January 19, 2007

Why Is This Difficult?

by PG

Maybe the Washington Post is oversimplifying the admittedly complex area of executive compensation, but...

The Senate Finance Committee is considering a proposal to sharply limit the earnings corporate executives and other highly paid employees can place tax-free into deferred compensation plans, one of the most popular executive benefits in corporate America.
Under the proposal, expected to be discussed today by committee members, an individual taxpayer could defer no more than $1 million annually in compensation, beginning this year. The shift in tax policy would be likely to affect top executives at hundreds of corporations and would raise taxes on some of the nation's wealthiest workers by an estimated $806 million over 10 years. ...
Business lobbyists reacted to the proposal with deep skepticism.
"There are lots of technical problems with this. For instance, we're not sure what the definition of deferred compensation is," said Lynn D. Dudley, a vice president of the American Benefits Council, an advocate of employer-sponsored benefit plans.
There may well be problems with this proposal, but I don't see how defining deferred compensation possibly can be one of them. If the executives didn't have any trouble figuring out what was supposed to be tax-free when there was no limit on how much could go into such a plan, they probably aren't going to become suddenly stupid and not understand that only $1 million of it can be tax-free henceforward. There may be a great deal of stress about what to put under that $1 million and how to value it (should I defer my stock options? what about non-cash forms of compensation like housing?). But that it is what I used not to have to pay taxes on if I deferred it and would have paid taxes on if I hadn't deferred it, and now do have to pay taxes on after the first annual $1 million, does not strike me as complicated.

January 19, 2007 12:14 PM | TrackBack
Post a comment

Remember personal info?

Sitting in Review
Armen (e-mail) #
PG (e-mail) #
Dave (e-mail) #
Craig (e-mail) #
About Us
Senior Status
Chris Geidner #
Jeremy Blachman #
Nick Morgan #
Wings & Vodka #
Recent Opinions
Persuasive Authority
De Novo Reporter

Powered by
Movable Type 3.21