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This would only further income inequality. Those with family funds to exercise their options and pay the taxes immediately will be at an advantage.

toomuchtodo 7y ago
So you keep tweaking the law to make it more equitable, while still ensuring the appropriate taxes are paid.
jiveturkey 7y ago
You've badly misunderstood the article. (Maybe the article is wrong tho, and it's you that got it right. I didn't read the bill.) This bill changes when taxes are due for non-quals. You already pay taxes upon exercise of non-quals. So the ability to pay at exercise does almost nothing to further inequality. In fact it's hugely risky and in almost all cases, a bad idea that leads to lots of money lost. In that sense, having the money to pay the taxes (anyway) improves inequality to the degree that it saps the assets of those with family funds and distributes it (via programs paid for via taxes) to the less fortunate. The opposite of what you're claiming, and what is the case today. This bill changes the tax to become due at vesting. It will either not pass, or will become immediately ineffective as vesting schedules change to a 10 year cliff, with a single [4-year] pro-rata vest upon termination. IOW, for tax purposes you won't vest-as-you-go anymore. You'll vest all at once upon termination. If you choose to not buy your options the company will cancel the option agreement. If you do choose to buy them, the tax consequences are identical as today. Such a thing would be awful for ISOs but for non-quals it doesn't matter. For ISOs you want to buy them early as you can. For non-quals you pay tax upon exercise, so you don't want to buy them as-you-vest anyway. It's very poorly thought out.
- sidewndr46 7y ago
  It's also hilarious when you think about it. For almost all startup employees, a long enough time scale reveals that the real value of those stock options is exactly zero dollars. This would have people paying taxes on fictional or purported wealth. As dumb as the tax code is, this isn't even reform.
  - dallbee 7y ago
    My understanding of the bill is that the tax would apply to the strike price value. $100,000 in strike price is quite a lot more than what your typical startup employee has, and that first $100,000 per year isn't even taxed. For this to apply to you, you'd have to be receiving a ton of options.

toomuchtodo 7y ago

So you keep tweaking the law to make it more equitable, while still ensuring the appropriate taxes are paid.

jiveturkey 7y ago

You've badly misunderstood the article. (Maybe the article is wrong tho, and it's you that got it right. I didn't read the bill.) This bill changes when taxes are due for non-quals. You already pay taxes upon exercise of non-quals. So the ability to pay at exercise does almost nothing to further inequality. In fact it's hugely risky and in almost all cases, a bad idea that leads to lots of money lost. In that sense, having the money to pay the taxes (anyway) improves inequality to the degree that it saps the assets of those with family funds and distributes it (via programs paid for via taxes) to the less fortunate. The opposite of what you're claiming, and what is the case today. This bill changes the tax to become due at vesting. It will either not pass, or will become immediately ineffective as vesting schedules change to a 10 year cliff, with a single [4-year] pro-rata vest upon termination. IOW, for tax purposes you won't vest-as-you-go anymore. You'll vest all at once upon termination. If you choose to not buy your options the company will cancel the option agreement. If you do choose to buy them, the tax consequences are identical as today. Such a thing would be awful for ISOs but for non-quals it doesn't matter. For ISOs you want to buy them early as you can. For non-quals you pay tax upon exercise, so you don't want to buy them as-you-vest anyway. It's very poorly thought out.

sidewndr46 7y ago
It's also hilarious when you think about it. For almost all startup employees, a long enough time scale reveals that the real value of those stock options is exactly zero dollars. This would have people paying taxes on fictional or purported wealth. As dumb as the tax code is, this isn't even reform.
- dallbee 7y ago
  My understanding of the bill is that the tax would apply to the strike price value. $100,000 in strike price is quite a lot more than what your typical startup employee has, and that first $100,000 per year isn't even taxed. For this to apply to you, you'd have to be receiving a ton of options.