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Google Execs Happy With $1 Salaries
DarkClown writes "ZDNet is on the one hand reporting that Google execs will keep their $1 salaries again this year, and on the other hand is reporting that the executives cashed in more than $160 million worth of stock last month." From the stock article: "Since the search giant went public in August 2004, Brin has sold about 6.5 million shares at a market value of $1.68 billion. Page has sold about 5.8 million shares at a market value of $1.4 billion, according to calculations from Thomson Financial. Chief Executive Eric Schmidt, who was brought in to run the company before it went public, has sold more than 2.1 million shares, worth more than $502 million." They could be getting a multi-million dollar salary *and* the stock money. Good faith efforts go a long way in my book.
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> But not income tax, which is what the parent mentioned. They probably pay the (much lower) long-term captial gains tax.
In Kalifornistan, all income - salary, interest, dividends, and both short-term and long-term capital gains - is taxed by the State as well as the Federal government. Every dollar earned over $40000 is taxed at 9.3%. (Every buck over $1M is taxed at 10.3% starting January 1, 2006.)
So if you have, say, a $400M capital gain on a $500M hunk of stock, the Feds take $60M (to build a quarter of a bridge to nowhere in Alaska, or to blow up some Arabs), and Ahnold takes an extra $37M in state taxes (for the pensions purchased by the various government employees union' under the previous administration in exchange for campaign donations.)
And since the AMT threshold is measured in thousands of dollars, no, you can't deduct the $37M in state taxes from your Federal return, because you're so far beyond the AMT threshold that your accountant can't even see the AMT threshold without very long baseline interferometry.
Ask yourself what the various levels of government have done to earn a quarter of the wealth spawned by Google.
This isn't a right-vs-left issue. Wouldn't most Democrats be a little happier if the government wasn't able to take a huge chunk of your wealth in order to buy bombs to drop on brown people? And wouldn't most Republicans be a little happier of the government didn't take the rest of your money to spend on government employees' unions and welfare queens?
Sadly this is not the way it has worked in practice.
Executives are granted options that are already in the money on issue. Thus, they get substantial income even if the stock does nothing. If the stock goes down these options are regularly repriced with lower exercise prices which effectively removes all the downside risk.
Furthermore, options are a poor tool. The link should be between the executives performance and outcomes, not the stock price. The stock price will move for many reasons unrelated to the executive's performance - for example, stocks go up in booms and yet you would be hard pressed to argue that any executive was responsible for the economic boom. Thus, at a minimum, they should only be paid when their stock outperforms other similar stocks (or even just the whole market index). Instead, you see executives being rewarded heavily for good luck. If the market is going up, only the most grossly incompetent executive could make a stock go down. A mere seat-warmer is still likely to get significant returns.
The basic economics is that poorly designed incentive schemes, of which option grants are an example, encourage gaming of the system and not proper results or rewards.
From TA, they sold 6 millions shares, but they still own 30 millions. so they still have an interest in Doing Good (stock-price wise)
Since Bush's tax cuts, Capital Gains tax on any stocks held over 1 year is a paltry 15%.
I make next to nothing, and I pay more income tax than that.
It's not what you know, or even who you know- It's how many people recognize your damn
Yes, there's actually a phrase for it.
The Google founders don't just have f*ck you money, they have f*ck everybody money.
...Capital Gains tax on any stocks held over 1 year is a paltry 15%.
If you hang on to if for less than a year, you tack the amount to your income and pay that rate. Holding it for 12 months helps, as that 'income' gets taxed at a fixed rate rather than what you make at a normal income. But no worries on the tax front. Once you break a certain threshold where you get to play with the glorious ATM (alternative minimum tax) codes, which these guys certainly hit... No changes there at all...
+++ UGUCAUCGUAUUUCU
This is clearly wrong, as stock sales and dividends are two totally separate things. The sale of stock generates either ordinary or capital gains income (depending on how long you hold the stock). Dividends reflect the stockholders share of the profit in ongoing operations, and you don't surrender your stock to get them.
When people talk about 'tax cuts for the rich', the dividend income tax change was the biggie.
Yes, well, people say lots of foolish things. Taxes on dividends are "double taxation", as profits have been taxed at the corporate level once, and then they get taxed again when they're dispersed to the shareholders. The most reasonable thing to do would to eliminate the dividend tax altogether, since it really doesn't increase tax receipts so much as force companies to distribute profits in other ways. Lots of (most?) companies either don't have dividends or have insignificant dividends for that reason. Typically you wouldn't buy a stock that disburses dividends unless it's in your IRA account where you won't pay taxes on it until you retire.
You could make the argument a tax on dividends makes sense because corporations are able to avoid corporate taxes through offset pricing schemes, but the real fix there is to fix the corporate tax system, not add another layer of taxes. Of course, if we did that the super rich would actually pay more in taxes, so you won't see much support for it in Congress.
In the case of The Google Boys, it's the difference between paying a base 35% on $1.4Bn in Income, or paying a base 15% on $1.4Bn. That's over $200 million dollars less in tax
If I'm reading yahoo correctly, Google doesn't even have a dividend, so the dividend tax rate is meaningless to the founders. Since Google just went public recently they're probably paying ordinary income taxes on most of the stock they've sold.