Re: George Bush

Tim, let me explain. An entrepreneur with no money gathers investors, puts in a tiny amount compared to theirs, and gets a “promote” for doing the deal. He pays capital gains twice, first on his actual investment less his basis of cash invested and second on the “promote” share in which he has no basis and therefore on which he pays more tax. David Cay Johnston may be opposed to the capital gains tax, but then is he saying that return on investment should be taxed as income? And that “sweat equity” is not real? Put that into law, and you erase 90 percent of the new business growth in America. This little company, as one example, would have never happened.

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Comments

26 responses to “Re: George Bush”

  1. Jack Jett says:

    Wick

    You just made Tim’s point.

  2. amanda says:

    And Jack just made W’s.

  3. Bob Stoller says:

    So, Wick, tell us how the (lower) capital gains tax that you entrepeneurs pay based on your exertions is fairer than the (higher) ordinary income tax that your minions pay based on their exertions. If you are in the trade or business of (whatever), then the revenue that you glean from that trade or business should be taxed at ordinary income rates, just like your employees.

  4. Jack Jett says:

    Amanda..

    Thanks, that is what I am here for. I am more than just Wick’s boy toy, I help make certain people understand him.

  5. Employee says:

    I am going out on a limb here, but I bet Wick’s employee’s annual taxes pale in comparison to the check he writes each year. No matter how many tax breaks the wealthy find, they still pay the majority of tax in this country.

  6. peterk says:

    While Wick’s tax payment may pale in comparison, he has put forth more effort than the employees to attract investors and financiers to help bankroll D Mag and its sister publications into what they are today. Don’t forget that without Wick, Tim et al might be working someplace else that would say “no more blogging (whip crack sound) back to work minions”

    wonder what Tim’s reaction would be if Wick were to give him a piece of the DMag pie? Would Tim gladly pay the higher tax rate or would he seek to shelter his money by selecting the lower capital gains tax rate?

    I’ve yet to see any individual who calls for more taxes voluntarily paying more than what they are legally required to. Here in Virginia we have a special fund set up where folks can contribute more in taxes. Needless to say the fund is not exactly overflowing with excess cash

  7. Guilty Bystander says:

    Mr. Allison:
    I don’t think the term “sweat equity” involves investing $600,000 and walking away with $17 million in just a few years. The “sweat equity” of most folks like myself involves busting my ass for a nice living while fat cats like you and our Empty Suit president figure out ways to feather their nests and the nests of all their “friends.”
    PeterK:
    I imagine that Mr. Allison is more than happy to have his employees blog since it keeps his publications in the public eye and provides free publicity and plugs.

  8. SLR says:

    Folks:

    Here’s how it works. Let’s say that I start a little lawnmowing company as a teenager that I grow into a big landscape company in my adulthood. Let’s say that I have my lawyers set it up as a corporation, etc. Let’s then say that an investor wants to invest $1 million for 10% of my company (where the $1 million goes into my company and not into my pocket). The investor’s investment values my 90% interest at $9 million. Should I pay tax as a result of that investment? Of course not. When we sell the company a few years later for $20 million, and my investor doubles his money and pays tax at the long-term capital gains rate of 15%, what rate of tax should I pay on my $18 million sales proceeds? Why, long-term capital gains, of course.

    Now to peterk’s point, if soon after the investor first made his investment, I bonused an employee with stock equal to 5% of the company, that employee would be deemed to have income, taxable at the 35% ordinary income tax rate, equal to $500,000 (assuming that the stock was not subject to a substantial risk of forfeiture). When we sold the company a few years later, the employee would make $1 million on the sale, but would pay tax at the long-term capital gains rate on his $500,000 gain (since his tax hit at the time the stock was granted to him gave him a $500,000 tax basis in the stock).

    The smartest minds in our country write the tax code, and these issues have already been fought over. (Section 83 of the tax code addresses the employee stock grant issue.)

    Bottom line, David Cay Johnston, Pulitzer Prize winner or not, is an idiot.

  9. SLR = Smarter than Rogers says:

    That’s all.

  10. RLS says:

    I’ve been following a series of articles by David Cay Johnston over the past year: and can tell you from personal experience that the man’s barely-concealed socialist genetics prevent him from aptly distinguishing Holes In The Ground from other types of orifices as to which decorum prohibits mention within this forum. But as long as Frank Rich is around, he’ll only be the Second Most Ridiculously-Biased Scribe in the pay of the New York Times.

  11. Mantooth says:

    If our president is just an empty suit, then why are people so angry at him? Seems pretty irrational to me to get all worked up about a jacket and some slacks.

    As for me, I think it would be just fine to give all my income to the centralized governmental authority, then let the government, in its collective wisdom, determine what I should receive back as a fair living wage. That would be fair to everybody and would maximize joy and freedom. This is an idea that is untested in history and should thusforth be known as Mantoothism.

    BTW, SLR, well done. Except that it is well established that the smartest minds in the country write for the NYTimes op-ed page. See, e.g., Paul Krugman.

  12. peterk says:

    “ow to peterk’s point, if soon after the investor first made his investment, I bonused an employee with stock equal to 5% of the company, that employee would be deemed to have income, taxable at the 35% ordinary income tax rate”

    and what actually has happened in the past is that employees have been granted stock options rather than being gifted with the straight stock. Just look at all the folks at Microsoft who were granted options over the years and were able to cash them in when it went public.

    truth be told that I worked for Enron in the late 80s and early 90s and received an annual bonus in stock equivalent to 10% of my annual salary. Taxes were not paid until I sold the stock and then on a capital gains basis not a straight income basis. this was all part of an ESOP

  13. SLR = Smarter than Rogers says:

    peterk…at least you got to pay taxes on the gains of Enron.

  14. Guilty Bystander says:

    I’m not preaching socialism. I just think that there are people of power who pad their bank accounts by expecting 100 times their return on any investment. And if an investment doesn’t come through, who loses? The CEO has his golden parachute while the company’s workers are on the street.

  15. peterk says:

    “peterk…at least you got to pay taxes on the gains of Enron”

    I left in the early 90s before the company went crazy. Plus I always made sure that when I sold the stock it was sold below the issue price so that I suffered a minor loss.

    Guilty bystander wrote;
    “there are people of power who pad their bank accounts by expecting 100 times their return on any investment. ”

    now you wouldn’t be referring to a particular Dimocratic presidential candidate who was able to turn $1k into $100k in the cattle futures market with no experience at all would you?

  16. SLR says:

    peterk:

    You must be mistaken in how your Enron stock grants were treated. If you were receiving stock grants as bonuses, then they were taxable to you at ordinary income tax rates — either at the time of grant, or, if the stock was both non-transferable and subject to a substantial risk of forfeiture, then at the time that either one of those conditions was removed. Are you sure that the stock was not being purchased with payroll deductions from your salary?

    I’m not calling you stupid — proof being (a) you’re not David Cay Johnston; and (b) you were smart enough to leave Enron before it imploded — but it’s possible that you were unclear on exactly how the grants were being treated.

    To put this in context, I know a thing or three about the federal income tax code, and what you describe is not consistent with the code.

  17. amanda says:

    SLR, will you be my accountant? Or my dad?

  18. Guilty Bystander says:

    It’s one thing if you bought Microsoft or Google before both hit. To me, that’s investing _ you put money into something and hope or expect it to explode. If it doesn’t, you lose.
    Our sitting president invested in the Rangers but the price of the team skyrocketed when Arlington (and taxpayers) built the ownership a new stadium. That’s not the same thing.

  19. SLR says:

    Dear SLR = Smarter than Rogers:

    Thanks, but that’s like saying SLR = Taller than Verne Troyer.

    Dear Amanda:

    You’re a naughty little girl. Daddy needs to give you a spanking.

  20. TreyG says:

    “I’ve yet to see any individual who calls for more taxes voluntarily paying more than what they are legally required to. Here in Virginia we have a special fund set up where folks can contribute more in taxes. Needless to say the fund is not exactly overflowing with excess cash”

    I say that every time Warren Buffet and Mark Cuban open their traps on the subject.

    They talk it but don’t walk it.

  21. pak152 says:

    “You must be mistaken in how your Enron stock grants were treated. If you were receiving stock grants as bonuses, then they were taxable to you at ordinary income tax rates – either at the time of grant, or, if the stock was both non-transferable and subject to a substantial risk of forfeiture, then at the time that either one of those conditions was removed. Are you sure that the stock was not being purchased with payroll deductions from your salary?”

    no payroll deductions. and they were not grants or options. They were actual shares in my name, but I could not touch the stock for a given period of time. It all had to do with how the merger of Internorth and HNG was set up. I left Enron in 1991 I believe it was about 1995 or so that I was able to take ownership of the actual shares. Generally during the summer Enron would take a 2 for 1 split because the price had run up to about $60 a share. They wanted it to be in the $25 to $30 price range. So my shares increased over time. The basis price for the shares was established when the share were distributed to me. I was not able to gain all of my shares (probably due to vesting can’t remember at this PIT.) Here’s an example of what I would do, just before Enron took its nose dive c. 1999 I gain possession of the last of my shares. The basis price was $75 a share. I sold the shares at $71 per share. I had put out no money to gain the shares. I was able to record a loss because the basis price was higher than what I sold them for.

    I have been using the same accountant for almost 20 years. The whole thing involved how the Enron ESOP was set up in the beginning. You will need to check the tax code back then not now.

  22. pak152 says:

    “t’s one thing if you bought Microsoft or Google before both hit”

    sorry but you have your analogy wrong. folks who worked for MS or Google were granted options. The venture capitalists who supported both of those companies before they went public are something else.

    your analogy about the president would be like say someone buys a piece of property with little or no money down at a low price and then someone decides to do something with the property next door that greatly increases the value of your property. But according to you premise you shouldn’t reap the benefits of that greatly increased value. In both cases individuals have put up money hoping that their investment will increase greatly.

    what I’m reading here from a lot of the comments is some serious examples of envy and jealousy

  23. SLR = Smarter than Rogers says:

    Wouldn’t the price basis for the Enron stock need to be adjusted down 50% for each split?

  24. pak152 says:

    The price basis didn’t come into effect until I took possession of the shares

  25. Puddin'Tane says:

    Considering the fact that a person living in the US may potentially be taxed in at least 16 different ways from birth to death and that in the US we are supposed to be guaranteed representation in this matter: how many of us actually pursue our representation to make fare and appropriate decisions toward the overall economic health of the country and to the service of the population at large while also funneling money to support half the rest of the world?

    Yep, it takes a lot of time and effort… which most of us are are choosing to put into the boardroom, driving our kids to soccer or contributing to a blog bitchfest on the subject.

    Now back to Enron.

  26. Grips says:

    As a tax attorney, I find myself discouraged by the level of incomprehension in the posted comments. Clearly, the average reader cannot come close to understand the complexities in our tax code. It’s time for Huckabee’s easy to understand consumption tax.