8 ms·

This story is insanely misleading though. Everyone here is talking about why the tech elite are leaving due to the quality of life when Keith Rabois specificall

• PopeDotNinja 6y ago
  I think you’re echoing OP’s point. Some people come to California for opportunity, and when they find enough success, they leave. They’re not CA natives, they’re expats from places with less opportunity and crappier weather. People who want to live in California view the taxes as a cost of enjoying California.
  • tempsy 6y ago
    No my main point is that people on here are reading into Rabois’ comments on quality of life issues at face value and not recognizing that his move out of state at this moment in time has to do with avoiding taxes on his IPO gains and not much else.
    • sampsonitify 6y ago
      How do taxes work in the US? I find it so complicated! So California has their own state Capital gains tax? How much is that?
      • rmah 6y ago
        In summary, for normal people, taxes in the US come at federal, state and local levels. 1. Federal: a) Income tax of 10% on income over around $12k (single) or $24k (married) up to 37% on income over $518k (single) to $622k (married). Capital gains tax is at the same rate for assets held less than a year but up to only 20% for assets held more than one year. b) FICA, a wage tax. You pay for 7.65% for social security and medicare/medicaid on all wages up to around $133k and 0% above that. 2) State. This varies widely. Some states have no income tax, some states have income tax rates of as high as 13.3% (California). Most are around 5%. Each state has different deductions and rules. Capital gains is usually included in this. Most states (but not all) also levy a sales tax of around 4% to 8% on retail transactions. 3) Local. Most local taxes are in the form of property tax on real estate. The rates vary from around 0.5% to 2% of property value. Some towns levy a separate sales tax on top of a state one (if it exists). The real estate and sales taxes are used to fund schools, police, fire, etc. Many municipalities also levy fees for water, trash, etc. Some cities also have an income tax (for example NYC). To give you an idea of just how complex it is, the US has approximately 11,000 different sales tax jurisdictions. And it's not just a matter of rates. What is taxed and in what context varies. For example, in NYC, food from groceries is not subject to sales tax. But food from restaurants is. Unless, I think the restaurant has no more than some minimum of seats and you orders your food to go. Some sales taxes can also vary by date (i.e. sales tax during summer, but otherwise none). There are also occasional sales tax "holidays" where no sales tax is charged. Unsurprisingly, tax lawyers and accountants make good money in the USA :-)
        • madamelic 6y ago
          >Some cities also have an income tax (for example NYC). SF afaik and all of Pennsylvania does the same. NYC's rate is 3.9% I believe.
          • shuckles 6y ago
            San Francisco is not allowed to have a city income tax due to state law. It wouldn’t matter much anyways: it’s a huge commuter town (daytime population is double or more the resident population), so the base to tax is relatively small. The real untapped taxable value in the city is land wealth. Until Prop 13 allows the city to tax land equitably, it will be forced to try harebrained tax schemes on employers or sales.
            • madamelic 6y ago
              Good to know! I think I mixed up discussion of a wealth tax with income tax. Or maybe that was somewhere else. Thanks for straighting it up for me! :)
        • twoodfin 6y ago
          Small nitpicks: The Medicare / Medicaid portion of FICA is 1.45% and uncapped, and increases by .9% over $200k. FICA is also paid equally by the employer (.9% ACA add-on excluded), so it’s only an accounting gimmick that prevents it from being a 15% tax on income.
    • johnwyles 6y ago
      I moved out of state BEFORE an IPO on options gained while working in CA that I then purchased as a resident outside of CA. This does not work as others are describing it. CA did and will come after anyone who earned options while in the state.
      • tempsy 6y ago
        It depends on your situation. A VC does not have options when they invest - they are getting preferred shares. An employee that forward exercises their options pay taxes on date of hire and vest automatically. Post IPO you’re only taxed when you sell.
      • throwaway09223 6y ago
        You had ISOs or NSOs either granted or vested or both while in CA and those count as income earned in CA. CA will tax that income, even if you don't realize the gains until after you leave the state. A VC is investing in a company, like any other stock investment. There is no earned income.
  • birdyrooster 6y ago
    If we want to start getting uppity about who is a Californian native, let's first consider the Muewkma Ohlone people who were decimated and whose lands were stolen by European settlers here in the Bay Area.
    • romanoderoma 6y ago
      I think you meant Muwekma Ohlone. If we are trying to be precise it was the Spanish who stole their land. Not all Europeans are made equal.
      • birdyrooster 6y ago
        I did, thank you!
  • almost_usual 6y ago
    This is literally the history of California and why most people immigrated here in the first place.
• cltby 6y ago
  But their success has very little do with the tax burden imposed on them by the state of California (c.f. any number of Seattle-based companies).
  • tempsy 6y ago
    I don’t know what you’re getting at but it isn’t my point. And the other way to look at it is California is expensive because the opportunity to become rich is greater here than elsewhere.
    • dcolkitt 6y ago
      Florida and Texas both have comparable numbers of billionaires, and aren't crazy expensive.
      • shuckles 6y ago
        Both have a considerably lower number billionaires (2-3x) per capita, and the Florida number should be investigated to see where the money was earned. (What’s the per capita billionaire rate of, say, Monaco or St. Tropez? Is that meaningful?) It’s certainly a nice place to retire to, as evinced by Keith.
    • cltby 6y ago
      > I don’t know what you’re getting at but it isn’t my point. I can't tell if you're upset by their disingenuousness, or by their refusal to give a cut to the state. If the former, I sympathize. But it mostly seems to be the latter. The obvious rejoinder to which: why should they feel so eager to fork over their money to an institution that did ~nothing to contribute to their success? > California is expensive because the opportunity to become rich is greater here than elsewhere Your statement only explains the e.g. high housing costs. The tax question is orthogonal.
  • rconti 6y ago
    ... so what you're telling me is, Washington has a very low tax rate and few people who complain about their overall tax burden?
• ido 6y ago
  Is that surprising? This is exactly how they treat the rest the world in business (e.g. Apple/Google/Amazon's elaborate international tax evasion schemes see dutch sandwich/double irish style arrangements). Also see Uber/AirBNB "disruption" of not paying benefits/hotel taxes. I would be more surprised if they didn't "optimize" like that.
  • tempsy 6y ago
    It’s not, but this entire thread is focused on quality of life issues, which is exactly what the “tech elite” mentioned in this article want people to focus on, and not the real reason why they’re leaving. My point is don’t fall for their public relations spin BS.
    • DSingularity 6y ago
      The longer I love the more I realize that heroes are doing their thing far from positions of prominence in front of the public eye.
• malandrew 6y ago
  The state didn't make them rich. You're giving credit where none is due. Their hard work coupled with many others like them that worked with them made them rich. The same group of people could have been in another state and done just as well. The people in California that made people successful are the Peter Thiels, Elon Musks and Keith Rabois of the area. VC money is the king maker. In the Bay Area it all started with Fairchild. It's the same reason why Seattle is successful. All the Microsoft money seeded the tech scene there. These kingmakers have had enough of California and are leaving for greener pastures where they can continue to build successful companies without the state leaching off their work. If they show up in Texas and other states and succeed in replicating their success, it will be clear it was them and not California that was responsible for the success. I'm glad California is rapidly losing its undeserved monopoly on tech.
  • tempsy 6y ago
    I’m not sure how to respond but no their success comes from being in Silicon Valley at the right time and developing relationships within this ecosystem. So no I disagree that if Rabois was somehow not in Silicon Valley that he’d be just as successful and wealthy as he is now. And I’m speaking about his investments. Cutting a check is not “hard work”. You could argue Musk is different because he’s actually the CEO of the his company.
    • malandrew 6y ago
      Why is Silicon Valley where it is other than accident of history? The US government could have made military investments elsewhere and Fairchild Semiconductor would have just as easily been in another state. California and the SF Bay Area doesn't get credit for that. Heck, Silicon Valley was a bunch of fruit orchards for decades. Could have been a different set of fruit orchards in a different state. Had Fairchild been elsewhere, the Traiterous 8 would have become the kingmakers they became in a different place and Keith Rabois or someone like him would have moved to that ecosystem instead to develop relations at the right time and become rich. Seattle is the perfect counterfactual to the narrative you're invested in. Microsoft is Seattle's Fairchild. Saying that all they are doing is "cutting a check" betrays the fact that you've likely never actually worked with a successful VC. The successful ones do so much more than cut a check. For example, the hard work they put in to help you identify and hire talent is indispensable.
• solidsnack9000 6y ago
  California actually has fairly carefully considered taxation of equity compensation. It might be that the structure Rabois has put together allows him to avoid taxes on equity after he moves; but most people who are leaving will still have to pay those taxes when they finally sell. Regarding their actions being a symbolic betrayal of the Bay Area, I suspect most of them feel betrayed. High income tax in California doesn't reflect high provision of services. It's due in part to poor cost control and in part to poor property tax policy, such that California's income tax is a de facto transfer of wealth from working people and capital investors to property owners. These investors, companies and workers have paid a tremendous amount in taxes, and have been repaid with ever greater taxation, ever decreasing access to the property they are helping to subsidize, poor services, and even disrespect. There's no reason to assume that every tax, fee or levy that the government issues is justified. The authors refer to Twitter and other companies as being "...let...off the hook..." for a tax but fail to mention that this was San Francisco's effort to impose its own payroll tax!
  • tempsy 6y ago
    Different situations. If you’re a VC you’re simply buying preferred shares. Shouldn’t be owing anything until you sell. And if your residence for that tax year is somewhere else I don’t know of any reason why California could claim capital gains tax simply because you invested in a pre-IPO company and selling post IPO. The reason some people are surprised by tax bills when they move is because they vested their shares or options while in California as part of their compensation and then later moved. Logically it makes sense in that situation to owe state taxes on income that you earn in the state you earned it. When you later sell you shouldn’t owe taxes in California if you’re out of state for that tax year.
    • bourgeoismedia 6y ago
      If you held the preferred shares while you were a resident of California, why shouldn't you be subject to California CGT when you realize the gain in proportion to the length of your residency, just like if it were deferred employment compensation (taxed by CA in proportion to workdays in CA vs workdays elsewhere) or real estate (taxed in full by CA)? Why should VCs get a tax preference employees don't get?
• e77rudhdheg 6y ago
  This is a pretty wild spin to me, if those taxes came with clean streets and blowjobs the well paid non-bazzilionaires wouldn't be leaving for QoL reasons. Why should people feel loyalty to a city that has tons of money to go around for bottomless budget traps like junkies and dregs from out of state but nothing of significance for the people who actually make those support programs possible in the first place? The only reason before was the money and now those earners can get that money while living in a less exploitive environment.