3 ms·

It's not income if you never exercise the option. Imagine starting as a senior-level manager at a company that's a few years into its life. They provide you wi

It's not income if you never exercise the option. Imagine starting as a senior-level manager at a company that's a few years into its life. They provide you with a salary of $150k/year and 100,000 options at $1 with a standard four-year vesting schedule. In the first year, the company's fair market value increases to $2/share. Your tax liability just increased as though you made an extra $25k, so you'll need to come up with ~$8k to cover. If the company sees its value increase 2x per year for all four years, you'll be on the hook for taxes on $675k having only made $600k in actual dollars. Good luck scraping together taxes to cover adjusted income of $525k in year 4 if the company doesn't go public. If the fair market value falls after you vest but before a liquidity event, you never saw a penny of extra liquid assets but still had to pay tens or hundreds of thousands in taxes. This will bankrupt people.

kolbe 9y ago
That sounds no less fair than someone who bought a home for $100k in 1980 who's seen its value appreciate to $5mm, and now has to pay $50k a year in property tax. That sounds no less fair than a family liquidating its estate because they can't afford the estate taxes. That sounds no less fair than a health-conscious person taking care to never drink or do drugs paying 10x more for socialized healthcare to pay for the ailments of an obese alcoholic. I doubt I need to go on, but the point is that taxation sucks. And it's completely hypocritical of someone to want to levy these burdens onto someone else while they themselves become indignant over a tax loophole of theirs being tightened (not even closed). It's even worse that the people who are getting indignant over it are some of the wealthiest in the United States, while at the same time, you want to stick a guy who earns $50k a year with an extra $3k with the ACA. I do admit that the story you provided sounds like it sucks more than average, but in reality, a bank will just give you a loan to cover the taxes. No one is going bankrupt. And if the shares end up going to zero, you get to have capital carryover losses just like everyone else whose investments lost money. But the point is that taxes, when you actually have to get down to it, suck. And if you're being truly democratic, you should try to empathize with all taxpayers in the same way that you think about your own taxes.
- greenleafjacob 9y ago
  You can sell a home to cover property taxes, or even reverse mortgage to get the cash flow. You can't sell private company stock, you can't even encumber it with a lien.

kolbe 9y ago

That sounds no less fair than someone who bought a home for $100k in 1980 who's seen its value appreciate to $5mm, and now has to pay $50k a year in property tax. That sounds no less fair than a family liquidating its estate because they can't afford the estate taxes. That sounds no less fair than a health-conscious person taking care to never drink or do drugs paying 10x more for socialized healthcare to pay for the ailments of an obese alcoholic. I doubt I need to go on, but the point is that taxation sucks. And it's completely hypocritical of someone to want to levy these burdens onto someone else while they themselves become indignant over a tax loophole of theirs being tightened (not even closed). It's even worse that the people who are getting indignant over it are some of the wealthiest in the United States, while at the same time, you want to stick a guy who earns $50k a year with an extra $3k with the ACA. I do admit that the story you provided sounds like it sucks more than average, but in reality, a bank will just give you a loan to cover the taxes. No one is going bankrupt. And if the shares end up going to zero, you get to have capital carryover losses just like everyone else whose investments lost money. But the point is that taxes, when you actually have to get down to it, suck. And if you're being truly democratic, you should try to empathize with all taxpayers in the same way that you think about your own taxes.

greenleafjacob 9y ago
You can sell a home to cover property taxes, or even reverse mortgage to get the cash flow. You can't sell private company stock, you can't even encumber it with a lien.