4 ms·

So glad the city did away with the stock option tax threat. That was added by some dumb schmucks in the lull between the dot-com boom and this one, when nobody

by abalone 13y ago

So glad the city did away with the stock option tax threat. That was added by some dumb schmucks in the lull between the dot-com boom and this one, when nobody was paying attention or doing new startups. No startup in their right mind would choose a city that taxes stock options. The reporting on this is rather poor. It characterizes this as an additional "cost" or "loss" to the city, e.g. "Twitter tax break to cost far more than estimates".[1] But what's missing from the reports is that this component, the stock option tax, is relatively new (2004) and has never been enforced. It's not that the city is losing something they had. They never had it. It was a bad idea that was slipped in during a down cycle when nobody understood or cared about the implications. I think Zynga calculated that they would end up paying more in local taxes than they pay for their building itself. [1] http://www.sfgate.com/technology/dotcommentary/article/Twitter-tax-break-to-cost-far-more-than-estimates-4929370.php http://www.sfgate.com/technology/dotcommentary/article/Twitt...

awongh 13y ago
OTOH it seems like a dumb move by the city to offer these tax breaks to twitter in the first place. Were they really going to up and move to mountain view? To save on payroll tax? I'm not sure what the precedence for something like that happening is, but it seems highly unlikely.
- capkutay 13y ago
  ? Why would a company pay tens of millions to the government when they can either report that same money as profit or invest it back into their company? A company like Twitter would not lose talent by having their headquarters in one of the suburbs in the peninsula (palo alto, redwood city, mountain view). Google, Facebook, Oracle would all be precedence for that case being that they're all located in the peninsula and not San Francisco.
- jroseattle 13y ago
  The precedence is very real, and it's gone on for years. Companies will up and relocate when it makes fiscal sense. Boeing, for example, was headquartered in Seattle for decades -- very established, entrenched locally, big production plants nearby. Chicago came along and offered serious tax breaks if they would relo HQ. This isn't down the road -- it's Seattle to Chicago, involving something like 1000 employees and their families. Boeing took the deal and gained millions in tax concessions. At the time, Twitter did an evaluation of payroll & stock option taxes and determined that it would be worth a lot of money to everyone (it's not just the company, it's the people) if they have a shop outside SF geographic boundaries. Pick up and move down the street? Yeah, easy choice.
- raldi 13y ago
  They don't have to "up and move" all at once; they could easily have just capped their SF headcount and expanded offices in other cities. Then the CEO starts spending more and more time in one of those "remote" offices, then they declare that desk to be their primary location, and before you know it, the company's de facto HQ is somewhere else.
- abalone 13y ago
  You're talking about the payroll tax holiday. You may be right about that, if we're only discussing a small tax on paychecks. But I'm talking about the options tax provision specifically. If this were enforced, successful startups would be faced with a MASSIVE, GIGANTIC tax bill. It's theoretical; no city has actually taxed stock options before (that I know of). So whatever your impression of local city tax is, throw it out. This would literally tax the rise in value of a company, so, tens or hundreds of millions of dollars.. in local city tax. Yes, every single startup would move out of San Francisco if the city actually taxed stock options.
stormbrew 13y ago
Tax breaks are considered government spending. Spending money and giving tax breaks has the same effect on the books, the government has larger deficits/smaller surplus, and the goal is the same: to support or encourage behaviour which benefits the government or its citizenry. http://en.wikipedia.org/wiki/Tax_expenditure#The_politics_of_tax_expenditures http://en.wikipedia.org/wiki/Tax_expenditure#The_politics_of...
- abalone 13y ago
  That is not some universal law. It is a convention that assumes a certain scenario, namely where the government has been receiving a certain amount of tax revenue which they will now lose by giving a break. In a scenario where a crazy new tax was passed that was never enforced, then noticed a few years later and abolished because enforcing it would blow up an entire local industry, it is a stretch to categorizing it as "spending". That'd be like writing a note you're owed $1B, tucking it in a drawer, and then when it's ripped up a few years later saying you just "spent" a billion dollars. The city never had the tax revenue to begin with.
seivan 13y ago
Sweden does it.
- abalone 13y ago
  Really, local cities tax stock options? How's that working out?

by abalone 13y ago

awongh 13y ago

OTOH it seems like a dumb move by the city to offer these tax breaks to twitter in the first place. Were they really going to up and move to mountain view? To save on payroll tax? I'm not sure what the precedence for something like that happening is, but it seems highly unlikely.

capkutay 13y ago
? Why would a company pay tens of millions to the government when they can either report that same money as profit or invest it back into their company? A company like Twitter would not lose talent by having their headquarters in one of the suburbs in the peninsula (palo alto, redwood city, mountain view). Google, Facebook, Oracle would all be precedence for that case being that they're all located in the peninsula and not San Francisco.
jroseattle 13y ago
The precedence is very real, and it's gone on for years. Companies will up and relocate when it makes fiscal sense. Boeing, for example, was headquartered in Seattle for decades -- very established, entrenched locally, big production plants nearby. Chicago came along and offered serious tax breaks if they would relo HQ. This isn't down the road -- it's Seattle to Chicago, involving something like 1000 employees and their families. Boeing took the deal and gained millions in tax concessions. At the time, Twitter did an evaluation of payroll & stock option taxes and determined that it would be worth a lot of money to everyone (it's not just the company, it's the people) if they have a shop outside SF geographic boundaries. Pick up and move down the street? Yeah, easy choice.
raldi 13y ago
They don't have to "up and move" all at once; they could easily have just capped their SF headcount and expanded offices in other cities. Then the CEO starts spending more and more time in one of those "remote" offices, then they declare that desk to be their primary location, and before you know it, the company's de facto HQ is somewhere else.
abalone 13y ago
You're talking about the payroll tax holiday. You may be right about that, if we're only discussing a small tax on paychecks. But I'm talking about the options tax provision specifically. If this were enforced, successful startups would be faced with a MASSIVE, GIGANTIC tax bill. It's theoretical; no city has actually taxed stock options before (that I know of). So whatever your impression of local city tax is, throw it out. This would literally tax the rise in value of a company, so, tens or hundreds of millions of dollars.. in local city tax. Yes, every single startup would move out of San Francisco if the city actually taxed stock options.

stormbrew 13y ago

Tax breaks are considered government spending. Spending money and giving tax breaks has the same effect on the books, the government has larger deficits/smaller surplus, and the goal is the same: to support or encourage behaviour which benefits the government or its citizenry. http://en.wikipedia.org/wiki/Tax_expenditure#The_politics_of_tax_expenditures http://en.wikipedia.org/wiki/Tax_expenditure#The_politics_of...

abalone 13y ago
That is not some universal law. It is a convention that assumes a certain scenario, namely where the government has been receiving a certain amount of tax revenue which they will now lose by giving a break. In a scenario where a crazy new tax was passed that was never enforced, then noticed a few years later and abolished because enforcing it would blow up an entire local industry, it is a stretch to categorizing it as "spending". That'd be like writing a note you're owed $1B, tucking it in a drawer, and then when it's ripped up a few years later saying you just "spent" a billion dollars. The city never had the tax revenue to begin with.

seivan 13y ago

Sweden does it.

abalone 13y ago
Really, local cities tax stock options? How's that working out?