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View Diary: Yes Mr. Romney, That is a Tax Cut for the 5% (52 comments)

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  •  The big executive compensation come in the (1+ / 0-)
    Recommended by:
    Calamity Jean

    form of capital gains from stock options and restricted stock - which don't get a tax rate cut.

    Salaries in the millions and tens of millions is actually quite rare in the 1%.  However, the press frequently miss-report ( or the public assumes) high executive compensation as salary when it is not paid as salary.

    The most important way to protect the environment is not to have more than one child.

    by nextstep on Thu Oct 18, 2012 at 08:23:12 AM PDT

    [ Parent ]

    •  salary is important (2+ / 0-)
      Recommended by:
      robizio, biscobosco

      So is capital gains, but neither is negligible when you talk about the top 1% or 0.1%.

      I wrote about this and would recommend the chart, showing not just the proportion of national income that the top 0.1% take, but the breakdown of how they take it - salary is something like 1/3rd of how the ultra rich make their money as a class (the blue).

      Contrast that to the 20s and 30s where capital income (which I think is dividends) really was the bulk of where their money came from.  Salary grew as a proportion during the reagan years where (my opinion) the social consensus/prohibition against exorbitant CEO salaries broke down and "plunder as much shareholder wealth as you possibly can" became the new normal.

    •  Most corporate equity comp is ordinary income (0+ / 0-)

      Restricted stock, stock units, stock appreciation rights, non-qualified stock options -- all are taxed as ordinary income when vested or exercised.

      •  But under Romney tax proposal these don't get (1+ / 0-)
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        Scientician

        His 20% tax rate reduction as they all get reported as capital gains, which he explicitly excludes from his rate cut.

        The most important way to protect the environment is not to have more than one child.

        by nextstep on Thu Oct 18, 2012 at 10:37:01 AM PDT

        [ Parent ]

        •  No they're not reported as capital gains (1+ / 0-)
          Recommended by:
          biscobosco

          They are ordinary income

          •  They are all reported on Form 1040 Schedule D (1+ / 0-)
            Recommended by:
            Scientician

            which is capital gains. Depending upon the particulars they may be classified as Long Term or Short Term gains, but they are still capital gains.

            If you believe otherwise, where would this income be placed on IRS Form 1040 if not Schedule D?

            The most important way to protect the environment is not to have more than one child.

            by nextstep on Thu Oct 18, 2012 at 11:24:43 AM PDT

            [ Parent ]

            •  On the W2. (1+ / 0-)
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              tejassaluki

              If the stock price goes up after you receive the actual stock (not the option), that's a schedule D gain, but the value of the stock at the time it was granted to you (or the difference between fair market value and what you paid for it if you're exercising an option or other discount purchase plan) is normally ordinary income.

              There are exceptions, such as a qualifying incentive stock options when the stock is held long-term (tejassaluki did say "non-qualifying stock options"), and probably lots of more obscure things, but the general rule is that if your employer gives you something or sells you stock at a discount, it's ordinary income.

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