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I don't entirely understand the arguments against taxing the perks made in the article. On one hand they're talking about how incredibly valuable to the company

by jsnell 14y ago

I don't entirely understand the arguments against taxing the perks made in the article. On one hand they're talking about how incredibly valuable to the company the free meals are, and on the other talking about how taxation would lead to these perks being killed. If the meals really do provide that value, the company can trivially pay the tax on behalf of the employees.

ChuckMcM 14y ago
"If the meals really do provide that value, the company can trivially pay the tax on behalf of the employees." How exactly? You could estimate that meals were valued at $250 a month and then bump the salary of every employee by $250*(marginal federal + marginal state)taxrate so that when their W2 came they would owe tax but they would have the money. But what about people that withhold 10% for a 401k, so the money you bump up has 10% of it contributed to the 401k so you have to bump it an additional 10% to make sure the employee cost hit is neutral. So now you're providing funding to the 401k effectively. And then there are employees who bring their meals and then don't incur the cost but they get the paybump, do they file for a reduction in gross income because they didn't eat the meals, and then just pay marginal tax on the income bump? What about when their spouse came to visit and they ate a meal too, extra bump in income? extra tax? discount? It isn't "trivially" possible to do anything except kill the benefit. That is "trivially" possible. And the people pushing for this aren't the IRS it's the companies that don't give their employees free food. I believe the free soda perk cancellation at Apple was before the web so it doesn't show up in archives but at one time all the soda machines on the Apple campus were free, and the IRS swooped in and told them to pay tax on them, and the soda was then "not free." I was at Sun (where food and soda was not free) but beer busts were, and thought that would help with our co-workers being poached. And it was part of the reason Sun killed the beer busts according to Crawford Beverage (no lie, that was his name!) who was the VP responsible. Do you follow through and tax free laundry? sports equipment? medical visits? store discounts? swag at product launches? If you really wanted to nitpick it you could kill a lot of stuff at Google. You don't think some "not Google" company wouldn't prefer to level the playing field a bit?
- jcampbell1 14y ago
  > How exactly? On December 31st, you gross up everyone's pay by say $10k, and pay taxes that are the marginal rate for YTD income. Of course this doesn't fully cover the taxes for dual income high earners, and it can create some additional taxes for employees that have other income, because now their base is $10k higher. In this case, the change will cost these employees up to a few hundred dollars. A tax change that may cost someone a few hundred dollars, pretty quickly get's lost in the noise when you are talking about multi thousand dollar raises and bonuses.
  - No1 14y ago
    "you gross up everyone's pay by say $10k" It's nice to pretend that it as easy as waving your hand and saying everyone got $10k worth of perks, but what about people who didn't? Really, not everyone is eating the corporate food every day. Not everyone is going to the corporate happy hour. It is not fair, or possibly even legal, to just amortize the costs across everyone. When faced with the accounting and legal overhead, companies are going to throw these perks out the window.
- jsnell 14y ago
  In most of Europe meals are a taxable benefit. There are various ways that a company can deal with that. What Google does is exactly what I described. You badge in for lunch/dinner, and the accounting department makes sure that the net effect to the Googler is $0. (The badging is there just to make sure that Google doesn't need to pay the tax for the people who don't eat). This is of course made in a way that ensures no effect on any "automatically pay x% of salary to a pension insurance" schemes. Now, I'm sure that your tax system is much more dysfunctional than that, and an ignorant European couldn't possibly appreciate all the subtleties of it. But somehow Google manages to nullify the tax effects when doing things like giving fancy consumer electronics as christmas gifts.

by jsnell 14y ago

ChuckMcM 14y ago

"If the meals really do provide that value, the company can trivially pay the tax on behalf of the employees." How exactly? You could estimate that meals were valued at $250 a month and then bump the salary of every employee by $250*(marginal federal + marginal state)taxrate so that when their W2 came they would owe tax but they would have the money. But what about people that withhold 10% for a 401k, so the money you bump up has 10% of it contributed to the 401k so you have to bump it an additional 10% to make sure the employee cost hit is neutral. So now you're providing funding to the 401k effectively. And then there are employees who bring their meals and then don't incur the cost but they get the paybump, do they file for a reduction in gross income because they didn't eat the meals, and then just pay marginal tax on the income bump? What about when their spouse came to visit and they ate a meal too, extra bump in income? extra tax? discount? It isn't "trivially" possible to do anything except kill the benefit. That is "trivially" possible. And the people pushing for this aren't the IRS it's the companies that don't give their employees free food. I believe the free soda perk cancellation at Apple was before the web so it doesn't show up in archives but at one time all the soda machines on the Apple campus were free, and the IRS swooped in and told them to pay tax on them, and the soda was then "not free." I was at Sun (where food and soda was not free) but beer busts were, and thought that would help with our co-workers being poached. And it was part of the reason Sun killed the beer busts according to Crawford Beverage (no lie, that was his name!) who was the VP responsible. Do you follow through and tax free laundry? sports equipment? medical visits? store discounts? swag at product launches? If you really wanted to nitpick it you could kill a lot of stuff at Google. You don't think some "not Google" company wouldn't prefer to level the playing field a bit?

jcampbell1 14y ago
> How exactly? On December 31st, you gross up everyone's pay by say $10k, and pay taxes that are the marginal rate for YTD income. Of course this doesn't fully cover the taxes for dual income high earners, and it can create some additional taxes for employees that have other income, because now their base is $10k higher. In this case, the change will cost these employees up to a few hundred dollars. A tax change that may cost someone a few hundred dollars, pretty quickly get's lost in the noise when you are talking about multi thousand dollar raises and bonuses.
- No1 14y ago
  "you gross up everyone's pay by say $10k" It's nice to pretend that it as easy as waving your hand and saying everyone got $10k worth of perks, but what about people who didn't? Really, not everyone is eating the corporate food every day. Not everyone is going to the corporate happy hour. It is not fair, or possibly even legal, to just amortize the costs across everyone. When faced with the accounting and legal overhead, companies are going to throw these perks out the window.
jsnell 14y ago
In most of Europe meals are a taxable benefit. There are various ways that a company can deal with that. What Google does is exactly what I described. You badge in for lunch/dinner, and the accounting department makes sure that the net effect to the Googler is $0. (The badging is there just to make sure that Google doesn't need to pay the tax for the people who don't eat). This is of course made in a way that ensures no effect on any "automatically pay x% of salary to a pension insurance" schemes. Now, I'm sure that your tax system is much more dysfunctional than that, and an ignorant European couldn't possibly appreciate all the subtleties of it. But somehow Google manages to nullify the tax effects when doing things like giving fancy consumer electronics as christmas gifts.