Silicon Valley stirs over proposal to end popular QSBS tax break

Honestly I find this article&#x27;s framing is quite funny. Ok, so first off, let&#x27;s imagine your an early employee of an enormously successful company and you have stock options. Tough life right you&#x27;re really the one feeling the squeeze. Let&#x27;s also assume you&#x27;re earning over $400k in salary. So you don&#x27;t just have valuable options, you&#x27;re also earning a great salary. Now under this proposal you&#x27;d only get a 50% exemption for your capital gains - so you&#x27;re going to pay 10% capital gains tax when you sell. If you choose to sell. If you don&#x27;t sell until a year where you don&#x27;t earn $400k (god forbid) you&#x27;ll still pay nothing.<p>Oh but it&#x27;s a disaster because in this hypothetical, you&#x27;ve already bought a mansion based on what you thought you were going to make selling your options and the 10% tax rate is going to ruin you. And you bought this mansion because you thought you were going to make a tonne of money from your options in a company that hasn&#x27;t even IPO&#x27;d yet so you don&#x27;t even have a clue what those options would be worth anyway, but somehow a 10% drop in the proceeds of your sale is going to be a disaster.<p>Here&#x27;s my take on it - if you were banking on having a 0% tax rate despite being in the top 1% of earners in the US maybe you have unreasonable expectations of how the tax system should work.

100% exempt does feel high to me.<p>I think my main problem w&#x2F; the tax proposals is that they are big, bold changes.<p>If anyone wants to increases taxes even 1%, I want there to be a big fight about it. Serious demands in to budget efficiency and transparency. If it passes, I want to know there is scrutiny over the taking of my dollars.<p>Passing a 10% increase swiftly and suddenly is like a punch to the gut, and we all know the tax code and laws around equity are totally moronic. &quot;We only tax if you make over $x!&quot; doesn&#x27;t account for the fact that many folks get all of their many years of equity... at once, in one tax year. Why is that counted as income for 1 year, and then boom, up to 65% tax?<p>Overall, taxes over 50% feel unethical too -- imagine if a mob boss goes to a retail store and demands half the profits. Why does anyone -- mob or Government -- deserve more than half of what you make? To hit 55% tax rate in California after this, you only need to make like $250k total. It&#x27;s a good amount, sure, but if you compare cost of living... it&#x27;s still hard to live on. You can still barely afford a crappy house. So you get this situation where &quot;life is hard&quot; AND the government is taking home more of your money than you do.

The cruel part here is retroactiveness of the change. Pioneered by California&#x27;s Proposition 30 in 2012 ([1]).<p>Retroactive changes of the (tax) law reduce the planning horizon and ultimately the efficiency of the economy.<p>1. <a href="https:&#x2F;&#x2F;gscpa.com&#x2F;prop-30-retroactive-tax-increases-approved-by-voters&#x2F;" rel="nofollow">https:&#x2F;&#x2F;gscpa.com&#x2F;prop-30-retroactive-tax-increases-approved...</a>

I wonder why there is so much thought and work on raising taxes but not on efficient spending by the government. There are several examples around where government spending is inefficients and sometimes corrupt.<p>Any way to stir to conversation and political thinking on efficient spending?

In all of this fever people seem to be ignoring this is a diff of $2m of tax incentive down to $1m of tax incentive on someone taking home $6m dollars (the diff between long term cap gains and the 0% with and without the 50% exclusion on $10m).<p>It’s sad for that person, but the most meaningful impact is to VCs and angels that receive this exception multiple times. Less than the diff of leaving California for a single exit.

Meh… you still get to exempt 50% of your gains, the capital gains tax isn’t that high anyway, and it only kicks in if you’re making over $400k. Good luck trying to get the general public to feel sorry for you.

Note there’s some subtlety to this example. That employee would have had to have exercised the options aand held the stock for five years at least. Which they have apparently but I don’t know how common that is.<p>This is mostly going to affect not employees, but individual angels.

Making large financial decisions based on a tax break not even able to legally drink sounds ... foolhardy.

&gt; The bottom line: The only thing that&#x27;s certain when it comes to federal tax policy is uncertainty.<p>People compete, it&#x27;s deep in their nature, so rules of the game get adjusted. Within boundaries, which overall beneficial for everybody, but still - the details of such thing as taxes, usually being imprecise, allow for gaming, so they don&#x27;t survive long. So - it looks like uncertainty here is by design.

Wouldn&#x27;t it just be easier to tax capital gains like ordinary income? It&#x27;s ridiculous that Mitt Romney pays a lower overall tax rate (~14.2% on ~$15 million income in 2011, IIRC) than I do on my non-FAANG software salary.

I see a literal zero percent chance that the Dems will pass a tax bill this Congress.

Not end, but cut in half, right?

I couldn&#x27;t care less about the outcome here. But what&#x27;s clear once again is that you can&#x27;t trust anyone&#x27;s election campaign. From now on, I will just simply assume that whenever we vote for Democrats, they will tax the shit out the rich, regardless of what they say. You might think that&#x27;s a good thing, except for the whole lying thing and the associated risk for everyone else.

Wow... the same sorts who rahrahed ending the SALT deduction ASAP are having a sad now? I can&#x27;t think of a better argument for ending this nonsense stat.

This is why we need a flat tax system. There are far too many tax loopholes. Everyone pays 25% tax on everything and leave it at that.<p>I find it pretty eye-opening that Biden would rip the military out of Afghanistan and deal with those consequences including loss of human life, and yet be too afraid to get rid of the carried interest loophole.

50% exempt is still high. It is hard to believe it is currently 100%.

Well this is what “tax the rich” means. If you don’t like it don’t vote for people who advocate tax increases. This is exactly what was promised.

There’s something to be said about losing an incentive here.<p>Likely they should pay _something_. But they should also be grandfathered in.<p>But at the same time, over the past year, it’s ridiculous how easily this government decides to change the rules of the game overnight and expect us to catch up without a problem. It was the money printing first, then talk about raising capital gains, now this.<p>What the hell. People had made plans (to buy a house, or to retire for example) based on numbers that we thought were sacrosanct.

Eh I know how to make this not affect my clients<p>I just cant see any point in talking about it anymore, as opposed to letting ICIJ or ProPublica figure it out three decades from now in an irrelevant leak, at least irrelevant in 2060.

Unpopular opinion: politicians always stealing what they do not produce in the name of whatever.<p>Leave people alone. Let people live. Do not control what people should earn or not. Just grant the right to not be damaged to others, that is your job politicians. Not trying to coactively spoil people their effort.<p>Good afternoon. Written from Spain, where things and mindsets are way worse than there in this regard. You are starting to mess up what took you to being developed.