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The importance of this change can’t be understated; this effectively kills compensation at startups in the form of equity, and would make startups completely un

The importance of this change can’t be understated; this effectively kills compensation at startups in the form of equity, and would make startups completely unable to compete with incumbents. Anyone that has options at a company that grows quickly would be paying tens or hundreds of thousands in taxes to keep their equity, which is still effectively a very risky bet that a company will end up huge. No one would want options anymore, which would make it impossible for startups to compete with large, cash-rich incumbents. That should be the last thing you want if your goal is for an economy to grow.

ihsw2 9y ago
While this is an unintended consequence, how do you otherwise tax the massive equity compensation packages offered to executives? It has to be across the board.
- kyleblarson 9y ago
  It's already taxed whenever they exercise.
  - ihsw2 9y ago
    Well, perhaps increasing tax at exercise was politically untenable, but tax at vesting was. Just a hunch that they needed to grab from somewhere easy.
    - noahdesu 9y ago
      It is definitely easier to sell "oh this is just an esoteric part of the tax code that effects a small percentage of people. You know, we are just moving around when they pay taxes it's not like a tax increase or decrease".
- toast0 9y ago
  Honestly, this feels like an accounting trick to recognize taxes sooner. This helps the early year or years of the budget balance, at the determent of the later years, which usually don't count for budget scoring. In this case, it also gives a fair number of people a bigger tax headache. In some cases, taxing earlier may mean future gains become capital gains when they may have been ordinary income; that's not good for tax revenue, even if you get some of it sooner.
- kstrauser 9y ago
  I don't think it's an unintended consequence. I think it was meant to punish Big Tech for their resistance to the Republican party in the 2016 election.
  - ihsw2 9y ago
    That is another hunch that I was considering posting but personally I'm skeptical of this. While immigration reform may have fell on its face due to opposition from tech firms, I find it hard to believe the Trump administration would conceive such an effective means of targeting them. It stands to reason that they recognized NSOs/ISOs being used heavily (perhaps more than anyone else) by tech firms but this just seems like a recognition that wealth taxation woefully needs reform. The estate tax is being retired so this seems to balance it out.
    - akhilcacharya 9y ago
      > The estate tax is being retired so this seems to balance it out. So taxes on people that work for a living are raised to pay for eliminating the estate tax multi-millionaires?
- stale2002 9y ago
  How about taxing the options when they are actually sold, and gains are actually realized?
  - Buge 9y ago
    As income tax or capital gains tax? Because usually with income there should be some income tax somewhere.
oneshot908 9y ago
I think the way to look at this is as yet another attempt by dying but deep-pocketed industries to buy themselves a few more years of oxygen whilst their executives either retire and GTFO or they desperately pivot to the scary new age of Tech and AI that is already upon us. IMO it's not partisan, it's just business. further, this already happened once with AMT and Dotcom 1.0, leaving a bunch of rank and files with huge tax bills for profits they never actually reaped.
- neom 9y ago
  no new money millionaires disrupting the status quo, please.
  - iamcasen 9y ago
    My thoughts exactly. There can't be any other reason for it.
    - neom 9y ago
      I'm not even a tin foil hat kinda person, and I'm not nearly as paranoid as many about "the powers that be" - but I thought about it for almost an hour solid this morning and this is the only reasonable consolation I can come to. It's odd because it's actually massively stifling the economy to protect what killed the economy.
- deleted 9y ago
  [deleted]
logfromblammo 9y ago
What if your goal is for technical talent to prefer companies that make parts for the F-35 that actually function as intended, instead of companies that could be described as "Uber for cat-sitters" or "the Snapchat of Etsy-linked Tumblr posts" or "Pets.com with more tulip bulbs" or "like Facebook, except fronting for GRU instead of NSA"? In that case, it would meet that goal very well. What a pity it is that the technical talent, who might prefer lucking into big piles of windfall cash by working for the right unicorn, has no big national organization to lobby in favor of our interests, and speak out against this type of change. (If you're one of the folks that knee-jerk downvotes any mention of tech worker unions, that's what I'm talking about, so let's get that click out of the way.)
- austenallred 9y ago
  In this instance the exchange you would have to make would be crippling startups and small businesses, which is where the vast majority of the growth of the economy happens. As an aside, how many companies do you see actually building Snapchat for Etsy-linked tumblr posts? I see that criticism of Silicon Valley all the time, yet despite being in the heart of it I rarely see that kind of company. I’d guess an order of magnitude more money is going into building human transporting drones and supersonic jets than into the silly stuff people love to rail on the Valley for. Look at the list of startups that just came out of YC and you’ll see maybe one or two companies that fit that kind of mockery.
  - logfromblammo 9y ago
    That's just it. Where I am, I don't see new companies building anything. YC isn't here. I'd love to work for a startup with a like-brand-X-but-for-Y or a word-salad elevator pitch, that also offered a compensation package as good as any found in Silicon Valley. But I don't get options or RSUs, or even cash bonuses. I get billed to a customer at $200-$400/hr and get maybe $50-$60 of that in total compensation. It's hard to tell, really, because my employers keep getting sold to other companies that proceed to change around the benefits plan. The details aren't very important. Those companies are getting a whole lot of money, and they are giving a smaller proportion of it to the leaf node workers, and a larger share to administration, management, business lubricators, and bureaucracy. The tech industry has very little political-economic clout outside of the handful of cities considered to be tech centers. I'd love to have an alternative to that, beyond moving my family at least 500 miles away. Again. But that SV money is mostly staying in SV. It isn't going into helping out the industry in the rest of the country, or the rest of the world. It isn't spreading business opportunities to local economies outside of central California and the Pacific NW. SV has done little for me beyond offering me new things to buy. They have not given me the additional local economic activity that I'd need to buy them. (That's not strictly true. SV has also exported business practices that get cargo-culted everywhere, usually to my detriment.) I have zero reasons to support the small businesses of Silicon Valley. They can go piss up a tree, because even in a hurricane-force gale blowing directly east, it still won't land anywhere near me. I also won't ever be in a position where I'd actually be able to move there, and it seems the culture has an unnatural aversion to spreading itself somewhere else. So choke on it. SV is competitive with my local tech community, rather than cooperative, so crippling its startups and small businesses helps ours, even at the expense of a smaller overall tech economy. I'm fine with a smaller overall pie, if I get a bigger slice on my plate. I'd only care about bigger pie if there are bigger slices for everyone, not just the ones closest to the ovens. So by all means, make options and RSUs untenable, and dry up the H1Bs, and let the major players collude with anti-poaching agreements, and let the NIMBYs drive up housing prices. I want Silicon Valley to fail, because in its success, it has been leaving me behind. It will take my money, but won't give it back by spending it in somewhere in my neighborhood. If the only way to claw that back is to vote it out of someone else pocket, so be it. Edit: Besides that, it's a bit ironic that those working on defense systems like THAAD and Aegis and C-RAM and Iron Dome are largely out of range of North Korean missiles, while the NK propaganda videos depict the atomic destruction of San Francisco and all of its peacetime-tech startups. Pork barrel military-industrial spending might be wasteful, but it does spread the wealth to a lot of people who are otherwise completely ignored by the investment sector.
nsxwolf 9y ago
Can I give back my options if this bill passes? I'm literally sick now reading this. What I thought was a great part of my compensation package is literally going to bankrupt my family.
- austenallred 9y ago
  Yes you can just give them back, but I would be shocked if the bill passed this way. This clause wasn’t in the House version of the bill. Call your senator.
  - heimidal 9y ago
    It was originally. It was removed last week.
  - ydt 9y ago
    Why would you be shocked? There's all sorts of nasty things in these tax proposals for the less than wealthy. They are looking everywhere they can to find offsets to make the tax cuts for the donor class work under the budget rules.
    - Gargoyle 9y ago
      If you're getting options and RSUs, you're going to be upper middle class at least, and thus wealthy by the definitions of most Americans.
      - ydt 9y ago
        The definitions of most Americans doesn't matter in this case. What's in the proposed congressional bills matters.
      - scarmig 9y ago
        Not by the definition of this bill, though, which is what matters. The majority of HN readers are going to see a net increase in taxation, to fund giveaways to the GOP's donor class.
quickthrower2 9y ago
Yes, it would be like here in Australia, where I paid higher rate tax on non-public shares allocated to me. I didn't even have the luxury of waiting until they vest! I think if you leave a company before vesting you have to try and get that tax money back from the ATO. In fact, you could, in theory, bankrupt someone by giving them enough shares. I think they may have changed this for small enough companies, but still, it's a bad thing aimed at taxing middle classes not the rich. The rich don't earn shares as part of payroll, I imagine.
- Buge 9y ago
  >The rich don't earn shares as part of payroll, I imagine. In Australia or the US? Because they do in the US.
shriram_b02 9y ago
The tech community is swiftly mobilizing against this. Outreach is being coordinated to Senate leadership. Note that this language is not what is in the House Bill. The tech community has sought to improve tax treatment of options for some time. Currently, options are taxed at time of exercise (not ideal). Unfortunately, the Senate bill is going in the wrong direction. My company, EquityZen (equityzen.com) joined other tech companies last year in an effort to move the taxable event from exercise to sale or other disposition of shares. The Senate bill goes in the other direction, moving from time of exercise to time of vesting. Taxation upon vesting would be a major, adverse development for founders and employees alike. The Senate is voting today on this, so as individuals we can write/call our local Senators asking them to strike Section III(H)(1) from the Senate Tax Cuts and Jobs Act.
exelius 9y ago
> No one would want options anymore, which would make it impossible for startups to compete with large, cash-rich incumbents. You're right; nobody would want options. So we have to start paying people in actual shares if we want to give equity. Which means you have to give employees way more of the company than deep-pocketed investment bankers who will still invest -- despite their temper tantrums to the contrary -- because there are very few companies that can absorb a nine-to-ten figure investment and do something productive with it. Just because the system as it exists right now would be destroyed doesn't make this a bad change. The system right now is overly complicated, leads to workers abandoning in-the-money options or staying at a job they hate, and is heavily slanted towards early employees. But the current model of venture financing is largely dead regardless of whether this change goes through. It's already being replaced by cryptocurrencies / ICOs, which seem like a far more sensible method of issuing restricted stock in excess of the SEC's limitations (since the right crypto / wallet scheme for something like this would not be anonymous). I think ultimately, cryptocurrencies are going to replace RSUs, but the cryptocurrencies that replace RSUs will probably have many of the same governance restrictions as RSUs. How we treat them for tax purposes is a different problem, but it should make the RSU liquidity problem less troublesome (e.g. you can sell some of your crypto-RSUs back to the company in exchange for ETH/BTC, then convert back to USD and pay your taxes).
- rsynnott 9y ago
  > So we have to start paying people in actual shares if we want to give equity. People wouldn't want that either; they'd still have to pay tax on shares that were, for practical purposes, worthless at time of issue (and time tax due) and would statistically probably always be worthless. Under this system, you'd really have to abandon compensation with stock of any sort for non-publicly traded entities.
  - exelius 9y ago
    I think the key here is that the valuations would change and likely be far more realistic. We certainly haven't seen the whole story on cryptocurrencies to know what regulation needs to apply, so I'll withhold any speculation there. But I have a feeling that with the amount of data a blockchain-based security gives you, the need to restrict non-publicly traded entities somewhat goes away (since you can always audit after-the-fact if the ledger is distributed). In any case, the market would be far more liquid. I'm not a huge fan of cryptocurrencies for personal use, but I absolutely think they're going to take over the world when it comes to the money used in investment finance (which is ~99% of the money on Earth).
clairity 9y ago
yeah, this is old guard trying to put up barriers against up-and-comers in tech, under the guise of sticking it to the elites (ironically). equity compensation has plenty of risks, which is why the timing of taxes gets complicated. the value of the underlying asset needs to solidify enough (meaning there is a liquid enough market for the equities) that it can be (partially) liquidated and used to pay the tax. but the variance in the liquidity over time is so high that it's nearly impossible to properly predict when the tax man should come knocking on the door.
jsonne 9y ago
I mean not to be a jerk about it but so what? It seems like giving out high risk stock options is a bad deal for workers overall. If the goal is to grow the economy wouldn't paying a rank and file employee more fairly be better for more people and the economy as a whole?
- tschellenbach 9y ago
  I know many early stage employees that achieved significant financial upside by working at early stage startups. Working at an early stage startup is probably the only low-risk way of achieving that. Creating your own startup is of course always an option but requires significant upfront capital, a huge opportunity cost in terms of how much you work and a significant cut to your salary. (if anything).
  - jsonne 9y ago
    >I know many early stage employees that achieved significant financial upside by working at early stage startups .Working at an early stage startup is probably the only low-risk way of achieving that. I mean knowing "many" is different than that being the majority of the cases, and I would strongly dispute that working at a startup is a "low risk" way of achieving some huge financial upside. I in fact remember seeing on Hacker news a few months back (I'll see if I can find it) a study that basically stated that in the aggregate employee stock options at startups aren't worth the risk.
    - atomicUpdate 9y ago
      Agreed. Isn't the general advice to treat the options as worthless and always negotiate for more cash whenever possible? Then, in the rare case they are worth something it's a nice bonus, but not something that should ever be relied upon.
  - rrhd 9y ago
    > low-risk way Unless it goes bankrupt or has some other issue and you don't get paid or get fired. I do not like this idea that startup employees aren't taking a risk. It encourages extremely one sided behavior.
beavisthegenius 9y ago
I guess they'll have to pivot or be disrupted.
cyberpunk0 9y ago
Equity is imaginary fugazi. you might as well be accepting empty promises. I wouldn't want it even now
- dopamean 9y ago
  Yeah so imagine having to pay taxes on something you think is "imaginary fugazi."
loeg 9y ago
> would make startups completely unable to compete with incumbents. They already are mostly unable to compete with larger companies on total compensation. Startup equity is worthless unless you win the lottery. https://danluu.com/startup-tradeoffs/ https://danluu.com/startup-tradeoffs/
- thanatropism 9y ago
  The Joel on Software post cited on your link is just too good. https://www.joelonsoftware.com/2008/05/01/architecture-astronauts-take-over/ https://www.joelonsoftware.com/2008/05/01/architecture-astro... > Jeez, we’ve had that forever. When did the first sync web sites start coming out? 1999? There were a million versions. xdrive, mydrive, idrive, youdrive, wealldrive for ice cream. Nobody cared then and nobody cares now, because synchronizing files is just not a killer application. I’m sorry. It seems like it should be. But it’s not.
  - deleted 9y ago
    [deleted]
ryandrake 9y ago
I don't know--maybe startups and small businesses will just have to go find a better way to be competitive compensation-wise. Today, they get to lure people in with an insufficient cash salary plus "free" equity lotto tickets, perpetuating the "jackpot or nothing" environment. I don't know what the solution is but it would be nice if a creative alternative could be found.
nhumrich 9y ago
> Anyone that has options at a company that grows quickly would be paying tens or hundreds of thousands in taxes to keep their equity, which is still effectively a very risky bet that a company will end up huge. No. Most companies give their employees ISOs, which arent affected by this bill. So it would actually be 0 change to the employees. What this affects is the investors or potentially the founders of a startup

ihsw2 9y ago

While this is an unintended consequence, how do you otherwise tax the massive equity compensation packages offered to executives? It has to be across the board.

kyleblarson 9y ago
It's already taxed whenever they exercise.
- ihsw2 9y ago
  Well, perhaps increasing tax at exercise was politically untenable, but tax at vesting was. Just a hunch that they needed to grab from somewhere easy.
  - noahdesu 9y ago
    It is definitely easier to sell "oh this is just an esoteric part of the tax code that effects a small percentage of people. You know, we are just moving around when they pay taxes it's not like a tax increase or decrease".
toast0 9y ago
Honestly, this feels like an accounting trick to recognize taxes sooner. This helps the early year or years of the budget balance, at the determent of the later years, which usually don't count for budget scoring. In this case, it also gives a fair number of people a bigger tax headache. In some cases, taxing earlier may mean future gains become capital gains when they may have been ordinary income; that's not good for tax revenue, even if you get some of it sooner.
kstrauser 9y ago
I don't think it's an unintended consequence. I think it was meant to punish Big Tech for their resistance to the Republican party in the 2016 election.
- ihsw2 9y ago
  That is another hunch that I was considering posting but personally I'm skeptical of this. While immigration reform may have fell on its face due to opposition from tech firms, I find it hard to believe the Trump administration would conceive such an effective means of targeting them. It stands to reason that they recognized NSOs/ISOs being used heavily (perhaps more than anyone else) by tech firms but this just seems like a recognition that wealth taxation woefully needs reform. The estate tax is being retired so this seems to balance it out.
  - akhilcacharya 9y ago
    > The estate tax is being retired so this seems to balance it out. So taxes on people that work for a living are raised to pay for eliminating the estate tax multi-millionaires?
stale2002 9y ago
How about taxing the options when they are actually sold, and gains are actually realized?
- Buge 9y ago
  As income tax or capital gains tax? Because usually with income there should be some income tax somewhere.

oneshot908 9y ago

I think the way to look at this is as yet another attempt by dying but deep-pocketed industries to buy themselves a few more years of oxygen whilst their executives either retire and GTFO or they desperately pivot to the scary new age of Tech and AI that is already upon us. IMO it's not partisan, it's just business. further, this already happened once with AMT and Dotcom 1.0, leaving a bunch of rank and files with huge tax bills for profits they never actually reaped.

neom 9y ago
no new money millionaires disrupting the status quo, please.
- iamcasen 9y ago
  My thoughts exactly. There can't be any other reason for it.
  - neom 9y ago
    I'm not even a tin foil hat kinda person, and I'm not nearly as paranoid as many about "the powers that be" - but I thought about it for almost an hour solid this morning and this is the only reasonable consolation I can come to. It's odd because it's actually massively stifling the economy to protect what killed the economy.
deleted 9y ago
[deleted]

logfromblammo 9y ago

What if your goal is for technical talent to prefer companies that make parts for the F-35 that actually function as intended, instead of companies that could be described as "Uber for cat-sitters" or "the Snapchat of Etsy-linked Tumblr posts" or "Pets.com with more tulip bulbs" or "like Facebook, except fronting for GRU instead of NSA"? In that case, it would meet that goal very well. What a pity it is that the technical talent, who might prefer lucking into big piles of windfall cash by working for the right unicorn, has no big national organization to lobby in favor of our interests, and speak out against this type of change. (If you're one of the folks that knee-jerk downvotes any mention of tech worker unions, that's what I'm talking about, so let's get that click out of the way.)

austenallred 9y ago
In this instance the exchange you would have to make would be crippling startups and small businesses, which is where the vast majority of the growth of the economy happens. As an aside, how many companies do you see actually building Snapchat for Etsy-linked tumblr posts? I see that criticism of Silicon Valley all the time, yet despite being in the heart of it I rarely see that kind of company. I’d guess an order of magnitude more money is going into building human transporting drones and supersonic jets than into the silly stuff people love to rail on the Valley for. Look at the list of startups that just came out of YC and you’ll see maybe one or two companies that fit that kind of mockery.
- logfromblammo 9y ago
  That's just it. Where I am, I don't see new companies building anything. YC isn't here. I'd love to work for a startup with a like-brand-X-but-for-Y or a word-salad elevator pitch, that also offered a compensation package as good as any found in Silicon Valley. But I don't get options or RSUs, or even cash bonuses. I get billed to a customer at $200-$400/hr and get maybe $50-$60 of that in total compensation. It's hard to tell, really, because my employers keep getting sold to other companies that proceed to change around the benefits plan. The details aren't very important. Those companies are getting a whole lot of money, and they are giving a smaller proportion of it to the leaf node workers, and a larger share to administration, management, business lubricators, and bureaucracy. The tech industry has very little political-economic clout outside of the handful of cities considered to be tech centers. I'd love to have an alternative to that, beyond moving my family at least 500 miles away. Again. But that SV money is mostly staying in SV. It isn't going into helping out the industry in the rest of the country, or the rest of the world. It isn't spreading business opportunities to local economies outside of central California and the Pacific NW. SV has done little for me beyond offering me new things to buy. They have not given me the additional local economic activity that I'd need to buy them. (That's not strictly true. SV has also exported business practices that get cargo-culted everywhere, usually to my detriment.) I have zero reasons to support the small businesses of Silicon Valley. They can go piss up a tree, because even in a hurricane-force gale blowing directly east, it still won't land anywhere near me. I also won't ever be in a position where I'd actually be able to move there, and it seems the culture has an unnatural aversion to spreading itself somewhere else. So choke on it. SV is competitive with my local tech community, rather than cooperative, so crippling its startups and small businesses helps ours, even at the expense of a smaller overall tech economy. I'm fine with a smaller overall pie, if I get a bigger slice on my plate. I'd only care about bigger pie if there are bigger slices for everyone, not just the ones closest to the ovens. So by all means, make options and RSUs untenable, and dry up the H1Bs, and let the major players collude with anti-poaching agreements, and let the NIMBYs drive up housing prices. I want Silicon Valley to fail, because in its success, it has been leaving me behind. It will take my money, but won't give it back by spending it in somewhere in my neighborhood. If the only way to claw that back is to vote it out of someone else pocket, so be it. Edit: Besides that, it's a bit ironic that those working on defense systems like THAAD and Aegis and C-RAM and Iron Dome are largely out of range of North Korean missiles, while the NK propaganda videos depict the atomic destruction of San Francisco and all of its peacetime-tech startups. Pork barrel military-industrial spending might be wasteful, but it does spread the wealth to a lot of people who are otherwise completely ignored by the investment sector.

nsxwolf 9y ago

Can I give back my options if this bill passes? I'm literally sick now reading this. What I thought was a great part of my compensation package is literally going to bankrupt my family.

austenallred 9y ago
Yes you can just give them back, but I would be shocked if the bill passed this way. This clause wasn’t in the House version of the bill. Call your senator.
- heimidal 9y ago
  It was originally. It was removed last week.
- ydt 9y ago
  Why would you be shocked? There's all sorts of nasty things in these tax proposals for the less than wealthy. They are looking everywhere they can to find offsets to make the tax cuts for the donor class work under the budget rules.
  - Gargoyle 9y ago
    If you're getting options and RSUs, you're going to be upper middle class at least, and thus wealthy by the definitions of most Americans.
    - ydt 9y ago
      The definitions of most Americans doesn't matter in this case. What's in the proposed congressional bills matters.
    - scarmig 9y ago
      Not by the definition of this bill, though, which is what matters. The majority of HN readers are going to see a net increase in taxation, to fund giveaways to the GOP's donor class.

quickthrower2 9y ago

Yes, it would be like here in Australia, where I paid higher rate tax on non-public shares allocated to me. I didn't even have the luxury of waiting until they vest! I think if you leave a company before vesting you have to try and get that tax money back from the ATO. In fact, you could, in theory, bankrupt someone by giving them enough shares. I think they may have changed this for small enough companies, but still, it's a bad thing aimed at taxing middle classes not the rich. The rich don't earn shares as part of payroll, I imagine.

Buge 9y ago
>The rich don't earn shares as part of payroll, I imagine. In Australia or the US? Because they do in the US.

shriram_b02 9y ago

The tech community is swiftly mobilizing against this. Outreach is being coordinated to Senate leadership. Note that this language is not what is in the House Bill. The tech community has sought to improve tax treatment of options for some time. Currently, options are taxed at time of exercise (not ideal). Unfortunately, the Senate bill is going in the wrong direction. My company, EquityZen (equityzen.com) joined other tech companies last year in an effort to move the taxable event from exercise to sale or other disposition of shares. The Senate bill goes in the other direction, moving from time of exercise to time of vesting. Taxation upon vesting would be a major, adverse development for founders and employees alike. The Senate is voting today on this, so as individuals we can write/call our local Senators asking them to strike Section III(H)(1) from the Senate Tax Cuts and Jobs Act.

exelius 9y ago

> No one would want options anymore, which would make it impossible for startups to compete with large, cash-rich incumbents. You're right; nobody would want options. So we have to start paying people in actual shares if we want to give equity. Which means you have to give employees way more of the company than deep-pocketed investment bankers who will still invest -- despite their temper tantrums to the contrary -- because there are very few companies that can absorb a nine-to-ten figure investment and do something productive with it. Just because the system as it exists right now would be destroyed doesn't make this a bad change. The system right now is overly complicated, leads to workers abandoning in-the-money options or staying at a job they hate, and is heavily slanted towards early employees. But the current model of venture financing is largely dead regardless of whether this change goes through. It's already being replaced by cryptocurrencies / ICOs, which seem like a far more sensible method of issuing restricted stock in excess of the SEC's limitations (since the right crypto / wallet scheme for something like this would not be anonymous). I think ultimately, cryptocurrencies are going to replace RSUs, but the cryptocurrencies that replace RSUs will probably have many of the same governance restrictions as RSUs. How we treat them for tax purposes is a different problem, but it should make the RSU liquidity problem less troublesome (e.g. you can sell some of your crypto-RSUs back to the company in exchange for ETH/BTC, then convert back to USD and pay your taxes).

rsynnott 9y ago
> So we have to start paying people in actual shares if we want to give equity. People wouldn't want that either; they'd still have to pay tax on shares that were, for practical purposes, worthless at time of issue (and time tax due) and would statistically probably always be worthless. Under this system, you'd really have to abandon compensation with stock of any sort for non-publicly traded entities.
- exelius 9y ago
  I think the key here is that the valuations would change and likely be far more realistic. We certainly haven't seen the whole story on cryptocurrencies to know what regulation needs to apply, so I'll withhold any speculation there. But I have a feeling that with the amount of data a blockchain-based security gives you, the need to restrict non-publicly traded entities somewhat goes away (since you can always audit after-the-fact if the ledger is distributed). In any case, the market would be far more liquid. I'm not a huge fan of cryptocurrencies for personal use, but I absolutely think they're going to take over the world when it comes to the money used in investment finance (which is ~99% of the money on Earth).

clairity 9y ago

yeah, this is old guard trying to put up barriers against up-and-comers in tech, under the guise of sticking it to the elites (ironically). equity compensation has plenty of risks, which is why the timing of taxes gets complicated. the value of the underlying asset needs to solidify enough (meaning there is a liquid enough market for the equities) that it can be (partially) liquidated and used to pay the tax. but the variance in the liquidity over time is so high that it's nearly impossible to properly predict when the tax man should come knocking on the door.

jsonne 9y ago

I mean not to be a jerk about it but so what? It seems like giving out high risk stock options is a bad deal for workers overall. If the goal is to grow the economy wouldn't paying a rank and file employee more fairly be better for more people and the economy as a whole?

tschellenbach 9y ago
I know many early stage employees that achieved significant financial upside by working at early stage startups. Working at an early stage startup is probably the only low-risk way of achieving that. Creating your own startup is of course always an option but requires significant upfront capital, a huge opportunity cost in terms of how much you work and a significant cut to your salary. (if anything).
- jsonne 9y ago
  >I know many early stage employees that achieved significant financial upside by working at early stage startups .Working at an early stage startup is probably the only low-risk way of achieving that. I mean knowing "many" is different than that being the majority of the cases, and I would strongly dispute that working at a startup is a "low risk" way of achieving some huge financial upside. I in fact remember seeing on Hacker news a few months back (I'll see if I can find it) a study that basically stated that in the aggregate employee stock options at startups aren't worth the risk.
  - atomicUpdate 9y ago
    Agreed. Isn't the general advice to treat the options as worthless and always negotiate for more cash whenever possible? Then, in the rare case they are worth something it's a nice bonus, but not something that should ever be relied upon.
- rrhd 9y ago
  > low-risk way Unless it goes bankrupt or has some other issue and you don't get paid or get fired. I do not like this idea that startup employees aren't taking a risk. It encourages extremely one sided behavior.

beavisthegenius 9y ago

I guess they'll have to pivot or be disrupted.

cyberpunk0 9y ago

Equity is imaginary fugazi. you might as well be accepting empty promises. I wouldn't want it even now

dopamean 9y ago
Yeah so imagine having to pay taxes on something you think is "imaginary fugazi."

loeg 9y ago

> would make startups completely unable to compete with incumbents. They already are mostly unable to compete with larger companies on total compensation. Startup equity is worthless unless you win the lottery. https://danluu.com/startup-tradeoffs/ https://danluu.com/startup-tradeoffs/

thanatropism 9y ago
The Joel on Software post cited on your link is just too good. https://www.joelonsoftware.com/2008/05/01/architecture-astronauts-take-over/ https://www.joelonsoftware.com/2008/05/01/architecture-astro... > Jeez, we’ve had that forever. When did the first sync web sites start coming out? 1999? There were a million versions. xdrive, mydrive, idrive, youdrive, wealldrive for ice cream. Nobody cared then and nobody cares now, because synchronizing files is just not a killer application. I’m sorry. It seems like it should be. But it’s not.
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ryandrake 9y ago

I don't know--maybe startups and small businesses will just have to go find a better way to be competitive compensation-wise. Today, they get to lure people in with an insufficient cash salary plus "free" equity lotto tickets, perpetuating the "jackpot or nothing" environment. I don't know what the solution is but it would be nice if a creative alternative could be found.

nhumrich 9y ago

> Anyone that has options at a company that grows quickly would be paying tens or hundreds of thousands in taxes to keep their equity, which is still effectively a very risky bet that a company will end up huge. No. Most companies give their employees ISOs, which arent affected by this bill. So it would actually be 0 change to the employees. What this affects is the investors or potentially the founders of a startup