That’s the point. If you get paid $10 at 30% tax the government takes 3 of the dollars. If you get paid $10 and 10 options, the government takes 3 dollars and 3 shares (when they vest). Simple as that.
Deciding what to do with the shares as the government is a hairy problem though.
Ok, I see what you mean, but now you have government holding stocks with 0 idea if they should cash out or hold. Both cases could result in the government loosing out on tax money.
If government immediately sells, and you hold until the stocks are 10x the value, the governmwnt lost out on 90% of the money.
If government holds and you sell, the government stocks can become worthless (e.g. company goes bankrupt) and again lose out on tax money. Plus government needs money in the budget, not stocks.
This is why you usually tax the income when you sell the shares. The loophole is taking a loan against those shares, but if you ask me, the answer is to tax the loan money and make repayments tax deductible. The loan is basically getting the money from selling shares early, so it should be taxed when you get it.
That’s the point. If you get paid $10 at 30% tax the government takes 3 of the dollars. If you get paid $10 and 10 options, the government takes 3 dollars and 3 shares (when they vest). Simple as that.
Deciding what to do with the shares as the government is a hairy problem though.
Ok, I see what you mean, but now you have government holding stocks with 0 idea if they should cash out or hold. Both cases could result in the government loosing out on tax money.
If government immediately sells, and you hold until the stocks are 10x the value, the governmwnt lost out on 90% of the money.
If government holds and you sell, the government stocks can become worthless (e.g. company goes bankrupt) and again lose out on tax money. Plus government needs money in the budget, not stocks.
This is why you usually tax the income when you sell the shares. The loophole is taking a loan against those shares, but if you ask me, the answer is to tax the loan money and make repayments tax deductible. The loan is basically getting the money from selling shares early, so it should be taxed when you get it.
Maybe the shares could go to a sovereign wealth fund with staff employed to try and maximize the value of the fund over the long term?
That makes sense if you have a balanced government budget or a surplus. But if you are running a deficit, you want cash.
Maybe congress gets voting shares…essentially making “the American people” a part-owner of the company. All companies.