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Google Founders Cut Salaries to $1
GeneralCern writes "MSNBC Reports that Google founders Larry Page and Sergey Brin, and CEO Eric Schmidt
all slashed their salaries to $1
last year. Since you do not have to pay FICA, Medicare, or income taxes on
the capital gains associated with stock sales, they stand to substantially decrease
their tax burden. Is this a breach of the company's "do no evil" mission
statement, or just an example of people who love their jobs so much they don't
need to be paid to go to work?" Update: 04/09 13:11 GMT by H :And don't trust the above tax lines; it all depends on how sales are done; moreover when you are worth X amount with stock, I suspect the "tax burden" of what is, relatively speaking, a salary that's small compared to networth isn't a substantial impact. Sorry folks; poor story.
Sergey Brin is, according to Forbes, already worth $7.2B. Wouldn't it be great to be so incredibly rich that you did'nt have to worry about personal income ever again?
Anyway, this is PR that's probably worth way more than the salary itself. Steve Jobs does the same thing, IIRC.
One *always* pays taxes on capitals gains from stock sales. Has nothing to do with salary.
Is it me or does the article poster spin from the left and ignore facts ?
Apple has been evil for a few years.
Not a Twitter sockpuppet... but I wish I was.
Yes we have minimum wage. The employee needs to complain, afaik. http://www.dol.gov/dol/topic/wages/minimumwage.htm
My Systems
The article poster stated that you don't pay FICA tax (another word for social security tax), medicare tax or income tax on stock appreciations. That is completely true and all of those are different than capital gains tax - which is what they would pay based on appreciation in their stock price.
I believe the article poster's premise is that they're becoming ungodly rich because of stock appreciation and that they cut their income to $1 per year to avoid contributing to society in the way that the rest of us do.
If I had to pick a reason, I'd say it's more of a PR stunt to make the Google founders appear frugal (or froogle if you like) and make it seem like the money hasn't gone to their head. Many other CEO-types have done this (including Steve Jobs).
I'm a big tall mofo.
OK. I'll try again, without the subtle sarcasm. In the original item, the word "breech" (the rear opening of a gun where bullets are loaded) is used, where the word "breach" (a disregard of rules) is meant. Still off-topic?
Isn't this what Steve Jobs has been doing for years?
"Does the US have a minumum wage?"
Yes, but that's for hourly wages, not salaries.
The tax rate for the options is probably going to roll in at 15% - certainly a lower tax rate than had it been 'earned income' (salary), but much more than zero. These rates were lowered in the 2003 tax revision - they had been 20% (there's a lower tax bracket as well, but I don't think it applies in this situation :-) ).
You only pay social security on the first $90k of earned income - so that tax relief in this case is pretty negligible (compared to the 15% of some huge number).
Of course, this assumes they sell any shares - most people in this position sit on a lot of the wealth in paper form, so there's a negligible cash flow anyway. At some point Page and Brin will diversify, but we don't know what their personal situations are like.
Furthermore, as founders, they may well have a much more complicated tax role than simply investors. This can get complex very quickly - but that doesn't intimidate the IRS.
If you've thought of the loophole, the feds have figured out how to get a piece of the pie. It's not _that_ easy!
Yes, the US has a minimum wage of $5.15/hr, but that's a wage. These guys are salaried -- they're paid for their total work throughout the year, nor for their work per hour. So minimum wage doesn't apply.
Undoubtedly they have some very good accountants, but the IRS takes a very dim view of this in General. The IRS does not want anyone to be engaged in work without compensation because it ends up cheating the federal government out of income, essentially. I forget the specifics, but I recall a story from several years ago where a pair of partners started a radio sttation in the midwest, and as there was no money coming in, they did not take a salary in order to help keep the company afloat. On tax fomrs, the company shows that it is in operation and turning a small profit, but has no employees to do the work. So they were audited, and ultimately indicted for tax fraud! The law may have changed somewhat, but the larger issue is not the minimum wage, but tax evasion, from the IRS standpoint. Of course, then there is the moral standpoint...
Bill Gates' open letter to hobbyists.
As others have said, Salaried employees (Usu. management) do not have a minimum wage. However, there must be a VERBAL agreement in order for the employee to recieve less than minimum wage/hourly even if they are on salary, in most states. (i.e. "Hey bob, can you stay until ten today? Big favor for me" "Sure, Earl" would work.)
Also, split wage (Those who recieve less than minimum wage + commission or tips) actually require a written agreement. (P.S. I live in California)
Don't you mean.. BIZZARO!
Tax evasion is a crime. However the grandparent was talking about tax avoidance which is totally legal.
http://en.wikipedia.org/wiki/Tax_evasion
Wage vs. salary does affect some laws; but not minimum wage.
m ployer/nolo/ency/244AD836-D9F5-49AE-813B0478FF9729 8B.html)
(from http://cobrands.business.findlaw.com/employment_e
The main law affecting workers' pay is the federal Fair Labor Standards Act (FLSA), found at 29 U.S.C. sections 201 and following. Although the FLSA is very broad, some employers and employees are not covered. Generally, your business must abide by the FLSA if you have $500,000 or more in annual sales. Even if your business is smaller, however, your employees are entitled to the minimum wage if they work in what Congress calls "interstate commerce." This includes any employee who makes a phone call to or from another state, sends mail out of state or handles goods that have come from or will go to another state.
There are a few exceptions. The following workers do not have to be paid the federal minimum wage:
* Independent contractors. Only employees are entitled to the minimum wage.
* Outside salespeople (a salesperson who works a route, for example)
* Workers on small farms
* Switchboard operators employed by phone companies with no more than 750 stations
* Employees of seasonal amusement or recreational businesses
* Employees of local newspapers having a circulation of less than 4,000
* Newspaper deliverers, and
* Apprentices, students and learners -- certain inexperienced workers as defined by federal law.
i imagine that patent would have expired by now, so that's kinda a moot point :)
ashridah
The taxes they'd be avoiding
Nice point, well stated. The generic fact that they were avoiding taxes was probably what got the mod points. I did not feel like becoming a tax lawyer over a simple question and used education as an example (and yes, out of your income tax there is fed money that goes to education) but your examples are better. My point is not even slightly altered. They are avoiding taxes.
Actually, it is has nothing to do with salary versus wages. It has do with whether the job description is exempt or non-exempt. Most managerial positions are exempt (meaning minimum wage/overtime etc. don't apply). Just because your paid by salary doesn't mean your not entitled under the law to overtime. Lots of white collar employees are incorrectly considered exempt by their employers. Unfortunately for Slashdot, sys admins by definition are non-exempt.
Also - it is stupid to say that accepting one dollar is a tax avoidance scheme. Earning less is always and option but not a smart way to lower your tax bill. Refusing to accept a salary because 37% of it (or whatever the top rate is) will go to the IRS is sort of silly if you are trying to maximize your after tax salary. After all 63% of it (minus state income tax) is still yours. You have more not less by accepting the salary. I'd fire my accountant for coming up with a tax strategy that resulted in me having less money.
(If they have less than 40 credits, then they should pay themselves the minimum that counts, which I think is somewhere around $360 per month. Tip for those of you looking into self-employment.)
Dunno how this could conflict with "do no evil." GeneralCern, have you stopped beating your wife?
As copyright owner of this comment, I authorize everyone to defeat any technological measure which limits access to it.
Quite frankly, looking at it from a historical perspective, you are wrong. That's the history of the minimum wage and this is the historical statistics for inflation. Notice the extremely low level of correlation.
"Action without philosophy is a lethal weapon; philosophy without action is worthless."
However the constitution did not give the right for the government to take money from the rich for the sole purpose of giving it to the poor (at least not in the US, some revisionist judges have however allowed it).
The 14th amendment gives Congress the power to tax, and gives no restriction on its use. No "revisionist judges" necessary.
Article XVI.
The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.
I usually don't read the story, but read the comments. While Slashdot sucks, there's usually a bunch of people who actually know what the story is talking about and will post the explanation and their opinions... Which is what I come for.
Don't trust a bull's horn, a doberman's tooth, a runaway horse or me.
When companies are privately owned and are run by some visionary like Henry Ford who wanted to mass produce cars, or Wozniak and Jobs who wanted to mass produce computers, yes, companies are about making products. But publicly owned companies really do have only one purpose: to maximize the return to the stockholders.
Yeah, which is why even though there is some public ownership of Google, more than 50% of the voting shares are privately held, and Google specifically warns investors that their goals for the company are more important to them than short-term profitability.
Seriously, if the shareholders of Apple decided that the best thing for Apple would be to stop making computers and become an investment bank, that's what would happen. More than a few product making companies have gone that route.
I know you're exaggerating, but come on, it's not like "the shareholders of Apple" are a small group of friends somewhere. They're hundreds of thousands of individual people with a few shares each, and a few hundred mutual fund owners, and so on. Under extraordinary circumstances, with a vocal critic of Apple making national headlines for months, they might be tempted to vote on a shareholder resolution to do something like oust Steve Jobs. But the shareholders of a computer company would no sooner vote to turn it into an investment bank than the U.S. population would vote a monkey for president of the U.S.
Simple answer. You can't patent a "mathematical expression," just like you can't patent a "law of nature." However, you can patent the application of either solve a specific problem.
The same way you patent anything else, and for the same reasons.
Except that you *can't* patent mathematical expressions. That's the whole argument against software patents --- all algorithms are trivially reducible to mathematical expressions in the lambda calculus, and you can't patent those.
A deep unwavering belief is a sure sign you're missing something...
I've never been audited, but I have been told and read the same. You are expected to pay yourself a reasonable salary for the work you actually do for the corporation. As an/the owner, you are still an employee for the purposes of the work you do. When you own a corporation, you are not self-employed. You are an employee of the separate legal entity, your business, and you are a shareholder.
I pay myself a "reasonable" salary plus dividends for my work. However, as I have an employee, I take the profit I earn due to his work as pure dividends.
I definitely recommend going S corp, in particular if you have a head for doing the legal/accounting aspects of the business. It is a little more work than a sole proprietorship, but it gives great benefits. Except, you can't deduct your benefits (pun intended) such as health care as a business expense. You can however deduct most/all of it on your personal income taxes, which is where an S corp is taxed in reality. The S corp pays no income taxes to the federal government directly.
Larry