Thread: Tax Reform
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Old 11-04-17, 07:22 PM
SWMCinci SWMCinci is offline
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Originally Posted by cabezadecaballo View Post
CEOs exercising stock options for 6, 7, and 8 figure pay days are taxed at a lower rate than the friggin' plumber that fixes the leak under my sink, for God's sake. WTH is wrong with some of you people ? Are you stupid ? If you aren't worth multiple millions, I say you're clueless.
It's not as black and white as you make it out to be. Let's make it a 9 figure payday....... Let's say the CEO has options for $200M of stock and their price is $100M (100% profit). In order to actually GET the stock they have to purchase it. If they have $100M laying around, they can self finance the purchase. They may have enough credit to borrow the $100M. If they don't have the cash or the credit, they can do a same-day sale and exercise and sell their options in a single transaction.

From a tax perspective, the same day is the easiest to perform but the most expensive from a tax standpoint. You are on the hook for 100% of the proceeds at your established tax rate - in this case 39.6% - so your net is roughly $60M on a $200M deal.

The other 2 will vary based on how soon you sell the stock - less than a year it looks like the same-day transaction. After a year, you pay 15% on the net. So you keep about $85M if the price stayed the same, but it could have gone up or down - meaning you could have lost money on the transaction as well. But 15% is the tax rate.

But your average plumber makes about $51K annually, on average someone at that income level pays about 7.1% in income taxes. I call bull on the supposed lower tax rate of the CEO options.
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