I'm all for taxing all of their compensation as income, but the problem with stock options is that the day they get them, they aren't worth anything (usually). Stock is trading at $100 per share. Exec gets 1,000 options to buy the stock at $100 per share. Worth nothing directly on day one. A year later, when the stock is trading at $110 …
I'm all for taxing all of their compensation as income, but the problem with stock options is that the day they get them, they aren't worth anything (usually). Stock is trading at $100 per share. Exec gets 1,000 options to buy the stock at $100 per share. Worth nothing directly on day one. A year later, when the stock is trading at $110 per share they are worth $10 x 1,000 = $10,000. If the stock price is at $100 or less, they are still worthless.
Now that's overly simplistic, and certainly having options is worth more than not having options, but the stock price has to go up for them to get value.
Point is, tax the eventual return on exercising them as normal income with all the other taxes (SS, medicare, etc.), but trying to tax them up front is fairly problematic.
I'm all for taxing all of their compensation as income, but the problem with stock options is that the day they get them, they aren't worth anything (usually). Stock is trading at $100 per share. Exec gets 1,000 options to buy the stock at $100 per share. Worth nothing directly on day one. A year later, when the stock is trading at $110 per share they are worth $10 x 1,000 = $10,000. If the stock price is at $100 or less, they are still worthless.
Now that's overly simplistic, and certainly having options is worth more than not having options, but the stock price has to go up for them to get value.
Point is, tax the eventual return on exercising them as normal income with all the other taxes (SS, medicare, etc.), but trying to tax them up front is fairly problematic.