Cisco's taxes

Max B. Sawicky sawicky at bellatlantic.net
Tue Oct 10 17:42:37 PDT 2000


On Tue, 10 Oct 2000, you wrote:
> > From dbreslin at ctol.net Mon Oct 9 20:27:48 2000
> > Is the tax liability transfer really a wash?
>
> It's better than a wash; CSCO "doesn't pay tax" on $2.8B of profit,
> but employees pay tax on $7B of gains ... do the math ...
> /jordan

My point was simply that the income would be taxable to somebody or something. The whole thrust of the article was that the cost of the options was deductible to the corp and by implication, lost forever.

It probably isn't a wash. First off, the rates on individuals differ from those on corporations. If taxed at the top marginal individual rate of 39.6, there is more revenue on the individual side. Some of this also might be taxable under the payroll tax, though don't hold me to that (2.9% for Medicare applies to uncapped wage & salary). Second, either side will have different alternative ways of reducing their exposure.

It is true that some things are double-taxed, such as dividends and the first $76,200 of wages. So we'll be studying Comrade DeLong's proposal.

mbs



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