cisco and microsoft didn't pay federal taxes last year.
October 9, 2000 8:32 PM Subscribe
cisco and microsoft didn't pay federal taxes last year. it seems it has something to do with paying employee stock options instead....
What a surprise!What idiot at the IRS forget about this loophole?
posted by jay at 10:00 PM on October 9, 2000
posted by jay at 10:00 PM on October 9, 2000
No, let's be quick.
When an employee exercises an option to buy stock, the difference between the strike price (what the employee pays) and the market price (which is almost always higher) becomes taxable income for the employee and a tax deduction for the employer.
Stock options have always been a tax dodge, as well as an income dodge. That's why they're an inevitable part of remuneration packages. As Adbusters notes, American law is screwed by the disparity between the constitutional position of corporations as "natural persons", and the way in which they evade the duties owing to individuals. The corporate deduction becomes the employee's liability.
posted by holgate at 5:35 AM on October 10, 2000
When an employee exercises an option to buy stock, the difference between the strike price (what the employee pays) and the market price (which is almost always higher) becomes taxable income for the employee and a tax deduction for the employer.
Stock options have always been a tax dodge, as well as an income dodge. That's why they're an inevitable part of remuneration packages. As Adbusters notes, American law is screwed by the disparity between the constitutional position of corporations as "natural persons", and the way in which they evade the duties owing to individuals. The corporate deduction becomes the employee's liability.
posted by holgate at 5:35 AM on October 10, 2000
Jay: you mis-spelled "What flunky in Congress WROTE this loophole?"
The counterargument is of course that a) corporations are due tax breaks because of all the wonderful thigns they do by paying people a pittance, b) corporate owners, i.e. stockholders, pay the taxes instead, and c) the economy grows by letting them use more of their money. Same old same old.
Meanwhile, if you actually work your ass off making a living, well, you're not actually a critical piece of the American economy, so can be soaked.
posted by dhartung at 7:18 AM on October 10, 2000
The counterargument is of course that a) corporations are due tax breaks because of all the wonderful thigns they do by paying people a pittance, b) corporate owners, i.e. stockholders, pay the taxes instead, and c) the economy grows by letting them use more of their money. Same old same old.
Meanwhile, if you actually work your ass off making a living, well, you're not actually a critical piece of the American economy, so can be soaked.
posted by dhartung at 7:18 AM on October 10, 2000
The employees/stockholders paid taxes on the income they recieved from the stock
Not all of them - I work in the UK for a big company based in the US and I get stocks instead of a cash bonus (when I qualify for one) - as Holgate says, I pay tax on the difference between the strike and market prices unless I keep them for 3 years at which time the shares become tax-free. I don't work for Microsoft or Cisco but I'll bet my employer is up to the same dodge.
posted by Markb at 9:12 AM on October 10, 2000
Not all of them - I work in the UK for a big company based in the US and I get stocks instead of a cash bonus (when I qualify for one) - as Holgate says, I pay tax on the difference between the strike and market prices unless I keep them for 3 years at which time the shares become tax-free. I don't work for Microsoft or Cisco but I'll bet my employer is up to the same dodge.
posted by Markb at 9:12 AM on October 10, 2000
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Excuse me, I have to go be sick to my stomach now.
posted by kristin at 9:14 PM on October 9, 2000