4 ms·
Ask HN: Why is there no movement to reform taxation of stock options?
There have been many threads on HN bemoaning the huge tax bills one can incur when exercising stock options at a pre-IPO startup in the USA. It makes little sense to treat an illiquid asset as taxable income, based on some arbitrary value. Yet that's how the law works and many options are abandoned as a result.
Among the moaning, however, there seems to be relatively few people who argue that the laws should be changed, so that taxes are paid on the profits gained by the sale of the shares, if and when that should ever occur.
Judging from the conversations on HN, it seems that the vast majority of people in the startup world are anything but apolitical. Yet, on this particular issue, that has huge adverse financial effects on so many of them, there seems to be a resigned acceptance of the status quo.
Why is that?
- humbleMouse 10y agoI think it's probably because traders who actually trade options for a living know how to use existing laws to minimize their tax bill. The people you are talking about in startups are likely the tiny minority of people getting screwed, while seasoned traders use all sorts of tactics to have a very small tax bill at the end of the year.
- YuriNiyazov 10y agoYou are incorrect. The reform of stock option grants has come up in committee multiple times, and even made it out of committee last year, but didn't get to be discussed before the year ended, and since there's a new government the order of things being looked at gets reset https://www.congress.gov/bill/114th-congress/house-bill/5719/text https://www.congress.gov/bill/114th-congress/house-bill/5719...