Ben Stein Takes a Turn to the Left?
Tim Groseclose ·
Sep 12, 2011 at 5:55am
Many people saw the debate below, where Ben Stein, advocating higher capital-gains taxes, debates Bill O'Reilly.
Some have wondered if Ben Stein has recently taken a turn to the left. However, he has long held a few liberal positions, including favoring higher taxes on the very rich. In fact, in my book, I argue that Stein (and indeed O'Reilly) have Political Quotients of 25. That is, although they still lean right, they are not nearly as conservative as politicians like Jim DeMint and Michele Bachmann.
But I'm with O'Reilly on this issue. And I think Stein would be wise to watch the following lecture, which explains how tariff revenue actually declined in the 1930s after the U.S. government raised tariff rates.
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Sep '10
Re: Ben Stein Takes a Turn to the Left?
Paying for the government services instead of borrowing money to pay for them is a conservative principle that is conveniently ignored by the GOP which likes to pretend they are conservative. If someone takes this principle seriously then the discussion revolves around how best to pay. Since neither party desires to reduce the size of government, the GOP proposes to reduce the growth rate, the discussion then must center on how to best raise revenue. If you could explain to me why increasing the tax rate on CEO’s of major corporations stock options would adversely affect anything, but the bribes they pay politicians, I would be interested in hearing it.
Jun '10
Re: Ben Stein Takes a Turn to the Left?
The reason stock options are given to senior executives, as opposed to stocks or salary, is that stock options transfer for a fraction of the value of the stock. Consequently options are either not taxed or taxed at a very low rate. The most important dates with regard to stock options are the day on which the option is exercised and the day on which the stock purchased under option is sold. Being Canadian, I'm not at all sure how the IRS treats the value of the stock on the day an option is exercised, but certainly taxes the profit on the day the stock is sold. A stock option has very little value until it is exercised, and the reason CEO's receive options in the first place is because the government is looking to confiscate as much money as it can at every turn. Not even government would be stupid enough to tax prior to receipt of income/profit, but it's government so you never know.
Dec '10
Re: Ben Stein Takes a Turn to the Left?
I lost on Win Ben Stein's Money, the Comedy Central game show. But if you were a fan of that show, you'd notice that he closed each episode by saluting the final contestant with a namaste gesture and by saying, "I bow to the Buddha nature within you." So maybe he has a religious view that accumulated wealth is bad.
Sep '10
Re: Ben Stein Takes a Turn to the Left?
Cas Balicki
The reason stock options are given to senior executives, as opposed to stocks or salary,
Options have an imputed value at the time of issue. This value is used by the companies to determine how many to issue to various executive officers. They are vested over a period of time and are clearly part of the salary a CEO receives. Vesting periods and exercise prices are frequently adjusted by companies in order to protect the option's values. They are not taxed as income at any point, in fact they are not taxed until exercised and then at the capital gains rate. The rationale for Cap gain rates are as a reward for risk taking. In this instance and other "carried interest" scenarios no risk is being taken. Salaries should be treated as salaries whether the person getting it gives generous political contribution or not. Why conservatives have so much trouble opposing welfare for the rich is beyond me.
May '10
Re: Ben Stein Takes a Turn to the Left?
It's amazing to me that people who know the truth don't always want to embrace it because it often times is in conflict with their emotions. My guess is, that BS knows what the cold hard realities are but rejects them in public and says something else because of his desire to be liked. I like BS and I believe him to be a real conservative, unfortunately I believe that he is falling prey to human nature, which is that he wants to fit in with the crowd or popular kids, and be liked or better yet not be ridiculed.
Mar '11
Re: Ben Stein Takes a Turn to the Left?
I have no issue if we reduce the tax burden on most middle income earners, ensure everyone has skin in the game even at the bottom, make is less costly to start and own a business, and raise taxes on those at the very top who make a significant amount of their bonus earnings through capital gains (that is, say, tax those gains at the normal rate of income, which would still be higher than gains are currently taxed, but not astronomical because income rates will have been lowered).
Jun '11
Re: Ben Stein Takes a Turn to the Left?
Ben's political-economy ideas were largely shaped by his father, Herb Stein. Herb chaired the council of economic advisers under Nixon & Ford and was called "a liberal's conservative and a conservative's liberal." Ben adored his late parents and it would be terribly difficult for him to embrace economic positions contrary to his economist father's.
As a reader of his Am Spec Diary column I'm quite sure that Ben sees Nixon as a superior president to Reagan-- he worked in the Nixon WH at the time of resignation. (I suspect that few of us here rate Nixon over Reagan.) If you tell Ben that higher tax rates on the wealthy will result in less government revenue, he'll argue with you faster than you can say "Laffer Curve."
Of course it could all just be self-loathing and guilt... but I'm not his shrink.
Jun '10
Re: Ben Stein Takes a Turn to the Left?
An option's imputed value is determined by the difference between share price at market and share price with option. Therefore, if the market price of the share is $100 and the exercise price on the option is $90, the imputed price of the option is $10. If the option is not exercised the $10 gain is not captured. I grant that the situation is different with the issue of treasury stock triggered by an option. The reason the option is not calculated into salary is that the option must be exercised to capture the gain of $10. As an aside the option price might be $90 dollars, but the share's market price may be $130 when the option is exercised, which exposes the transaction to a much higher tax liability. Also if it's a treasury stock issue a larger gain is captured and accordingly recognized at a market price. It is the uncertainty that leaves the transaction unreportable for tax purposes until values are locked in. Capital gains treatment has a specific meaning for tax purposes, and unless you are in the business of trading shock in Canada, you are accorded capital gains treatment.
Jun '10
Re: Ben Stein Takes a Turn to the Left?
The mistake people make is most commonly seen as a home equity fallacy: You buy a house for $100,000 and the market value of your land (it is never the home that appreciates) appreciates to $140,000 over four years. It is a fallacy to think that as a result of fortuitous market activity you are now "worth" $40,000 more.
In order to realize your new worth you must either sell or refinance your home. If you aggressively refinance you face no new taxes because you assumed more debt and did not gain more income. Sell your house, however, and capture the equity, and you attract new capital gains tax based on the difference between what you paid and the sale price. If you do nothing your net worth does not change, and therefore you should not attract new tax.
Nov '10
Re: Ben Stein Takes a Turn to the Left?
To further the argument, let's just grant, for the purposes of discussion, that increased taxes would not have a short or perhaps near term effect on investment in the USA. I don't think that one could argue that it will not have a long term effect as high income earners will vote with their feet.
Be that as it may, the real issue is not soaking the rich. I submit that the issue is the expansion of the welfare state by expanding those that are dependent on it for their livelihood. Today we have ~1/3rd of the population that receive all of their income from the government. We have ~1/2 of the population that pay no income taxes whatsoever. We have 1/2 of the population with no skin in the game (other than the "receive" side). Further, we have a huge percentage who are "civil servants" at all levels of government. This is what's destroying the system -- not tax rates on the "rich". Increasing tax rates on the rich merely allows the druggie to defer cold turkey for one more hit or two.
Edited on Sep 12, 2011 at 12:52pmSep '10
Re: Ben Stein Takes a Turn to the Left?
The meaning is the gain on investment. Capital was put at risk. The company executives put zero capital at risk and therefore no cap gains. The options are part of their compensation package. If they were allowed to buy company stock at a 20% discount as part of their compensation the discounted amount would be consider income and tax as such. Options are just a way of getting around this.
Nov '10
Re: Ben Stein Takes a Turn to the Left?
@liberal jim,
"Options are just a way of getting around this." Huh? I happen to be a VP Finance at a Cal software company. What precisely do you think employees with stock options get around from a tax standpoint? To educate you, the answer is nothing. As soon as an employee exercises a stock option, the gain is added to income on the W2 and taxed at marginal, not capital rates. After this taxable event, the market price on the date of exercise does become the tax basis from which future capital gains (or losses) are calculated. No different from any other stock that one might hold.
Edited on Sep 12, 2011 at 2:37pmJun '10
Re: Ben Stein Takes a Turn to the Left?
liberal jim
The meaning is the gain on investment. Capital was put at risk. The company executives put zero capital at risk and therefore no cap gains. The options are part of their compensation package. If they were allowed to buy company stock at a 20% discount as part of their compensation the discounted amount would be consider income and tax as such. Options are just a way of getting around this. · Sep 12 at 1:34pm
What he said!
Re: Ben Stein Takes a Turn to the Left?
I'm a little worried: I think I might be agreeing with a person whose first name is "liberal." Suppose I'm an executive, and my company gives me an option to buy 1 share at $100. Suppose the share price is currently $90. Even though I can't currently make any money off the option, it's value is not zero. That is, I would never throw the option away. Further, I'm sure that pricing formulas like Black-Scholes, would value the option significantly above $0. Accordingly, when I receive the option, it seems like income to me, and I should be taxed as if it is income. On the other hand, suppose I eventually cash in the option and I make more money than the option is worth today. Then it seems reasonable to tax the difference at the capital gains rate.
On a separate issue: Was no one impressed with the Ferris Bueller clip I found?
Re: Ben Stein Takes a Turn to the Left?
Mr. Promm: Suppose my company gave me an option a year ago. Specifically suppose it gave me the right to buy one share of stock at $100. Now suppose that today the stock price is $150. Suppose I exercise the option. Specifically, consider two ways I could exercise it: 1) I take $100 out of my pocket and buy a share. Do I owe any taxes? 2) I take $100 out of my pocket, buy a share, and then immediately sell it at $150. Is the $50 profit considered income or capital gains?
Jun '10
Re: Ben Stein Takes a Turn to the Left?
Suppose the share price never moves from $90 or even worse falls to $70. Options expire, and the nearer you come to the expiry date with a market price below the option price the less the option is worth. How do you establish value?
Edited on Sep 12, 2011 at 6:16pmMay '10
Re: Ben Stein Takes a Turn to the Left?
Ben Stein has always exhibited one of the more repulsive traits of the Left; resentment, if not outright hatred, toward those who achieve more than the likes of Ben Stein. Years ago, he was part of the the commentariat heaping unthinking abuse on one of America's most important innovators in the field of finance, Michael Milken, calling him "greedy" and all the rest of it. When the government is persecuting a creator, and you get out the pom-poms and cheer the persecution, that makes you kind of a worthless individual.
Nov '10
Re: Ben Stein Takes a Turn to the Left?
Answer to #1 - yes. You would be taxed on the the $50 gain as regular income at your marginal rate. #2 -- as in #1, the gain is regular income not capital gain. The reason why most folks buy and sell on the same day is for the very reason of paying the tax which is due immediately. High net worth folks can buy and hold and if they hold for longer than a year, the difference between the price on the exercise date and the price on the date they sell becomes a capital gain (or loss).
Edited on Sep 12, 2011 at 8:54pmNov '10
Re: Ben Stein Takes a Turn to the Left?
Cas Balicki
Suppose the share price never moves from $90 or even worse falls to $70. Options expire, and the nearer you come to the expiry date with a market price below the option price the less the option is worth. How do you establish value? · Sep 12 at 6:13pm
Edited on Sep 12 at 06:16 pm
Messieurs Black & Scholes got the Nobel prize in economics for their formula and this is what most companies use to value options on their books. However, this valuation has nothing to do with what employees actually gain from the options. Sometimes options do expire worthless (it has happen to me, sigh) The IRS is not interested in some theoretical value. They are only interested in the actual cash that is involved.
Nov '10
Re: Ben Stein Takes a Turn to the Left?
Robert Promm
Answer to #1 - yes. You would be taxed on the the $50 gain as regular income at your marginal rate. #2 -- as in #1, the gain is regular income not capital gain. The reason why most folks buy and sell on the same day is for the very reason of paying the tax which is due immediately. High net worth folks can buy and hold and if they hold for longer than a year, the difference between the price on the exercise date and the price on the date they sell becomes a capital gain (or loss). · Sep 12 at 8:44pm
Edited on Sep 12 at 08:54 pm
My comment about high net worth folks is not that they get away with anything. The same tax is due immediately for them. The reason they can buy and hold is that they pay the tax directly out of their pocket so they don't have to do what is called a same-day sale upon exercise.