>while the rich use loopholes like 1 dollar salaries
explain?
explain?
Major executives also commonly make use of the company's private jets etc. for "business purposes" and so get to use them without it being considered taxable income -- and the corporation itself gets to deduct the cost. Meanwhile "business meetings" are so often in Las Vegas or some kind of tropical paradise.
You're still taxed on the value of the stock at the you received them. The reason why steve jobs had billions in apple stock isn't because apple paid him billions in stocks in the 2000s, it's because he had those shares decades ago when they were worthless. The billions came from appreciation on his part. It's independent of his position as CEO. Framing it as "loopholes like 1 dollar salaries" doesn't make any sense.
You don't think his work as CEO might have had something to do with it? Was he doing the job for $1 out of pure altruism?
And displacing a salary isn't really the point. Jeff Bezos could retire from working whatsoever and still be making more money than you (entirely in stock price appreciation) while not paying any taxes at all.
This isn't necessarily wrong -- they have to pay the tax if they want to spend the money -- but that's kind of the point. It's not really a loophole, and there are actually good reasons why it works that way, but it's also in practice a thing that enables very rich people to pay lower effective tax rates than random doctors and engineers.
maybe he gasp likes working as CEO?
>And displacing a salary isn't really the point.
right, but then it's not really the "$1 salary loophole", it's the "capital gains are treated differently than regular income" loophole. Specifically, getting a $1 salary has nothing to do with the loophole working. In a parallel universe where steve jobs were paid 1M/year and still had his initial stock grants, he'd still be a billionaire and benefit from the same tax lopphole.
Maybe he does. But if he has a billion dollars in stock and his being CEO caused the company to grow 6% a year instead of 4% under some other CEO, being CEO that year earned him an extra twenty million dollars.
> right, but then it's not really the "$1 salary loophole", it's the "capital gains are treated differently than regular income" loophole. Specifically, getting a $1 salary has nothing to do with the loophole working.
But it does, because a salary would be taxed at the ordinary income rate. Effectively zeroing it out avoids that. Meanwhile the company might grant him some stock options instead, which under the right circumstances might be taxed as capital gains.
I agree in this case you would have "earned" 20 million dollars or whatever by being CEO, but I disagree with equating this to regular income (and therefore worthy as labeling it a "loophole"). Let's push this to the extreme. If you owned a bunch of stocks in a company, and believed voting for a particular board chair would cause the company to grow 6% a year instead of 4%, does that also mean you "earned" $20 million dollars, and exploited a "loopphole" to avoid paying regular income taxes on it?
>But it does, because a salary would be taxed at the ordinary income rate. Effectively zeroing it out avoids that.
Right, but your "income" is composed of two parts:
1. your salary
2. whatever capital gains you stand to earn
Regardless of what the company paid you for your salary, you still stand to gain from the capital gains. The capital gain is where all the "loopholes" what we discussed are (ie. taxes being due only when you sell, being able to borrow against it). Regardless of whether you got paid $1M or $1 salary, you still benefit from the capital gains, and the tax loopholes on those gains. I suppose not having a salary will allow your tax return to show $0 owing rather than $xxx,xxx or whatever, but that's not really an accurate depiction of what the loophole is. Besides, I'm sure that bezos/jobs has other other stocks that pay dividends which are taxed immediately, and so his tax owing will never be $0.
Okay so we have this dude who likes working for no pay but he's getting all the money.
Meanwhile there are lots of poor people who need to work to feed themselves but don't get paid. Do you see a problem here? It's a quite simple market failure.
It's not a market failure because shareholders don't want just anyone (ie. "lots of poor people who need to work to feed themselves ") to be CEO, they want the best (ie. steve jobs). I'm sure steve jobs can ask for a multi-million dollar salary if he wanted it, and the board wouldn't even blink. As for why he's not asking for such a salary when he could, my guess is that he's doing it for non-monetary reasons (to appear more humble?), not as some part of diabolical tax-dodging scheme. The board certainly wouldn't consider hiring one of the "poor people who need to work to feed themselves" for minimum wage as CEO, just to save a few million dollars. The opportunity costs and/or damage that an incompetent person can do is too high to risk it.
https://www.forbes.com/sites/johnhyatt/2021/11/11/how-americ...
That's true; in practice executives may create a little flexibility in determining when they were received. This was a problem for Apple/Jobs:
https://www.cultofmac.com/460003/jobs-backdating-scandal/
regarding Jobs having super-appreciated Apple stock, I'm not a Jobs history expert but IIRC he sold all of his stock when he was ousted out of spite, keeping some token amount (internet suggests to be just one share to still get shareholder reports). That could be urban legend. IIUC his net worth dipped a lot in the 90s and he became a billionaire from Pixar's sale to Disney.
Yeah in that case it's less of a "loophole" and straight up fraud.