IRS from simplifying even further and just sending you a bill, like HMRC does.
  - nostrademons 10y ago
    It's somewhat infuriating that the IRS doesn't just send you a bill. It has full data on every form you put into TurboTax. It runs its own calculations independently and checks them against your return. It has full knowledge of the tax code. If you disagree with it, the IRS just tacks on penalties & interest and eventually garnishes your wages. Why not just send a bill?
    - liquidise 10y ago
      > the IRS just tacks on penalties & interest I believe you answered your own question.
  - deleted 10y ago

iaw 10y ago

I agree that there's too much added complexity in the tax-code but do you really feel that this requirement is that onerous? The likely motivation being being in line with those around 401k account requirements: if a company uses this, it should be to the benefits of the employees and not just the executive staff.

edoceo 10y ago
It's complicated but this one rule is OK. Repeat * 100000 = Mess!
ericd 10y ago
401k plans are very annoying to administer, much more so than, say, a SEP IRA.
SilasX 10y ago
401ks are itself a convoluted mess. They should just say, "hey, if you work, you can invest it tax-deductible and tax-deferred". The current system is, "if you work, then you should be able to participate in your caricatured, mustache-twirling, ultra-rich boss's tax-deferred plan, in accordance with all these rules and exceptions that clumsily try to make him share his bottomless wealth with you."
- st3v3r 10y ago
  "They should just say, "hey, if you work, you can invest it tax-deductible and tax-deferred"." That's called an IRA.
  - SilasX 10y ago
    Except that, if your employer offers a 401k at all, you lose the tax deduction benefits (if income over 70k). And the contribution limits are much lower. http://www.fool.com/retirement/ira-vs-401k-which-is-better-for-you.aspx http://www.fool.com/retirement/ira-vs-401k-which-is-better-f...
harryh 10y ago

throwaway2016a 10y ago

> a company’s highest-paid executives would not be able to defer taxes on their stock under the legislation. Where is the line drawn on this? I am a companies highest paid executive... I make a whopping $100k. Some of the others have no pay check at all. Exersizing would net a $40k tax bill for me. 40% of my pre-tax take-home pay. But as the highest paid executive am I exempt from deferring? Edit: to answer my own questions... > who has been for any of the 10 preceding taxable years one of the 4 highest compensated officers of such corporation determined with respect to each such taxable year on the basis of the shareholder disclosure rules for compensation under the Securities Exchange Act of 1934 Translation... I guess this doesn't benefit me, then.

st3v3r 10y ago
To be honest, if they can afford to work without being paid, they're probably fairly well off already.
- throwaway2016a 10y ago
  Well based on this bill unless they are the CIO or CEO they can defer their taxes. Whereas I can't. Yet I have much less wealth than the other people. So the bill doesn't really help in my case. And being an early stage employee having an executive title is very common.