Octopus Overlords

Posted: **Thu Nov 16, 2017 12:18 am**

noxiousdog wrote: ↑Thu Nov 16, 2017 12:13 am
Rip wrote: ↑Wed Nov 15, 2017 10:36 pm
noxiousdog wrote: ↑Wed Nov 15, 2017 9:25 pm
Zarathud wrote: ↑Wed Nov 15, 2017 4:14 pm It depends on how they're granted, the terms, and the industry. Capital gains are reported as income but pay lower rates.

Carried interests granted to fund managers is what should be fixed and this bill doesn't touch it yet. Instead, the priority is to screw you not the wealthiest.
And, let's be real, option profits should not be subject to capital gains anyway. It should be income. The point of capital gains is to lower the bar for investment, not to make people pay less taxes.

At least that's the theory.
I would say income when exercised and capital gains on what the increase in value is when sold.
Why? An option has no equity. It's a lottery ticket. Gambling winnings are taxed as income.

The only reason options are treated as capital gains is because rich people use them and have made tax law in their favor.

Once you exercised it becomes an asset I would think. An increase in the value of that asset from the time you acquire it until you sell it would be a capital gain. At least that is what makes the most sense to me. But I'm certainly no expert on the subject.

Posted: **Thu Nov 16, 2017 12:48 am**

Because the conversation goes back and forth between standard options that you can buy on the market vs. those that are given to you by your employer, there is some confusion over value on the employer given option whereas the market obviously knows what the the market options are worth, it's their price for buying the option.

I think you're jumping from one to the other without clarifying which you're talking about Rip, which is adding to the confusion. At least that's my interpretation.

Normal options are clearly capital gains when bought and sold before they mature. ND suggests they are lottery tickets after that, which I guess is fair, however the very nature of the stock market is speculation, so I'm not sure what ND finds special about options versus regular stock. Buying stock or buying the option to buy stock, shrug.

I would think that once an employee is vested, the options are worth the current stock price minus the option price. If the option is executed, it's capital gains/losses. Before, it's just the value of the option.

It's clearly an employee benefit. The only argument is when to tax it. The capital gains part seems straight forward, but you had to get the options from somewhere. They didn't magically appear in your investment portfolio. And that's the crux of what's being argued, as far as I can tell. How much are those options worth when you receive them? Zarathud seems to think that they can be evaluated, and since he does this sort of thing for a living, for people with a lot of money, I'll simply accept his opinion on the matter. It's beyond my ken anyway.

Posted: **Thu Nov 16, 2017 12:57 am**

geezer wrote: ↑Wed Nov 15, 2017 11:02 pm
Rip wrote: ↑Wed Nov 15, 2017 10:36 pm I would say income when exercised and capital gains on what the increase in value is when sold.
You want me to pay income tax on a good that I buy?? So if I *buy* a house, I should pay income tax on that house and then pay tax again if I sell it for a profit?

You should always get to apply any price you pay (tax basis) to reduce the income tax. If the option vests with no out-of-pocket cost (carried interest or stock grant), you should be taxed on 100% of the value. If the option has a strike price (a typical over-the-counter option), you should be taxed only on the gain (at time of exercise or vesting).

If you buy a house, you pay no tax unless you get it partially as a gift and partially as a sale. You pay tax again (capital gain) when you sell the house at a profit. Standard tax rules should cover these situations, assuming Congress doesn't break them in the tax bill (or in past legislation).

The idea of taxing capital gain or appreciation before the total gain is known as "mark-to-market." While it may cause some taxpayers to sell to pay the tax, it creates a more steady stream of income tax than the current system which encourages gaming.

Gaming the tax rules is an issue for orderly government, if you find that socially valuable. Why sell an asset in December 2017 when your tax rate will go down as of January 1, 2018? Distortions are why temporary tax rules are hugely counterproductive, and why the Republican party's budget shenanigans have driven me firmly away over the years. The whole argument that they'll pass "temporary" tax cuts for individuals with the expectation of extending them later is anathema to sound tax policy.

Posted: **Thu Nov 16, 2017 7:19 am**

noxiousdog wrote:
RunningMn9 wrote: ↑Thu Nov 16, 2017 12:11 am I’m not sure everyone understands that. I don’t know how many people here have directly dealt with them before. I have no trouble treating the proceeds as income vs capital gains - when the sale takes place.

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I'm pretty sure Zarathud has more experience with this than anyone.

Maybe he does. But I’ve personally received nearly a dozen grants and have personally experienced just about every scenario imaginable with them over the years. And based on that experience (detailed above via math), taxing at the moment of vesting is something that would only make sense to someone that doesn’t really understand what they are or how companies use them (the scenario creating the “problem” that some people think needs to be solved is not the predominant usage).

Taxing at the point of exercise vastly simplifies things and is the only way to ensure that we’re taxing the proper amount to the employee.

Also, the argument to tax at the long term capital gains rate would apply to an exercise and hold scenario where the stock was purchased by the employee and held for at least 18 months. And the argument for that is that you paid a fuck ton of money for the stock and held it for 18 months. So why wouldn’t you treat it the same way as all the other times people spend money to buy stock and lock that money up for 18+ months?

Posted: **Thu Nov 16, 2017 7:30 am**

To use the house example. An employee stock option grant would be comparable to the company saying today this house is worth $200K, if you stay with us for at least four years, we will let you buy the house for $200K. In four years the house might be worth $150K (and you won’t be allowed to buy it), or it could be worth $300K and you could buy it and sell it to make $100K. Or I could still not buy it and speculate that it will eventually be worth even more.

In either scenario, when the four years expires, I don’t own the house. Suddenly pretending that I’ve bought a house and taxing me on it doesn’t make sense. I don’t own the house. I may never own the house. Why would you tax me on the proceeds from selling a house that I don’t and may never own?

This is different from a call option in another fundamental way. Which is that when the call expires, if the current price is at or above the strike price, the owner of the call must buy the stock. At that moment they own the stock. Incidentally, last year I sold a bunch of calls on VTI. When I sold the calls and got that money, that would be taxed. When the call expired and the buyer got my shares of VTI at a discount, he was not taxed on the spread value. He won’t be taxed on that until he sells the stock and realizes any gains. Because that’s the only sane way to approach this.

Posted: **Thu Nov 16, 2017 9:46 am**

RunningMn9 wrote:Taxing at the point of exercise vastly simplifies things and is the only way to ensure that we’re taxing the proper amount to the employee.

Remember when the Republicans promised to simplify taxes rather than just add more loopholes?

That's simple and sensible, but not quite the only way. Your stock option could be covered by another transaction, or the company could permit you to borrow against the option.

RunningMn9 wrote:Also, the argument to tax at the long term capital gains rate would apply to an exercise and hold scenario where the stock was purchased by the employee and held for at least 18 months.

There are many options in how the option can be structured to make it look more like capital -- like a carried interest. Many industries and companies keep it simple.

Posted: **Thu Nov 16, 2017 10:29 am**

Yeah, I don't disagree with anyone that there are a lot of things that we *could* do. I just don't believe that there is a problem here that needs solving, and from firsthand experience I have seen that the way it worked for me is by far the simplest and most reasonable way to handle the issue.

If we simply must concern ourselves with CEOs that are paid in stock options to avoid taxes, then there has to be a more sensible approach. Maybe leave Employee Stock Options alone, aside from putting a cap on the grants (based on number of shares), and setting a formula for determining strike price (something like the average between the open/close of the stock price on the day that the grant is made). You'd probably have to make a distinction between publicly traded companies that have an easy market to determine that, and private companies whose share price is more difficult to determine.

And in addition to that, create something like an Execute Stock Option Grant that you treat differently to fix this "problem".

Posted: **Thu Nov 16, 2017 2:29 pm**

I see a ton of people living in NJ arguing that this is a good plan as they just don't get it. It's really a shame that people just blindly follow things without looking up the facts. It will be hard to argue when they see their taxes go up hundreds of dollars a month. I hate this country so much right now.

Posted: **Thu Nov 16, 2017 2:46 pm**

Octavious wrote: ↑Thu Nov 16, 2017 2:29 pm I see a ton of people living in NJ arguing that this is a good plan as they just don't get it. It's really a shame that people just blindly follow things without looking up the facts. It will be hard to argue when they see their taxes go up hundreds of dollars a month. I hate this country so much right now.

The sad[dest?] part is that it will not be hard to argue at all, just as it's not hard for lots of folks to argue today that the continued increases in healthcare premiums are all that mean old Ba-rack's fault.

Posted: **Thu Nov 16, 2017 2:53 pm**

The House just passed their version of the tax bill.

Hooray?

Posted: **Thu Nov 16, 2017 2:56 pm**

Fuck them and their huge tax hikes. The only positive is they are cutting own throats.

Posted: **Thu Nov 16, 2017 3:24 pm**

malchior wrote: ↑Thu Nov 16, 2017 2:56 pm Fuck them and their huge tax hikes. The only positive is they are cutting own throats.

If so they are using a butterknife. I do not credit their constituents with the ability to see what was done to them and recognize who did it. That and gerrymandering out the wazoo will keep them mostly safe. Fuck heads.

Posted: **Thu Nov 16, 2017 3:26 pm**

How I envision today's vote went down.

Posted: **Thu Nov 16, 2017 4:01 pm**

227-203 vote

Posted: **Thu Nov 16, 2017 4:02 pm**

Remus West wrote: ↑Thu Nov 16, 2017 3:24 pm
malchior wrote: ↑Thu Nov 16, 2017 2:56 pm Fuck them and their huge tax hikes. The only positive is they are cutting own throats.
If so they are using a butterknife. I do not credit their constituents with the ability to see what was done to them and recognize who did it. That and gerrymandering out the wazoo will keep them mostly safe. Fuck heads.

A lot of their checks will go down immediately as the payroll changes occur. That is why it will potentially be bad for them. Even Rs that voted no could get swamped in the backlash.

Posted: **Thu Nov 16, 2017 4:06 pm**

Zarathud wrote: ↑Thu Nov 16, 2017 4:01 pm227-203 vote

I'm not surprised that the bill passed. It's completely bonkers to me that more Republicans didn't vote no, though, given that they could spare a few no votes. They seem genuinely delusional about the politics of the bill.

Posted: **Thu Nov 16, 2017 5:54 pm**

So is this really basic example accurate?

Standard Deduction Pre-Asshole Family of 4 (We will ignore the child credit stuff for now)
12,600 married filed jointly
4,050 person 1
4,050 person 2
4,050 kid 1
4,050 kid 2
total = 28800

New proposed
24000

So -4,800... That seems like it would be really bad for large families...

Posted: **Thu Nov 16, 2017 5:59 pm**

El Guapo wrote: ↑Thu Nov 16, 2017 4:06 pm They seem genuinely delusional about the politics of the bill.

This is one of the problems of living in an echo chamber that is increasingly divorced from reality. I'm sure they all watch Fox News at night and hear about how much the country loves them, but as a result, they aren't hearing from the nearly twice as many people out there that are disgusted with what the Republicans have become.

Posted: **Thu Nov 16, 2017 6:02 pm**

The deduction for married couples in the House plan is $24,400, but your basic accounting is correct, Octavious.

Posted: **Thu Nov 16, 2017 6:09 pm**

Wow that's going to hurt some people. I haven't really figured out how screwed I am yet. I'm going to pull my tax return from last year and see. I think I might end up owing A LOT more. I'm beyond disgusted.

Posted: **Thu Nov 16, 2017 6:17 pm**

They're also making tuition benefits (TA tuition breaks for grad students, tuition breaks for university employees) taxable. Those are pretty crazy to tax, because they're not convertible into cash for some time. I suppose a university could cover the taxes for grad students / employees (or loan them the money for the tax component, although that removes part of the point of the tuition break).

Posted: **Thu Nov 16, 2017 6:23 pm**

Octavious wrote: ↑Thu Nov 16, 2017 6:09 pmI think I might end up owing A LOT more.

If my taxes under this new plan call for me to pay even more than I already do?

Posted: **Thu Nov 16, 2017 6:26 pm**

They’re proposing to tax tuition remission (common in PhD programs) as income. This would completely decimate higher education for many, maybe most, students.

Many universities provide a stipend of around 20k for their PhD students (typically in exchange for the student being a teaching or research assistant). They pay taxes on that stipend. At top private schools, tuition could be an additional 40k but this is waived for PhD students at many universities. If it suddenly became news taxable income, a student in my example would be required to pay tax on 60k even though they only receive 20k. This would be prohibitive for most students and completely kill the current model.

But of course demolishing higher ed is a feature not a bug of today’s GOP.

Posted: **Thu Nov 16, 2017 7:53 pm**

I wonder how accurate this is. It makes it seem like it wouldn't be as soul crushing for me as I'm thinking it will be. My property taxes aren't as batshit insane as most people in the state since my house is tiny, so I have that going for me?

url]http://www.businessinsider.com/trump-ta ... es-2017-11[/url]

Posted: **Thu Nov 16, 2017 9:07 pm**

Smoove_B wrote: ↑Thu Nov 16, 2017 6:23 pm If my taxes under this new plan call for me to pay even more than I already do?

There are few non-poor or super-rich NJ home owners who will not be affected. I'm personally going to ask for a raise specifically because my taxes are going to skyrocket. I'll start holding my breath now.

I rank this as having a high risk of causing our state's shaky finances to totter over. Suck $3000 to $6000 out of 150K households in one state and send it elsewhere and you have a multi-billion dollar hole in our economy. That money will not be spent in NJ. Consider that NJ GDP growth is near the bottom of the pile. Consider that one of the few incentives we have are tax breaks to businesses since everything else costs a king's ransom. It was shit policy but it was all we had. Now every red state is going to swoop in and pick us apart. This is warfare against blue states. California or Mass can survive this. NJ and IL probably aren't in a position to survive it. All to make the most inequal western democracy - more inequal. This is pure insanity - they are literally channeling Marx and are digging their own graves.

Posted: **Thu Nov 16, 2017 9:11 pm**

Octavious wrote: ↑Thu Nov 16, 2017 7:53 pm I wonder how accurate this is. It makes it seem like it wouldn't be as soul crushing for me as I'm thinking it will be. My property taxes aren't as batshit insane as most people in the state since my house is tiny, so I have that going for me?

url]http://www.businessinsider.com/trump-ta ... es-2017-11[/url]

It is complete fantasy stats - heritage level nonsense. This is a big lie and it in any case it doesn't model NJ at all. It isn't even close. Nearly 40% of households here itemize. That'll drop precipitously with SALT at 10K or off the table entirely. It will crater NJ's already crap economy. I don't know the other state's well enough to analyze them but this will be potentially catastrophic for NJ.

Posted: **Thu Nov 16, 2017 10:26 pm**

Consider it a departing FU to NJ from Chris Christie.

He can only look better if the state goes down the toilet.

Posted: **Fri Nov 17, 2017 12:10 am**

malchior wrote: ↑Thu Nov 16, 2017 9:07 pm California or Mass can survive this.

Education, health care, and clean energy are three of our biggest economic sectors in MA. We might survive on the strength of biotech (because that doesn't need advanced education, right?), but much of our economy is under attack. This is unsurprising; we always suffer under anti-science, anti-future administrations.

Posted: **Fri Nov 17, 2017 6:51 am**

Zarathud wrote: ↑Thu Nov 16, 2017 10:26 pm Consider it a departing FU to NJ from Chris Christie.

He can only look better if the state goes down the toilet.

What's crazy is his administration gave away billions in tax breaks to corporations to attract business and still our GDP growth was still bottom of the barrel. Turns out they want stable costs and infrastructure. Whoops. He was a complete and utter failure and only hastened what will likely come soon.

Posted: **Fri Nov 17, 2017 10:58 am**

Posted: **Fri Nov 17, 2017 11:15 am**

just realized the updated child credit increases are only for five years. My god they really just want to kick the little people in the nuts.

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Posted: **Fri Nov 17, 2017 11:21 am**

Octavious wrote: ↑Fri Nov 17, 2017 11:15 am just realized the updated child credit increases are only for five years. My god they really just want to kick the little people in the nuts.

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Correct the argument is that they can't pass it via reconciliation without making some sunset. Their promise is that those cuts will become permanent when the Corporate tax cuts provide all the miracle grow-like economy magic. Unfortunately it is a complete sham. This is a setup to gut social services. My opinion is this is literally the plutocrats looting the country before it all falls apart. I think they know exactly what they are doing. The long-term plan is to get clean post-tax money and get it out of the country as soon as possible.

Luckily a hero will emerge to solve this problem.

Posted: **Fri Nov 17, 2017 11:37 am**

pr0ner wrote: ↑Thu Nov 16, 2017 2:53 pm The House just passed their version of the tax bill.

Hooray?

But the sky's not really falling here, right? Nothing even resembling what the House passed is going to make it through the Senate, right?

It better not. From my own personal perspective, my understanding is I will be royally screwed. We're a two income, upper middle class family with 3 kids (hopefully) heading to college in the next 5+ years. We always itemize deductions (mortgage interest and property taxes are by far the biggest). I'm told we'd be in for a serious tax hike under the House plan.

Posted: **Fri Nov 17, 2017 11:45 am**

Kurth wrote: ↑Fri Nov 17, 2017 11:37 am
pr0ner wrote: ↑Thu Nov 16, 2017 2:53 pm The House just passed their version of the tax bill.

Hooray?
But the sky's not really falling here, right? Nothing even resembling what the House passed is going to make it through the Senate, right?

It better not. From my own personal perspective, my understanding is I will be royally screwed. We're a two income, upper middle class family with 3 kids (hopefully) heading to college in the next 5+ years. We always itemize deductions (mortgage interest and property taxes are by far the biggest). I'm told we'd be in for a serious tax hike under the House plan.

Kind of wish I had better news for you here. The Senate bill is worse than the House bill in a lot of ways, including by eliminating SALT deductions entirely, whereas the House 'merely' limits them. Ryan and McConnell are both clearly all in on the "slash / eliminate every deduction helping lower and middle income people in order to pay for a large corporate tax cut and tax deductions for the idle rich" plan. So anything that passes the Senate is likely to be about as horrible as the House bill, just horrible in slightly different ways. That the Senate GOP is trying to add eliminating the ACA individual mandate as part of their bill does marginally raise the chances that the whole effort comes crashing down entirely. Also Ron Johnson opposing the current Senate bill (for not being conservative / harsh enough) does gum up the works there a least little bit (although it's very likely he'll ultimately vote for whatever the final bill is).

Basically anything that passes is going to be terrible for America and probably terrible for you, so we're mostly hoping that the GOP screws everything up in the meantime.

Posted: **Fri Nov 17, 2017 11:54 am**

Actually, there is one piece of quasi-good news for you. A lot of the ways that the GOP tax bills would raise taxes on lower and middle income people, as written, come from tax credits / deductions / etc. that under the bill will expire 5 - 10 years from now. It's written like that because under reconciliation rules they need the bill to be nominally budget neutral after 10 years. But they're desperate for the upper income and corporate tax breaks to be permanent, so that they don't have to have the upper income tax breaks yanked away like the Bush tax cuts were. So instead they're making the lower and middle income tax cuts expire, figuring that they can count on Democrats to go along with a later bill extending *those* tax deductions / credits. So (while I haven't gamed this out for my family's situation), there's a reasonable chance that you won't pay more taxes in the next couple years, at least.

And hey, if you need a tax break, just start a company managing private jets:

Posted: **Fri Nov 17, 2017 12:50 pm**

malchior wrote: ↑Fri Nov 17, 2017 11:21 am
Octavious wrote: ↑Fri Nov 17, 2017 11:15 am The long-term plan is to get clean post-tax money and get it out of the country as soon as possible.

Dubai, baby. That's why we've spend the last 25 years preparing the region for the new elite stronghold.

Posted: **Fri Nov 17, 2017 6:10 pm**

Orrin Hatch wants us to be distracted by his taking offense and acting the sanctimonious shit. It is almost amazing how every one of these assholes always plays the personal offense card without getting called on that. He knows what he is doing. What a piece of shit.

Posted: **Fri Nov 17, 2017 7:12 pm**

Noted communist Bruce Bartlett weighs in.

Posted: **Tue Nov 21, 2017 3:23 pm**

Isgrimnur Isgrimnur isgrimnur

I read via bumpersticker social media that private school tuition is deductible under the proposed new tax law but "Student Loans" are not. Is that true? (Were student loans deductible before? Mine never were. I also never go the any of the learning credit tax breaks. I'm always too early or too late when it comes to tax incentives.)

Posted: **Tue Nov 21, 2017 3:26 pm**

Student loan interest paid is deductible currently under certain incomes.

The deduction is phased out - beginning at 65K for singles/130k married and completely phased out at 80k/160k. It is for up to $2500 of interest.

Octopus Overlords

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