Subscribe

Resources

« Rip-Van-Amazon Awakes, Opens Music Store | Main | M&A in the Digital Ad Sector is Smoking Hot; Here's Your Handy Future-Take-Out List »

May 16, 2007

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d83451656f69e200d83550f98d69e2

Listed below are links to weblogs that reference VCs Cry Boo-Hoo, Refuse to Pay Income Tax:

Comments

Victor

This is a classic case of "it's not my money so I don't care if we tax it". I think we should tax the hell out of sanctimonious bloggers.

curmudgeonly troll

A better question is why capital gains are taxed at a different rate from income.

If I own a hot dog stand, should I get taxed at a high rate if I take a salary, at a low rate if W 57 St Wieners pays me a dividend or 'capital gain' on purchase and resale of the hot dogs?

The whole system is nothing but a full employment act for accountants, lawyers and lobbyists, better blame them than the sharp investors who take advantage.

Henry Blodget

I'm not blaming VCs for taking advantage of the loophole--I'm blaming them for complaining that it is unfair that the loophole might be closed.

Alex

.....if the tax-treatment is changed, the economy will suffer and they'll quit the business.

1) "economy will suffer": hello! is anyone home. They are nutz.
2) WOW! this is like professional athletes saying the same thing. Imagine, getting real jobs and earning $90,000/year versus earning in some cases $20M+/year.


Should the tax rates increase you can bet that the VC snakes will look to increase the carry fee to new heights in order get back to par. Oh ya, they will also increase the mgnt fees.

Tom

As a point of interest, does the same reasoning hold for hedge fund managers and suchlike?

james

Your dividend from 57 st. Wieners would be taxed as income. Of course, you can move to the UK where there is no such thing as a short term capital gain...and effectively, you tax rate on gains is your income tax rate....and you get to do it at a higher rate than in the states to boot.

All this winging about paying taxes from the super rich is nauseating. A friend working at a wealth management firm says the last month of the tax year has him busy every time clients who are more interested in learning how to minimize their tax payments rather making more money. It's like a psychosis.

Here's a different take for these folk. Appreciate your taxes. (Even if you don't agree with the way every penny is spent!) They are the price of civilization. If you lived in a place for a while where tax enforcement was lax, you'd soon appreciate just how important they are, especially if you are rich; for the lucky few (be they members of the lucky sperm club, or fortunate enough to have made a pile out of the sweat of their brow) taxes are what keep the masses from ripping their heads off in the street. (Even if you don't agree with the way every penny is spent!)

curmudgeonly troll

Ummh, James, perhaps you meant dividends should be taxed as ordinary income, but they are not. To wit Wikipedia:

In 2003, President George W. Bush proposed to eliminate the U.S. dividend tax saying that "double taxation is bad for our economy...[and] wrong...[and] falls especially hard on retired people". He also argued that while "it's fair to tax a company's profits, it's not fair to double-tax by taxing the shareholder on the same profits."[2]

(Leading Warren Buffett to wonder why his income should be tax-free while his secretary pays 30%)

Soon after, Congress passed the Jobs and Growth Tax Relief Reconciliation Act of 2003, which included some of the cuts Bush requested and which he signed into law on May 28, 2003. Under the new law, dividends are taxed at a 15 percent rate for most individual taxpayers.

When the ordinary citizen needs to go to a tax preparer, the whole system is a mess, instead of targeting a particular offense against logic, we need a comprehensible system.

Don MacAskill

Man, I hope I'm not embarassing myself, but the tax law *is* nearly impossible to decipher...

"Employees who exercise incentive stock options pay income taxes, no matter how long they've held the options."

I don't believe that's the case. As long as you sell your ISOs 2 years after the option was granted, and 1 year after exercising, it's taxed at long-term capital gain rates (15%). Only if you have a "disqualifying disposition" (sell too early, basically), are they taxed as normal income.

Which, I believe, is the reason VC's feel they belong in that bracket. The founders and employees in the corporations in question get that treatment, so why not the VCs who are taking the risk alongside them?

(Note that I'm not arguing one way or the other, I'm just explaining what I believe in the VC mindset. I really haven't thought enough about it to know which side of the fence I'm on.)

Maurice

>>Of course, you can move to the UK where there is no such thing as a >>short term capital gain

Er no your wrong.

There is theres a yearly alowance for CGT around $16,000 at the moment and you get taper relief on that depending on how long you hold the stock - thers also some aproved employee stock schemes which can be very advatagous for the employees..

you also get about 14k yearly to invest in a tax free ISA which can be 100% securities (only realy helps higher rate taxpayers for incom) but you can use it to shelter securities for capital gains.


And in the UK you don't got the same problem you had in the last boom where people with worless stock options where bakrupted by tax demands - the taxman took there pensions to pay the bill I seem to rember reading.

Henry Blodget

Don...To get the long-term cap gains treatment with employee stock options, you have to exercise the options without selling the shares, which means putting up capital to actually buy the shares. Then, if you hold the shares for 366 days after exercising the options, you can book the gain as a capital gain.

The key point here, though, is that you actually have to put up the cash to buy the stock and then have value at risk throughout the year. It was via this "clever" tax avoiding technique that so many folks blew themselves up in 2000 (they exercised options with the stock at, say, $50 a share, then held it until it dropped to, say, $2 a share--but still owed tax on the difference between the strike and $50).

VCs do not have any capital at risk. All they have at risk are performance-based fees. This puts them in a different boat than long-term investors, who can actually lose everything.

VC loather

Never heard such a load of self-serving baloney. The industry will collapse? Man, these VCs sure have egos.

By-and-large, to get concessional capital gains tax rates you have to risk capital. When the VCs are prepared to personally underwrite the losses in their own funds, they can justify paying capital gains rates on the profits. Until then, they are just a bunch of greedy, self-serving crooks.

I hope Congress revokes their privilege and hits them with an additional windfall tax for being such a bunch of jerks.

hayaletchat

chat-Sohbet

oz

Australia Tel: (61 2) 9223 1116 or 9232 7000 Fax: (61 2) 9221 5628 or 9232 3355 [email protected] www.aca.nsw.edu.au
The fact that peace-lovers cannot stop a war should not be held against them. Those who are determined to kill, rape, maim and plunder will find a way to do so, somewhere, some time, somehow. [Their] beliefs, thoughts and feelings are as real and valid as yours, mine or anyone else's. You cannot crush out of existence that which you do not like. Thakns chat - sohbet odaları

solariz

thanks for this Oyun oynapost guys

Race

To be an adult you need to take

The comments to this entry are closed.

Sponsors