By Mary Cristy
AMT capital gains spell woe to high tech employees
The story is sad and the future looks bleak for those who purchased houses, cars and furniture with paper profits, only to have all snatched away by last year’s downturn.
State and federal taxes, ranging from the hundreds of thousands to millions in some cases, have shattered the hopes of many high tech 30- and 40-somethings, who built their castles on the shifting sands of stock options. Silicon Valley techies are running scared as the spectre of cutbacks casts a dark shadow on the future.
Paper money or not, AMT rules, intended to target capital gains of the super-rich and their tax shelters, have fallen heavily on the young nouveau riche, who bought into the high-tech mirage of wealth through such options.
San Francisco-based e-mail provider, Critical Path Inc, starting at the top with President Diane Whitehead,who was hired as trouble shooter to jog the company out of a financial hole, will soon issue pink slips to more than half of their l,050 employees.
Similar scenarios are being enacted throughout the industry and will leave unfortunates, who have staked their futures on the financial stability of a tenuous market, with mountains of bills that lock them into a program of repayment that reflects the gruesome aspects of medieval debtors’ prisons.
A Texas engineer with a wife, 8-month-old baby, and a house he had financed with his Cisco Systems Corp. stock options was devastated when last year’s plummeting market wiped out his dreams.
The state of shock he and his wife are in is minor compared to the IRS-tendered $2.5 million dollar tax bill on a $6.5 million dollar return. These were paper profits of which he never had an actual penny in his hands.
The sale of his house, all the cash in his savings and liquidation of all his assets would still find him $700,000 shy of the money he needs to come up with for the IRS.
Intoduced in l969 to net big financial fish with gobs of sheltered income, the alternative minimum tax law is now so complicated that even the experts consider it a disaster, and a time-consuming nightmare. As things stand it can only get worse.
Unless the rules are changed, increasing numbers of taxpayers will be drawn into this debacle. Perhaps the time has come for another taxpayers’ rebellion, on the order of which our Republic was founded. We pay taxes on earned income, and again on savings account interest that accrues because of that already-taxed income: “taxes here, taxes there,” ad infiniturm.
For now, there are too many hard-working young persons out in the marketplace trying to earn a decent living, rear their children and pay for the many privileges we enjoy as citizens of the luckiest and best country on the planet. Wouldn’t it make sense to forgive these particular debts and set these bedeviled souls back on their feet so they can go on being good citizens, performing their good jobs and providing for happy families.?
Let the quality of “twice-blessed” mercy shine upon them and forget “the pound of flesh,” Uncle. Give the kids a break!
Cristy, a Los Altos Hills resident, has been writing for the Town Crier for more than 40 years. Her column is published the first week of the month.
