So the rich do actually pay more taxes. MUCH more

[halik]

http://finance.fortune.cnn.com/2014/04/08/taxes-save-your-outrage/?source=cnn_bin

I keep hearing Mitt Romney's 15% tax rate, or Warren Buffett's 4% tax rate (ala deferred compensation).
and, yes, apparently those making $10M+ do pay less taxes than lower millionaries.

but for the other 99.4% of the population, the tax system is progressive.

You're missing the bottom half of the scale. Top 400 AGI filers have effective tax rate of about 14%

 

[halik]

We don't have a wealth tax in this country, we have an income tax. So logically the super wealthy pay proportionally less taxes because once you're wealthy you no longer need a taxable income. If you want rich people to pay more taxes regardless of income level or source, replace all taxes with national sales tax ala the fair tax.

People that say that cannot explain what "regressive tax" means.

 

[kia75]

Non qualified options are taxed at regular income rates, not capital gains.

Stock options are also counted as income for alternative minimum tax.

So for all intents and purposes, yes they are taxed the same as traditional income.

Technically that's true, but in practice that's false.

Stock options and non qualified options can be taxed at regular income rates, but if you do a little bit of accounting magic then you can turn those stock options into capital gains. It's complicated and dry reading but if you're being paid in stocks that means you have an accountant, and that accountant knows how to work the system.

This article talks about how you can convert your management fees into capital gains on years when you manage a fund and expect the funds to earn a profit . It's a way of turning Salary and income into Capital Gains. There's also something called Carried Interest which again is taxed at the Capital Gains rate.

 

[Zaap]

No, but the vast majority of CEO compensation in this country comes in the form of stock options...

Please show me a source for this. I don't believe that for a second. And of course not every company is publically owned.

First off, it'd be absurd. Rather than pay taxes, most people could claim a capital LOSS on a pure stock compensation package in one company!

Its only in some people's fevered imaginations that just receiving stock options= "automattic riches" for people just because they are an exec in said company. For every winner like Apple there are countless losers you sure as hell wouldn't want as stock payment in place of a fair salary.

Also of course, CEOs aren't the only executives any large company has that are highly compensated.

Using examples like Larry Ellison, Steve Jobs, Elon Musk etc as if they represented the "average" corporate executive is just silly.


The day most anyone here actually finds themselves making any real money in this world (7 figure incomes and the like) the first thing that will happen is the financial advisor you hire will sit you down and laugh at just how much pure horeshit you've been fed all your life about "once I'm rich, I'll pay no taxes!!!" Then you'll get a nice long earfull of reality.

 

[kia75]

Please show me a source for this. I don't believe that for a second. And of course not every company is publically owned.

Like you said, A lot of that stuff is private so it's impossible to show that the majority of CEO's are paid that way, but when Mitt Romney showed us his tax information it showed how easily CEO's can avoid paying taxes. If you truly think Mitt Romney is an aberration rather then the norm you don't understand how people work.

First off, it'd be absurd. Rather than pay taxes, most people could claim a capital LOSS on a pure stock compensation package in one company!

Its only in some people's fevered imaginations that just receiving stock options= "automattic riches" for people just because they are an exec in said company. For every winner like Apple there are countless losers you sure as hell wouldn't want as stock payment in place of a fair salary.

Which is why you only take the stock when you expect it to gain value. You take the money when you expect losses. You stack the deck in your favor and take whatever gets you the biggest payout, which changes from quarter to quarter and from tax year to tax year.

I've posted a few examples and it's more complicated then "taking stock options" but a good accountant will handle the tricks for you.

Also of course, CEOs aren't the only executives any large company has that are highly compensated.

Using examples like Larry Ellison, Steve Jobs, Elon Musk etc as if they represented the "average" corporate executive is just silly.

CEO's is shorthand for people who largely get paid in stocks but the rules are usually made so that board members, CFO's, etc can benefit from this. Steve Jobs is a name that everybody knows but Steve CEO of a multi-million dollar company probably does something similar. It's just if we talked about Steve CEO nobody would know who we're talking about.

The day most anyone here actually finds themselves making any real money in this world (7 figure incomes and the like) the first thing that will happen is the financial advisor you hire will sit you down and laugh at just how much pure horeshit you've been fed all your life about "once I'm rich, I'll pay no taxes!!!" Then you'll get a nice long earfull of reality.

You're exaggerating, nobody is saying the rich pay NO taxes, but its true that the rich pay significantly less taxes as a percentage of their income as you or me. I paid much more then the 14% Mitt Romney paid in taxes this year, and Warren Buffet pays less in taxes as a percentage of his income then his Secretary. IMO, this isn't fair, they have way more money and yet their tax burden is lower. At the very least we should have a similar tax burden. That's only fair.

 

[MagnusTheBrewer]

Ooh! Do you have one that shows what percentage of the wealthy actually pay the rate they're nominally taxed at?

 

[Zaap]

Like you said, A lot of that stuff is private so it's impossible to show that the majority of CEO's are paid that way,

WTF?
You do know what *stock* is, don't you? Care to rethink this statement and try again?

but when Mitt Romney showed us his tax information it showed how easily CEO's can avoid paying taxes. If you truly think Mitt Romney is an aberration rather then the norm you don't understand how people work.

Romney's income was primarily investment dividends. Do people actually know the differences between all these things and stock options (not all companies even pay a dividend) or are people just doing the usual, lumping all sorts of things they know little about together as if they were the same thing?

If Romney represents the majority of CEOs, then you're now claiming CEOs mostly get paid in killer dividend yeilding portfolios. Thats actualy a direct contradiction to the claim they all get paid in stock options.

 

[Fern]

Please show me a source for this. I don't believe that for a second. And of course not every company is publically owned.

It's true.

It's performance based compensation. They'll have a base salary, but the bulk of what the media reports as their salary is qualified stock options ("QSO"). 'Qualified" means it qualifies for special treatment under tax law. If they're not qualified then they are taxed exactly the same as a cash payment - at ordinary income tax rates and subject to SS tax too.

I worked in NYC for a large multinational acctg firm doing tax returns for high level execs of Fortune 500 companies. All received QSO's. And every article I remember looking at involving 'outrageous' comp was an exec mostly paid in QSO's.

First off, it'd be absurd. Rather than pay taxes, most people could claim a capital LOSS on a pure stock compensation package in one company!

It doesn't work that way.

QSO's must be purchased by the exec. They must pay nearly the full FMV. So, only if the stock price goes up do they get anything (i.e, it's performance based). Typically you're not allowed to buy the stock (exercise the option) until after a waiting period of years. If the stock price has gone down the exec won't buy/exercise. Why would they? They'd be paying more for the stock than it's worth.

And capital looses can only be used to reduced capital gains. If any cap loss loss is unabsorbed by cap gains then a limit of only $3,000 can be deducted against regular income.

Its only in some people's fevered imaginations that just receiving stock options= "automattic riches" for people just because they are an exec in said company. For every winner like Apple there are countless losers you sure as hell wouldn't want as stock payment in place of a fair salary.

Yeah. When the market goes down that means a lot of execs don't make anything from their QSO's. Those option are referred to as being "underwater" and are worthless.

Fern

 

[Fern]

The biggest issue is capital gains tax. If you look at the truly wealthy (the billionaires of this world), literally every one of them has massive wealth through their ownership stakes of prominent companies. They can draw a symbolic $1 salary and make billions through their investments, yet that investment income is taxed at a lower rate to "encourage investment" (as though wealthy people would withdraw all their money from investments if capital gains taxes were increased at the top end). If it's money people are earning and using to pay for their lifestyles, why should it be taxed differently if it's from selling labor than investing?

Because of inflation.

The lower rate for LTCG is a very crude method of recognizing that inflation is not income and shouldn't be taxed as such.

Fern

 

[CountZero]

So if the top marginal bracket was 35% when this was done isn't it a bit amazing that as the percentage of income that isn't at the 35% bracket goes down the tax paid doesn't move. Really demonstrates why going to a basic progressive tax bracket with zero tax breaks at all would make a lot more sense, too many games to play when you have the money to do so.

Also median numbers would be more interesting than averages.

 

[Fern]

So if the top marginal bracket was 35% when this was done isn't it a bit amazing that as the percentage of income that isn't at the 35% bracket goes down the tax paid doesn't move. Really demonstrates why going to a basic progressive tax bracket with zero tax breaks at all would make a lot more sense, too many games to play when you have the money to do so.

Also median numbers would be more interesting than averages.

I don't understand what you're trying to say, except for the part about "playing games" when you're rich.

And it's absolutely true. The rich have the ability to defer income (just don't sell etc.) until they like the rates.

Fern

 

[Zaap]

It's true.

It's performance based compensation. They'll have a base salary, but the bulk of what the media reports as their salary is qualified stock options ("QSO"). 'Qualified" means it qualifies for special treatment under tax law. If they're not qualified then they are taxed exactly the same as a cash payment - at ordinary income tax rates and subject to SS tax too.

I worked in NYC for a large multinational acctg firm doing tax returns for high level execs of Fortune 500 companies. All received QSO's. And every article I remember looking at involving 'outrageous' comp was an exec mostly paid in QSO's.

This is *not* the majority of CEO compensation. I've never seen anyone claim that as an across the board fact because it's absurd.

As I said, many companies aren't even publically traded. Yes, there can be a form of stock option in private companies with no common stock, but that's fairly rare, let alone the majority.

Yeah. When the market goes down that means a lot of execs don't make anything from their QSO's. Those option are referred to as being "underwater" and are worthless.

And yet you're floating that a *majority* of CEOs are being paid in a scheme that could either reward them handsomely or (far more likely beyond the top companies in the best of markets) render them paupers. Once more, I want to see an actual source for that.

Please show me a reliable source (reputable news, business site etc) reporting that most CEOs receieve the majority of their pay as stock options.

 

[spidey07]

It's true zaap. For executives of public companies is stock options based on performance.

Notice the key word option. It doesn't make them broke. They simply have the option to exercise them. There are very strict rules of when and how they can exercise as an executor or director and above.

Most of mine have been non qualified options and that's counted as regular income when I exercise them. Every professional job I've had came with options. I ain't rich

 

[IGBT]

they also provide nearly ALL the jobs. Next time you need a job go ask a PBF (poor broke fusk) and see what you end up with.

 

[Zaap]

It's true zaap. For executives of public companies is stock options based on performance.

Notice the key word option. It doesn't make them broke. They simply have the option to exercise them. There are very strict rules of when and how they can exercise as an executor or director and above.

Most of mind have been non qualified options and that's counted as regular income when I exercise them. Every professional job I've had came with options. I ain't rich

I'm not saying they may not get options, but that's not the *majority* of CEO compensation as claimed.

 

[HumblePie]

Sales tax is a regressive tax...

Only if it is applied to all items equally.

 

[Fern]

This is *not* the majority of CEO compensation. I've never seen anyone claim that as an across the board fact because it's absurd.

As I said, many companies aren't even publically traded. Yes, there can be a form of stock option in private companies with no common stock, but that's fairly rare, let alone the majority.


And yet you're floating that a *majority* of CEOs are being paid in a scheme that could either reward them handsomely or (far more likely beyond the top companies in the best of markets) render them paupers. Once more, I want to see an actual source for that.

Please show me a reliable source (reputable news, business site etc) reporting that most CEOs receieve the majority of their pay as stock options.

If you want info on compensation of non-publicly traded corporations you won't get it.

They don't need to file publicly available financial statements with the S.E.C (10-Q's etc.) like publicly traded corps do and their tax return info is strictly private.

Most small corporations don't use stock options. They're no good. First, these companies are usually 100% owned by the exec. If you own 100% of the stock, more stock is still 100%. I.e., nothing. Secondly, there is no market to sell the stock even if they wanted to. While it's not worthless; it is illiquid. Thirdly, most don't want others owning any of the stock of their corporation.

The exception to small companies using stock options are mostly start ups that want to go public eventually. They would use NQO (nonqualified stock options) because the stock is basically worthless at that point so there's little-to-no tax anyway. 99.99% of these start ups go no where so the exec with stock compensation gets nothing anyway.

Fern

 

[spidey07]

I'm not saying they may not get options, but that's not the *majority* of CEO compensation as claimed.

It usually is. CEO and other executive comp for public companies is listed in their annual report, you can look it up as it's public knowledge being a public company.

I encourage everybody to read the annual reports sent to them from the stocks they own. The performance based options are incentives to the directors and above to improve company performance, it's like a yearly bonus but instead of cash it's hefty options at a nice option price.

Again, they are OPTIONS. They must buy the stock at option price or do a sell to cover which is what I normally do.

 

[Zaap]

If you want info on compensation of non-publicly traded corporations you won't get it.

They don't need to file publicly available financial statements with the S.E.C (10-Q's etc.) like publicly traded corps do and their tax return info is strictly private.

Most small corporations don't use stock options.

Right, so that's a direct contradiction of the "majority"claim.

The exception to small companies using stock options are mostly start ups that want to go public eventually. They would use NQO (nonqualified stock options) because the stock is basically worthless at that point so there's little-to-no tax anyway. 99.99% of these start ups go no where so the exec with stock compensation gets nothing anyway.

Exactly.

So how do we go from this to the claim that this represents the *majority* of CEO compensation for the majority of CEOs?

 

[Fern]

Right, so that's a direct contradiction of the "majority"claim.




Exactly.

So how do we go from this to the claim that this represents the *majority* of CEO compensation for the majority of CEOs?

Because the rest of us know that the term "CEO" means exec's at big corporations.

As to the rest, it's just a glorified term for the "self employed".

Fern

 

[Zaap]

^ maybe I'm not getting the sarcasam (?) since of course CEO actually means neither.

What exactly do you mean by that?

 

[spidey07]

Because the rest of us know that the term "CEO" means exec's at big corporations.

As to the rest, it's just a glorified term for the "self employed".

Fern

You know how to tell the difference between folks that own stock and don't?

Look at how they rail against the rich and have zero clue about how compensation works in the real world along with the tax implications.

Jealousy is the most evil emotion.

 

[spidey07]

^ maybe I'm not getting the sarcasam (?) since of course CEO actually means neither.

What exactly do you mean by that?

Fucking A. Do you even know what an executive is or an officer or director?

 

[Zaap]

CHIEF EXECUTIVE OFFICER.

That does not mean: "exec's at big corporations" or "self-employed".

Fuck, is it like Bullshit Day or something?

 

[WHAMPOM]

http://finance.fortune.cnn.com/2014/04/08/taxes-save-your-outrage/?source=cnn_bin

I keep hearing Mitt Romney's 15% tax rate, or Warren Buffett's 4% tax rate (ala deferred compensation).
and, yes, apparently those making $10M+ do pay less taxes than lower millionaries.

but for the other 99.4% of the population, the tax system is progressive.

Those are the effective tax rates, what you don't show is taxes collected.