Update On Stock Options/RSUs Issue

I just saw this on my twitter:

This means that the Senate has now made the tax reform bill a win for those who work in startups instead of a loss.

I’m thrilled and I want to thank all of you who called your elected officials and those in the Senate Finance Committee who clearly understand the importance of equity compensation to the startup model.


Comments (Archived):

  1. awaldstein

    I made the calls and glad to see this happen.I woke up to the news that the plan is to pass the bill now by removing health care from 13 million people.What a shit show Fred and hard to be unemotive about this.

    1. Tom Labus

      Supply Side economics is not economics but the cornerstone of every con run in history

      1. awaldstein

        Yup–on a flight the other day read the whole Horse and Sparrow background and the data on each time it has been attempted.Con run is a good way to put what is happening under the guise of some higher goal.

  2. jason wright

    this is very interesting to observe. your political process seems quite open to the influence of lobbying in near real time.EDIT 11:44 GMT.helps to explain the oversized influence of foreign interests in America’s decision making and actions process.

    1. Rob Underwood

      Re “quite open to the influence of lobbying in near real time.” –> probably true historically compared with other countries, for better or worse. On the for better side, the Congress is there to do the will of the people, so responding in this way is probably a healthy sign.However, it must be observed that a whomever shouts the loudest form of policy making can lead to legislation most favorable to only the loud and powerful. On a somewhat related note, we also have a republican (small r) form of government vs. a direct democracy (now perhaps more technologically possible than it once was) in part to moderate legislation and balance out government that would otherwise be the always the whim of the majority (see some of the issues in the California propositions historically — though must be said in Maine, my home state, referenda have been a powerful check and balance to the governor there in the last few years most recently just last week w/ Medicare expansion.)But the larger point is that our democracy and legislative process has broken down. Add to a very long “It’s not normal” list that we’re now trying to do arguably the two largest forms of legislative reform – health care earlier this year, and now tax reform – in days and weeks when these were historically done over months and years.In more normal days, there would be lots of hearings and study of the implications of policies, and authentic opportunities for individuals, businesses, etc. to weigh in. But for various reasons, including the incredible situation in Alabama with accused pedophile Roy Moore who maintains significant support still among Christian evangelicals, a critical block of voters in that state, the GOP leadership feels like its legislative power to rally the votes is tenuous. Hence the desire to want to ram this through and put points on the board even faster, implications and consequences be damed. Of course this was the same party that bemoaned deficits, the debt, and a now comparatively glacial ACA legislative process as way to fast just a few years ago.More generally this is the result of a governing philosophy that’s chief tenet is “own the libtards.” The origin of this tax at vesting policy proposal was likely the realization by someone in the GOP caucus that many startups are in California and New York and hence, like the SALT tax reduction, this policy could be another way to “own the libtards”, to stick it to the blue states who already subsidize many of the red states. Thankfully, some more sober, thoughtful members of the GOP (and thankfully there are some, like Portman, Collins, and – I hope – my fellow Xer Sasse) seem to have come to their senses for a moment.Make no mistake though — we’ve entered a cold civil war and stuff like this is going to only get worse, and hence constituencies will have to get better still at rapid organizing like the startup community did this week. As a country, we’re not coming apart, we’ve altogether come apart. I want to believe we can come together again, but the bounds of common values and a shared vision for our future seem gone replaced by deeply emotional desires by each side to exert maximum harm and hate on the other.(On a loosely related note, the HBO documentary on Rolling Stone is absolute must watch and provides some interesting context on how we got here).

      1. JLM

        .If one genuinely wants to understand the basis and logic for some of the proposed tax cuts, one only has to research from whence they originated.In every single instance, they were driven by nationwide concerns — banking, homebuilding, insurance, energy. They were created to support a particular industry.The balance between the composition of the Senate v the House has ensured that regions do not dominate other regions as well as ensuring big states don’t exert undue influence over small states.When it comes to national energy legislation in the Senate, Wyoming and Montana get the same voice as N.Y., California, and Texas.It seems a little disconnected from reality to suggest that tax policy – particularly tax reform and reduction – is triggered by regional differences.Having said that, there is nothing new or novel about discussing SALT, capital gains, property taxes, carried interest, estate taxes in the context of tax fairness.JLM http://www.themusingsogheredcar.com

  3. LIAD

    wow!democracy in action in real-time.impressive.

  4. Ludwig

    Hello from Germany: This is also great news for VCs who nie don’t need to invest more money in underpaid startup employees’ salaries, right?But to make this sure: the idea was stupid and for the ecosystem this is good news, and I admire your political system allowing for real time political lobbying. This wouldn’t work here.

    1. PhilipSugar

      From America. Startup employees other than founders are not underpaid. Options are the icing on the cake if true value is created.

      1. Rob Underwood

        I generally agree with you Phillip on most things, but I’d quibble a bit here. I do agree in general — startup employees are not underpaid but instead paid less on a cash only basis than what they’d make “in the market”, which really means working for more established companies, not the market as a whole. And with equity compensations is meant to be, at least in theory comparable.But there are also startup employees, especially at earlier stage startups in high cost places like NYC and SV/SFO, who do not make enough money to get by month to month and have to live off of other jobs, gigs, or other sources money (trust funds, inheritances, etc). It took my only a couple seconds to find a couple startup developer jobs here in NYC on AngelList for skills like React that pay $40k or $50k, and that is neither market nor truly a living wage here in NYC. If you’re being paid $50k as a React developer in NYC — you’re underpaid.BTW, I’d argue that this — the inability to pay employees of early stage startups enough for them to pay basic living expenses – is one barrier to fostering more diversity in startups. (I’d also add another barrier to diversity in startups and tech more generally — the insistence at many companies that developers have made significant OSS contributions as evidenced by github accepted/merged PRs, etc… while I get the intent behind this, it’s often the case that presenting a huge body of production quality dev work done for no compensation is something only those who have the means to not work for months at a time can do when they are young).

      2. BillMcNeely

        Here in Dallas employees are underpaid. Probably 50% of market would be normal. not enough exits to prove out equity payoff is worth the paycut

        1. Rob Underwood

          “not enough exits” is an issue in NYC too. I hear young people more and more saying “I know the options will never turn into anything real”. This in turn contributes to the strategy of some to try and work for as many startups as they can, leaving once they’ve secured their first traunch, effectively over 5-10 years creating a portfolio with hopes that one of the ten or fifteen chunks will pay out, similar basically to a VC fund strategy.

          1. Salt Shaker

            That’s a good model for employees to follow, like betting on 4 diff teams to win the SB, but it displays the inefficiencies (and shortsightedness) of the startup model, particularly when more and more employees realize the options gambit is a bit of a ruse w/ low and long term exit rates. Turnover and replacement hires come w/ a learning curve and no institutional knowledge, not the best scenario for biz building. The industry def needs more balance in cash/equity compensation, but that’s likely not gonna happen anytime soon. Caveat Emptor.

        2. PhilipSugar

          Average salary for a developer in Dallas $80k. I can tell you much higher is reality. So yes, no skill no pay. But right out of a ten week bootcamp here in wilmington? $60k

      3. LE

        I don’t get the entire notion of ‘underpaid’ to begin with. It really sounds like some kind of entitlement at the core.Nobody (young people) is forced to live in a high rent area just as nobody is forced [1] to take a particular career path.If you can’t make a living in SF or NYC doing what you ‘love’ to do maybe you should move elsewhere or consider doing something else. And it won’t be as nice but to bad.There is nothing that makes software developers (or people in ‘startups’) more special or entitled than, say, actors wanting to live in LA who then complain that Beverly Hills is nicer but they can’t afford to live there. Or actors in NYC who have to wait tables and live in a shitty walkup in order to be able to go on auditions. You can’t live in a low cost area and pursue your dream? Welcome to real life.Let’s recognize this for what it is.That said, the startup business is great and I profit greatly from it so keep up the fight.[1] This isn’t the USSR and central planning deciding careers.

        1. sigmaalgebra

          > You can’t live in a low cost area and pursue your dream?The Internet often permits just that. From nearly anywhere in the more developed world, can develop a Web site. Likely nearly anywhere in the US big enough to have, say, a McDonald’s, there’s consumer coax Internet data rate enough for a Web site with significant revenue, well over $100,000 a month just from ads. For more, host the Web site on the cloud.E.g., I’m doing the work for my Web site 70 miles north of Wall Street. It’s a relatively rural area, nice — deer in back yard although I haven’t see the local flock of wild turkeys recently — but I don’t really have to be here.

  5. Tom Labus

    This is good news but the Bill itself is still a mess with Obamacare mandate repeal now tossed into the mix.

    1. pointsnfigures

      Some of us think that is a great idea.

      1. Tom Labus

        I understand but we are suppose to be in this together

        1. Richard

          So why didn’t VCs contact their representatives to change the pass through income exception?

      2. Salt Shaker

        13 million potentials w/ out healthcare will lead to a fair share of sickness and personal bankruptcy, where no income tax will be captured and a shift to increasingly underfunded Fed/State social services will occur. Homelessness (already a major crisis nationally) and healthcare costs will rise for all, while many hospitals could easily be driven to insolvency. The mandate is a good circuit breaker on a lot of diff fronts.

        1. Pointsandfigures

          Let’s be honest. Virtually all the numbers on healthcare have been entirely wrong throughout the whole process. There were never 25M uninsured and the budgeting amounts were always wrong-and premiums skyrocketed with less service. Obamacare was ruled by SCOTUS as a tax-so repealing the individual mandate is simply a tax reduction (and a good idea). Most of the people you cite will have access to healthcare-it will be government funded Medicaid. Not the best situation but until we truly embrace free market cross border competition with no mandates, and full price transparency so an actual market can be created we aren’t going to see a drop in health care prices. Show me which political party can get behind that (hint: it’s neither) Repealing Obamacare should simply be a starting point. Socialized medicine isn’t the answer. Neither is mandating Cadillac care. Only a free market transparent price system with lots of competition will work for citizens. Separating insurance from your job will help citizens. No one is worried about that right now.

          1. Salt Shaker

            Medicaid dollar allocations are heading south, the pot is shrinking, while demand will only grow. Even if only 3-5% of that uninsured group ends up in bankruptcy that’s still a huge financial burden for a system already under duress, even if you assume 13M is an inaccurate and inflated number. Make it 3M less potentials, it’s still gonna be a financial mess that will cost everyone (including you and me) a lot more in the long run vs. mandate retention, independent of the lives saved. A mandate shouldn’t be viewed in a vacuum, it’s an octopus.

          2. Pointsandfigures

            We can agree to disagree on this point. There is no competition in medical insurance markets. There are price floors, ceilings and subsidies, without transparent prices. Perhaps we should be designing a well functioning market.

          3. alhutch

            While a “new” market is designed from the ground up, what happens to everyone else? As mentioned above, the mandate is a good circuit breaker to keep much worse outcomes at bay. Incremental steps are the only realistic way to get to your “better” system.Are you also against mandated car insurance coverage?

        2. awaldstein

          You are completely correct.

        3. Richard

          How does the elimination of this tax FORCE 13 million to be without insurance?

          1. Salt Shaker

            Never said the elimination forces anyone to be w/ out insurance. But let’s be honest, if given an option, many will just take a flyer. Certainly that’s their prerogative, but bad health is not something you can sched in your calendar. The law of unintended consequences is a big part of the equation that likely becomes a shared burden. A so called “individual decision” has consequences for others, too.

          2. JLM

            .The vast majority of the voluntary uninsured are young who think they are invulnerable. They should have catastrophic coverage.JLM http://www.themusingsofthebigredca...

          3. Salt Shaker

            Doesn’t the mandate kind of push them in that direction? Forces them to explore options (penalty vs. premiums), where many will upsell to a catastrophic plan.

          4. Richard

            I’m not convinced that the penalty which is far less than the premiums will change this?

          5. Salt Shaker

            Maybe not, but it does force people to make an informed decision, vs. kicking the can down the road.

          6. Richard

            There is another solution. If everyone has a Jewish mother, no one would even consider being without health insurance.

        4. JLM

          .It is difficult to see how eliminating a “punitive” tax imposed on those who already do not have health insurance fosters more uninsured.You can only be “uninsured” once.As an example, I used concierge medical coverage which did not qualify as insurance under Ocare. I paid the mandate punitive tax. I was and am insured.Last point, I do not believe any set of numbers related to insured or uninsured from the guys who told us we could keep our doctors, plans. How could anyone?What we need is national competition and a single base plan. With Medicaid and Medicare, this will work.JLM http://www.themusingsofthebigredcar

          1. Salt Shaker

            The CBO provides the estimates, and O said you can keep your plan/doctors. Diff sources. Not defending, as I got screwed financially w/ O-Care. More expensive, less coverage. My monthly premium for 2018 (same coverage) is gonna rise 46%. It keeps getting worse, and there evidently is no incentive to fix it.

          2. JLM

            .The CBO only provides “estimates” to score the impact of an impending bill on the deficit, the budget, and the National debt.They have been breathtakingly wrong.They have nothing to do with actual performance which comes from HHS, IRS, BLS.JLMwww.themusingsofthebigredca…

          3. Parkite

            +72% ($1450/mo) for me this year and need to spend $14K in deductibles for a family of 4 before we get any real benefit.

          4. Salt Shaker

            That’s crazy. Not as much the premium as the high deductible, which creates a disencentive for even seeing a doctor, unless it’s a necessity. In essence, in practice it becomes more or less a catastrophic plan.

          5. Marc Whitman

            “What we need is national competition and a single base plan. With Medicaid and Medicare, this will work.”Agreed, but that is completely the opposite of what this bill is and what it will do. They’re going to add 1.5 trillion to the deficit and then demand cuts in medicaid, medicare and SS. Some of those cuts are already in the bill, but mark my word, there will be more. This has been Paul Ryan’s MO for years.

          6. JLM

            .Marc, my comment had nothing to do with the tax cut bill.To your comment, there are no cuts to SS, Medicare, or Medicaid in either the Senate or the House versions.As to the deficit, the Federal revenue has always gone up after tax cuts. It is difficult to imagine this tax cut being different.Ryan has been a particularly ineffective Speaker. He has not passed any meaningful tax legislation, so ascribing an MO to him seems farfetched and unfounded.There is much to find fault with Ryan, but this is not one of them.JLM http://www.themusingsofthebigredca...

          7. Marc Whitman

            “As to the deficit, the Federal revenue has always gone up after tax cuts. It is difficult to imagine this tax cut being different.”–>This is just not true.”To your comment, there are no cuts to SS, Medicare, or Medicaid in either the Senate or the House versions.”–>https://twitter.com/kylegri…Ryan has been trying to find a way to cut “entitlements” for years. He may not have been successful, but it is definitely his plan. He, of course, would never admit to it.

          8. PhilipSugar

            Never actually held a job that wasn’t paid for by me. Same for Paul Ryan. Hence why you get Trump.

        5. LE

          I am not sure I would consider homelessness a ‘major’ crisis. I guess it depends on how you define ‘major crisis’ of course. I don’t think it is.According to this report:http://www.socialsolutions….There are 564k people who are homeless in one degree or another. That is about 1/5 of 1% of the population. (.0017) I wouldn’t call that a major crisis. To be fair. That’s hyperbole. Doesn’t mean it’s not a problem (for the homeless who are homeless for more reasons than economics as you know; mental illness).Obesity on the other hand is a major crisis:https://en.wikipedia.org/wi…This is brought on in part by food marketing and people’s obsession with eating tasty only and getting enjoyment from dining and food. There is little question in my mind that that has contributed greatly to this ‘epidemic’. So food marketing is the primary culprit preyin on people’s addiction to food as a way to both get pleasure and reduce stress.Alcohol abuse (as an addiction) is also way greater than homelessness (although I guess it could lead to homelessness):https://www.ncadd.org/about…Alcohol is the most commonly used addictive substance in the United States: 17.6 million people, or one in every 12 adults, suffer from alcohol abuse or dependence along with several million more who engage in risky, binge drinking patterns that could lead to alcohol problems.Ironically good medical care also contributes to more medical costs as people who are helped can continue to have bad habits that require more medical care. (And commons sense says this is the case the safety net gives you so many do overs).

          1. Salt Shaker

            Have you traveled to LA, SF, SEA, PORT, NYC or even VANCOUVER lately? Def getting worse. Seattle is a mess, in part cause social services here are generous. They keep throwing more and more money at it with no tangible results, at least that I and others I know can see. Alcohol, drugs and homelessness aren’t mutually exclusive. Throw in mental health too. It is a major crisis in many urban areas.

          2. LE

            So in NYC you see ‘more’ homeless? This is like the media showing a protest in NYC of 5000 people (which looks really ‘big’ visually) and making it seem as if the entire metro area (20 million let’s call it) has risen in arms up against something. I hate when that happens.To me a ‘major crisis’ is something that impacts a ‘major’ part of the population. I don’t see this as an issue regardless of what someone who visits those cities (and is well insulated) might encounter. In all fairness. Obesity on the other hand does. Maybe smoking at 15% of the population has a far reaching impact.In Philly when there is some cold weather problem social services go out and attempt to round up the street people with vans. The local news shows it. Last I saw (has been going on for years) they aren’t using multiple large buses and there aren’t lines of people on the streets of the city who are homeless either. (Not a scientific comeback for sure but I might as well offer that observation..)

          3. Salt Shaker

            Read the local paper’s in any of those cities. It’s not a manufactured story.

          4. LE

            This recent story says the following:There are now at least 4,177 people without permanent homes on any given night in Portland, the latest survey shows.http://www.oregonlive.com/p…The Portland SMSA is roughly 2.5 million. So once again it’s a problem but I wouldn’t call it ‘major’ for the vast majority of people in the SMSA. For the 4000 of course it’s ‘major’.And as far as ‘increase’ that depends on how the data is gathered and a through vetting of that. But even an increase of any amount does not in itself prove a point about a problem. Numbers (just like I am doing) are pretty easy to sensationalize.My question is where do you want the money to come from to reduce the number of homeless people to zero (or whatever)? Is that more important to you than other things your tax dollars are spent on?

          5. Salt Shaker

            First, the homeless gen are heavily congregated near downtown areas, where biz and tourism thrive, and where social services and panhandling can provide the most benefits to them. Looking at SMSA data is misleading. There are quality of life issues and economic consequences for residents. There are things tolerated in Seattle that would never pass muster in NYC (e.g., large number of tent cities, loitering, pan handling, drug deals out in the open). I have great empathy for the homeless. It’s a difficult problem, conflated often by drug addiction and/or mental illness. Empathy is important, but so is a degree of accountability. This prob will continue to grow w/ economic inequality.Google: Seattle + homeless.

          6. Salt Shaker

            Those are the REAL slumlords. I was a semi-slumlord when I managed family owned residential prop in nyc (not really, JK.) Btw, when I was a tenant I didn’t exceed the rent stabilization max income limit for half the time I lived there. I only exceeded it the latter half of my tenancy. The onus was on the landlord, not me, to do any due diligence. I guess I dressed just poorly enough to not whet their appetite 🙂 My 1B apt and the combined 1B next door (my neighbor also negotiated a buyout) just sold for $2.4M. What was a dump turned into a beautiful renovation. NYC RE is crazy, though.

          7. LE

            I don’t have many data points on this but I have heard from my brother in law that he rents an apartment that is rent controlled and then he re-rents it to someone else. Something like that. And makes money off it.I can fully understand (being a small landlord myself for some commercial properties) how there is no time to ferret out people who abuse the system (such as yourself!). But it also seems to me that this would be an opportunity for a third party to do due diligence and take part of the gain by providing evidence and getting people to move out so it can be re-rented at a higher rate. Probably people are doing this but NYC being so large probably not everyone that could.

          8. Salt Shaker

            There’s a cottage industry of investigator types out there tracking scofflaws. It’s also relatively easy to track a prime tenant’s whereabouts online, or explore if property or car ownership is registered elsewhere, etc. Illegal sublets and Airbnb are more a prob for bldgs that don’t have f/t services. Bldgs w/ on-premise support makes it more challenging, unless, of course, the staff is on the take. Everyone thinks Airbnb is killing the hotel industry in NYC, but tourism is up and tens of thousands of new rooms will be avail in next 3 years. I have a friend who has a large, beautiful PH apt near Lincoln Center. Private elevator and wraparound terraces. He can rent on Abnb and stay in a relatively cheap hotel for the rental period. Doesn’t do it very often, but he can still make a couple hundred a night.

          9. LE

            I have a friend who has a large, beautiful PH apt near Lincoln Center. Private elevator and wraparound terraces. He can rent on Abnb and stay in a relatively cheap hotel for the rental period.I don’t get that. Someone has enough money to own (or rent, whatever) a ‘penthouse’ near Lincoln Center, but they are going to arbitrage the difference between what they can rent for and then stay in a hotel? This makes zero sense to me. I must be missing something in this story.Is this someone living hand to mouth that really needs the amount they are making because they are trying to make ends meet? Short on cash?I see this behavior on those real estate reality tv shows. Someone has enough money to have a $10,000,000 place then they rent it out to ‘pick up some extra income’? So you have enough to carry a multi million dollar place but then you need that amount to offset your expenses?Airbnb is bad for renters forgetting about hotels. If someone can rent out a place that means the landlord can charge them more for the space and the renter has the risk and the work involved. I do this with a commercial property. In fact I hand delivered a doctor to another doctor group and negotiated the deal where my tenant gets the rent and I get nothing. I just want him to continue paying me and renew the lease. So sure rent your place out and it’s all their risk and I benefit and he is more likely to not quibble about the amount he pays or look elsewhere. So I can charge more.Related concept: I once had a guy work for me who wanted to open a side business (cafe) with his wife at the local art school. I said ‘sure do it’. I figured if he made money from that it would be less that I would have to pay him. As such I even said it was cool if he needed to take a few phone calls or go there during the day. (And it worked btw.)

          10. Salt Shaker

            My friend is between jobs and single. Nothing coming in and he has large overhead. Did not pursue while gainfully employed. Stop gap.

    2. Antone Johnson

      Agreed. GOP’s fixation on sabotaging ACA is yet another threat to the US startup ecosystem. Portable health coverage has coincided with mass migration to contract, part-time and other “gig economy” work. Take away the former and the latter is thrown into chaos as millions are again shackled to large employers offering subsidized group plans.

      1. Tom Labus

        I believe health care through your employer started during WWII as a perk since there were wage and price controls and rationing.

  6. Rob Underwood

    The startup community would also be wise to keep an eye on the ongoing debate about tax-free tuition waivers. It appears the Senate, like on the stock option taxing topic, has come to its senses on this, but this is all moving very fast.https://cen.acs.org/articlehttps://www.wired.com/story

  7. pointsnfigures

    I am glad it happened and not surprised. Every year we fought the transaction tax in Washington DC. Eventually when I would go to Washington the first thing out of a staffer or representatives mouth was, “I know, the transaction tax.”The most important thing sometimes is not to win or lose, but to have an open door so you can make a cogent argument. While most in DC do not understand the finer points of an industry that they oversee, they aren’t generally the ignoramoses the press makes many of them out to be. Most are attorneys by trade and will understand argument on issues like options and RSUs. It’s other issues where each side gets dogmatic.

  8. Amer Ali

    Thanks for bringing attention to the matter!

  9. Lawrence Brass

    Congratulations for the campaign!It is interesting to notice that when representatives do what is expected from them, it is kind of a special event.Lobbying in the open is very healthy.

  10. steve cheney

    Impressive leadership by you and all! Our tried and true system of the people influencing local reps influencing national consensus never gets old.

  11. JaredMermey

    If forced to exercise options without having opportunity to liquidate the stock and then the stock plummets beneath strike during 5 year deferral period, then is tax still owed?

  12. Antone Johnson

    We dodged a bullet here. I was picturing virtual orange “detour” signs directing entrepreneurs and startups to Canada. When combined with boneheaded hostility to skilled immigration and anachronistic coupling of first-world healthcare to full-time employment by large companies, it’s hard to conceive of a more jarring reversal of the US’ historic role as a magnet for innovators.

  13. Tom Evslin

    great news. while not a cure for income inequality, stock options are a wormhole to wealth for some and an incentive to help the whole economy by betting your labor on innovation.

  14. JLM

    .There are few things as inspiring as having liberals acknowledging and praising conservative Republicans for their business savvy and acumen. This is true bi-partisanship.Both of New York’s Senators, of course, will vote against this tax reduction bill.This also proves the maxim that we all “vote our pocketbook.”After 8 years of continuously rising taxes and anemic growth, it will be refreshing to allow citizens to keep more of their own hard earned money and to fuel the growth of the economy.Corporations will move with more certainty.I predict we will see growth of 3% + for the next 5 years. I predict we will see growth of 5% for two quarters in 180 days when these cuts kick in.Remember you are dealing with the Republicans and they have an incredible talent for screwing things up.Please remember to thank President Donald Trump.JLM http://www.themusingsofthebigredcar

    1. JaredMermey

      With the hard earned money that citizens will get to keep, do you believe using it for consumption or investment is the primary driver of growth?

        1. JaredMermey

          Yes. Trying to get to right/fair/best way of taxing (or tax returning) across a population.Consumption v. Investment as root cause tends to give insight towards one’s opinions on how to best do so.

        2. Sholto

          That is simplistic. Reducing taxes on low wage earners tends to foster consumption but can lead to investment in capital like property. Increasing consumption can lead to increases in investment if consumers are consuming US goods or could lead to greater imports. Likewise corporate investment is driven by future perception rather than taxes. If companies believe that future demand will increase then they may consider investment.

          1. JLM

            .Both incremental consumption and investment will drive jobs and growth. They are different sides of the same coin.As a guy who was a CEO of public and private companies for 33 years, I can assure you that capital investment is accelerated by immediate expensing of plant/equipment.Taxes are a critical part of any company’s COGS/expenses. Decisions are made based on net earnings (after taxes) and access to cash. A reduction in taxes will generate more cash.JLM http://www.themusingsofthebigredca...

    2. Salt Shaker

      I want to see a simple online calculator to determine precisely the impact this legislation has on my taxes. I don’t believe or trust any of these clowns, in part cause I don’t believe they know themselves. Of course, I want to see what it means for DJT, too. Honestly, what is there to hide? He’s already acknowledged taking advantage of the right offs he’s legally entitled to. Can’t he manage that spin? Not the least bit interested in transparency. Mostly slight of hand or an explanation of conspiracy theory.

    3. Marc Whitman

      Are there any real incentives or requirements in this bill that would give us any guarantee that this growth will actually happen? I see nothing but a huge giveaway to owners and shareholders. Sure, some businesses will invest some of their tax savings savings in jobs, goods and services, but many will not because they 1) are not required to and 2) more importantly, don’t have the additional demand in their markets to warrant the investment.

      1. JLM

        .There are no guaranties other than the historic perspective of EVERY meaningful tax reduction since WWII spawning growth.JLMwww.themusingsofthebigredca…

        1. Marc Whitman

          Where’s the data?How about the Bush tax cuts?https://www.cbpp.org/resear…What about Kansas and what happened since they drastically cut taxes?I am all for simplifying the tax code and finding ways to better compete with the rest of the world, but trickle down economics is a farce.

          1. JLM

            .The article you note is a screed that stands for the proposition that the benefits of the Bush tax cuts inured to the benefit of the highest earners, which is a political statement.In fact, taxes can only be decreased by those who actually pay taxes. This is a harsh reality. The top 10% is paying a hugely disproportionate amount of income taxes.The Bush cuts were phased out and then we had the Obama crash which then added more debt than every President combined.The benefit of tax cuts is stimulative, not constant.In that period, Obama raised taxes as often as he could including inventing new taxes which never existed before.He violated the sequester rules he himself authored and we have now endured the most anemic recovery in US history.This is about tax policy, its impact on GDP growth, not politics.JLM http://www.themusingsofthebigredca...

          2. Sholto

            You referred to the Obama Crash – was that the financial crisis of 2008? Calling it either the Bush crash or the Obama crash is simply political posturing and undermines your other arguments as it creates the perception that your arguments are motivated by ideological position rather than pure economic reason.

          3. JLM

            .Yes, I can see the massive confusion that creates.I care less about the Obama crash than I do about the Obama profligate spending and the Obama tax increases which saddled the Nation with more debt than all the Presidents since Geo Washington.I admit to believing, fervently, that Obama was The. Worst. President. Ever. but he had strong competition from his predecessor, Geo W Bush. W was a big spender, but O made him look like an amateur.In many ways, I am more disappointed in W as he posed as a CONservative.Many of my arguments are grounded in a certain ideology. There is nothing wrong with having a philosophy of governing. In fact, it may be essential.JLM http://www.themusingsofthebigredca...

          4. Marc Whitman

            Calling things out for being political, then immediately politicizing the 2008 recession by labeling it as the “Obama Crash?” Classic.Here’s another “political screed” proving you wrong:http://www.epi.org/publicat…But you’ll probably find some other way to ignore the facts or fudge your own.I won’t be responding further.

          5. JLM

            .The article you refer to is about the correlation between wages and corporate tax rates. It has nothing to do with nor does it address the immediate impact of reduced corporate tax rates on the actions of corporations or the immediate impact on reduced COGS, a bonanza for consumers.As an aside, 12MM illegals have more impact on wage growth.Reducing individual taxes with a commensurate decrease in Corp pass through COGS can only benefit consumers.In any growth scenario, first jobs grow and then wages increase under the pressure of full employment – not faux U3 but U6-7 rates.Sorry I scared you off.JLM http://www.themusingsofthebigredca...

          6. PhilipSugar

            My biggest disappointment of W was he originally came in and said I am not cutting spending I am cutting the rate of increase in spending.They rallied against him so hard and said he was cutting spending on educating kids, when he was just saying lets not just spend more and get the same results. Then we got massive increases in spending and no child left behind testing which was the worst thing ever. Teachers had to teach for the test because it was used like the sword of Damocles.

          7. JLM

            .Two insanely expensive, inconclusive wars. Plus the unfunded Medicare prescription benefit. At least he was not a big liar.JLM http://www.themusingsofthebigredca...

          8. PhilipSugar

            Yes we should add those as well.

          9. JLM

            .As to Kansas, it is an error of composition. It is a tiny economy and not arithmetically comparable.The better comparison is the tax policy of a big state like Texas (no personal income taxes, small corporate taxes, low regulation) versus California (polar opposite).The results speak for themselves.JLMwww.themusingsofthebigredca…

  15. Richard

    OPM. VCs love the idea of employees being compensated with someone else’s money tomorrow vs VC dollars today.

    1. Rob Underwood

      Not an entirely unfair critique though worth noting that there are all sorts of American private enterprises that rely on others to pick up the bill:https://www.forbes.com/site

  16. Jeff Widman

    Am I missing something?While it’s great that the “tax on vesting” was dropped, the “taxed 5 years after exercise” still concerns me:1) It sounds like I’ll need to pay this tax regardless of whether I’ve sold the stock?So if I exercise my options upon leaving a company, and the company stock is still illiquid 5 years later, I’ll still be liable for taxes, even if the company eventually goes bankrupt with no chance for me to sell the stock. This is different than public stock purchases where I am only taxed when I eventually sell the stock.If this is true, I and many others will probably want to exercise as many options as possible this year before the new rules go into effect. Unfortunately that exercise will result in large AMT, vs waiting til next year when AMT is likely abolished.2) What number is used to calculate the gain amount that is taxed? Is this the spread between the strike price and the 409a valuation at time of exercise?This would incentivize folks to exercise as soon as stock vests in order to keep that tax low, but could still result in a “golden handcuff” situation where the stock that is vesting in their 4th year could generate 6 figures in taxes, but they might have no liquidity for greater than 5 years if the company is not in a hurry to go public… but as an employee you wouldn’t know for 5 years so it’d be a gamble of either take the risk or don’t exercise but stay at the company so you don’t lose the options… This might result in more pressure on companies to allow employees to exercise up to 5-10 years after leaving the company, rather than the 90 days that is typical now.

  17. geomcq

    I had sent your post on the stock option tax issue to the Angel Capital Association. They liked it very much and asked me to see if you would let them reprint it. In the meantime, we learn that the offensive proposal, like Dracula, is dead at the moment. Here is what the ACA reports: https://www.angelcapitalass

  18. george

    This may spark new life into employee stock options; I’m really happy with this one piece of reform. The true beneficiaries should always be those who work hard and earn it. Keep the system simple and fair, then watch the market take it from there.

  19. Will Madden

    A slam dunk win that would have been an epic catastrophe otherwise. I’m glad someone noticed early enough to sound the alarms. I was asleep at the switch.