
IRS considers taxing perks at Google, other tech firms - aray
http://www.mercurynews.com/business/ci_22982220/irs-is-looking-into-whether-free-meals-at
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avar
I don't see why this is unreasonable. Right now it's basically a pretty easy
way to evade taxes with freebies.

Don't have enough money for the payments on your house? No problem, just offer
to take a pay cut and move into a "free" house provided by your employer.
Alcohol sales tax too high in your state? No problem, just open a bar with
"free" alcohol and charge an entry fee to the premises at the door.

In The Netherlands where I reside my employer provides "free" meals but they
have to charge me 2 EUR for each one as a matter of law. In some other
countries if you give out "free" beers to people you have to pay a mandatory
minimum fee for each one etc.

If you don't do that then the optimum financial endgame for a company like
Google is to basically turn into some mega corporation that pays its employees
almost minimum wage, but provides "free" meals, housing, food, transportation
etc. which they don't have to pay any taxes on because it's not being sold to
anyone and can all be written off as internal costs.

Compensation isn't just handing someone a dollar bill.

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liber8
Right, except the IRS has included perks such as housing, automobiles, even
frequent flier miles[1], as "income" for over 60 years.

I think the outcry here is that government has much bigger fish to fry than
hounding taxpayers over a few thousands bucks worth of free food every year.
Your slippery slope argument isn't too far fetched though: this same sort of
tax policy is exactly how the U.S. ended up with its ridiculous employer-paid
health insurance scheme.

[1] In some cases. See 91 F.3d 72

~~~
incision
>I think the outcry here is that government has much bigger fish to fry than
hounding taxpayers over a few thousands bucks worth of free food every year.

I know the article repeatedly talks about employees paying additional tax, but
at glance such taxes would seem to be paid by employers?

Also, to go off on a bit of a tangent - I've noticed that the perceived size
of the "fish to fry" has a way of changing in line with the predilections of
the source of the outcry.

Present the same person with the same dollar value as tax increase/break,
spending cut/increase and watch their impression of the relative size and
opinion of the change turn on a dime.

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guan
> I know the article repeatedly talks about employees paying additional tax,
> but at glance such taxes would seem to be paid by employers?

It would be paid by the employees. Such expenses are tax deductible by
employers regardless of whether it’s a taxable benefit or just a cost of doing
business.

Of course the incidence of the tax may be different, for example if, due to
market forces, employers have to give people raises to cover the increased tax
liability.

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patio11
If you're interested in what the IRS actually has to say about the taxability
of meals and other perks:

<http://www.irs.gov/publications/p15b/ar02.html>

 _Meals on Your Business Premises

You can exclude the value of meals you furnish to an employee from the
employee's wages if they meet the following tests.

They are furnished on your business premises.

They are furnished for your convenience.

This exclusion does not apply if you allow your employee to choose to receive
additional pay instead of meals._

Assuming AmaGooFaceSoft have prominent, enforced "These meals are provided to
be consumed on the premises" signs, they're golden. (I assume that if they
don't, they will shortly.)

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jsnell
I don't entirely understand the arguments against taxing the perks made in the
article. On one hand they're talking about how incredibly valuable to the
company the free meals are, and on the other talking about how taxation would
lead to these perks being killed.

If the meals really do provide that value, the company can trivially pay the
tax on behalf of the employees.

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ChuckMcM
_"If the meals really do provide that value, the company can trivially pay the
tax on behalf of the employees."_

How exactly? You could estimate that meals were valued at $250 a month and
then bump the salary of every employee by $250*(marginal federal + marginal
state)taxrate so that when their W2 came they would owe tax but they would
have the money. But what about people that withhold 10% for a 401k, so the
money you bump up has 10% of it contributed to the 401k so you have to bump it
an additional 10% to make sure the employee cost hit is neutral. So now you're
providing funding to the 401k effectively. And then there are employees who
bring their meals and then don't incur the cost but they get the paybump, do
they file for a reduction in gross income because they didn't eat the meals,
and then just pay marginal tax on the income bump? What about when their
spouse came to visit and they ate a meal too, extra bump in income? extra tax?
discount?

It isn't "trivially" possible to do anything except kill the benefit. That is
"trivially" possible. And the people pushing for this aren't the IRS it's the
companies that don't give their employees free food. I believe the free soda
perk cancellation at Apple was before the web so it doesn't show up in
archives but at one time all the soda machines on the Apple campus were free,
and the IRS swooped in and told them to pay tax on them, and the soda was then
"not free." I was at Sun (where food and soda was not free) but beer busts
were, and thought that would help with our co-workers being poached. And it
was part of the reason Sun killed the beer busts according to Crawford
Beverage (no lie, that was his name!) who was the VP responsible.

Do you follow through and tax free laundry? sports equipment? medical visits?
store discounts? swag at product launches? If you really wanted to nitpick it
you could kill a lot of stuff at Google. You don't think some "not Google"
company wouldn't prefer to level the playing field a bit?

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jcampbell1
> How exactly?

On December 31st, you gross up everyone's pay by say $10k, and pay taxes that
are the marginal rate for YTD income.

Of course this doesn't fully cover the taxes for dual income high earners, and
it can create some additional taxes for employees that have other income,
because now their base is $10k higher. In this case, the change will cost
these employees up to a few hundred dollars.

A tax change that _may_ cost someone a few hundred dollars, pretty quickly
get's lost in the noise when you are talking about multi thousand dollar
raises and bonuses.

~~~
No1
"you gross up everyone's pay by say $10k"

It's nice to pretend that it as easy as waving your hand and saying everyone
got $10k worth of perks, but what about people who didn't? Really, not
everyone is eating the corporate food every day. Not everyone is going to the
corporate happy hour. It is not fair, or possibly even legal, to just amortize
the costs across everyone.

When faced with the accounting and legal overhead, companies are going to
throw these perks out the window.

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mindcrime
And people wonder why some people think the government is basically a bunch of
brainless fuckups who couldn't pour water out of a boot if the instructions
were on the heel.

This is, simply put, one of the most absurdly brain-dead stupid things I've
ever heard in my life. And I've heard some _really_ stupid ideas in my life.

Whether this goes through or not, it's a perfect example of why we need to end
the income tax and eliminate the IRS.

~~~
rverghes
Why is it a stupid idea?

Company A pays an employee $100 per day, and provides a lunch which costs the
company $10.

Company B pays the employee $110 per day, but the employee has to provide her
own lunch.

Is it really fair that Company B has to pay more tax than Company A?
Compensation is compensation, whether in kind or in cash.

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BrianEatWorld
The cost of the lunch is $10, but is the value to the employee $10?

The problem with taxing a product is that the actual value is unknown. In your
example, taxing the lunch as $10 of income is actually giving the benefit to
Company B due to the "reverse inequality of exchange". IE if you buy a $10
lunch, you actually value it more than the $10.

~~~
rverghes
Sure, but the cash has the value of being flexible. For example, if you were
looking to save money, you could brown bag a lunch from home and pocket the
extra $10.

That flexibility might be more valuable to the employee than the nice lunch.

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jcampbell1
I have heard that when Google negotiates salaries, they often chime in about
the value of the perks, and that employees should be willing to take a lower
base bay because of the perks.

Google tells the IRS it is non-compensation, but tells prospective employees
to value it as compensation.

~~~
wutbrodo
This seems similar to touting "You get a Macbook Pro as your work laptop!" in
recruiting materials (which I've seen countless times in recruiting pitches),
even though that's undeniably a work expense when dealing with the IRS. This
isn't a zero-sum game; just because a free meal at Facebook may be a net gain
to Facebook (employees don't need to go off campus to work and thus can be
more productive) doesn't mean the employee gets no benefit out of it and
shouldn't consider it as a plus.

~~~
wutbrodo
That should say "go off campus to eat", rather than "go off campus to work"

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benatkin
Is the shuttle necessarily a perk, though? It may just be compensating for the
negative effect of their location on employees who would rather be in SF than
Mountain View.

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opinali
These meals are actually profitable. Because I have free and good meals at
Google, I always have my lunch there instead of leaving office and spending an
extra ~30 min to go some place near (NYC office so I have that option), wait
for service etc. My pay rate for this half-hour is higher than the cost of any
meal that I would buy, regularly with my own cash; so I fail to see how Google
is "spending". Not to mention the days when thing are busy enough so I take
the food to my desk and eat it while working [instead of eating it at my desk
while reading HN as usual :)]. It's also common for coworkers to have lunch
together, or having visiting customers for lunch and other "business"
scenarios.

Also, I know how much $ Google spends with food per employee, and it's a
significantly lower number than what I would pay for the same amount and
quality of food anywhere -- a small part of that due to no sales tax, but the
bulk of savings comes from big economies of scale, very efficient operations,
and no profit margin.

I am a Brazilian, and there most companies provide complimentary compensation
as food coupons that are subsidized by not paying income or payroll taxes
(both are very high in BR). Even higher-salaried employees get these coupons,
usually in a value that's proportional to the salary; for an engineer that's
high enough you can feed your whole family... when I lived alone I couldn't
hope to spend all my coupons, so whenever I had a lot of accumulated excess
I'd donate that to a charity. Now THAT is an obvious loophole to increase
wages at the expense of taxes. Compared to this, the free food in companies
like Google is available only to the employee, only at office, and it has no
relation to your salary -- everybody gets the same food and other office
perks.

There's an important element of healthcare too. Companies that can afford to
provide free lunches are always also, companies that subsidize most or all of
their employee's health insurance, which is a huge cost. The company has
interest in managing employee health to minimize costs of insurance and sick
leave; and Google certainly does that, they use lots of tricks and tactics to
promote a healthy diet.

To summarize, this is much more complex than just "giving freebies" like some
other posters think.

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michaelburk
Anyone know if the IRS serves free coffee in its break rooms?

~~~
mpyne
I'm in DoD and we don't. Actually I'll take it a step further, I'm in the
__NAVY __, where we joke that the whole Navy runs on coffee, and we make the
government employees bring in their own snacks/coffee/etc.

Some random employee brought in their Keurig machine and lets the other
employees use it. That what passes for "perks" for the rank-and-file.

~~~
kpozin
I'm reminded of the government's TP Pool Regulations [1] in Neal Stephenson's
_Snow Crash_.

[1] <http://soquoted.blogspot.com/2006/03/memo-from-fedland.html>

~~~
mpyne
I actually did almost buy TP the other day after an unpleasant encounter with
the new post-sequester personal hygiene equipment. But I forgot as soon as I
sat down at my desk and apparently the bad TP was an accident and not actually
due to the budget crunch.

But yeah, the memo is spot-on in many respects (15.62 exact == smartass) but
unrealistic in others. For example I haven't seem this many words correctly
spelled in a memo since I was on submarine duty, and no one here would be able
to figure out how to word logic as twisted as that described.

Instead they would probably omit major details that need deciding while
repeating minor details, slightly differently each time so that you can't be
sure whether it's a unique requirement or not...

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snprbob86
I'd be curious to see how much revenue this would generate for the government.
I can't help but wonder if this is only a target because of its visibility.
Even if this brought in an extra $1,000 per each of 10M IT workers in the US,
that's only $10B. However, it's likely to not even be close to that.
Meanwhile, the 0.0034% transaction tax only brings in less than $2B in revenue
from financial trades. The proposal to increase that tax to 0.5% would bring
in as much as $200B. I might be bias, but it seems like Wall Street should pay
more taxes before silicon valley.

[http://en.wikipedia.org/wiki/Financial_transaction_tax#Unite...](http://en.wikipedia.org/wiki/Financial_transaction_tax#United_States)

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seanmcdirmid
In China, we get something like 20 RMB a day for lunch; this is a government-
specified benefit that the company can give us tax free, which is why
Microsoft, which doesn't otherwise offer free food in Redmond, will give us
this benefit in China.

On the other hand, we must pay tax on our health insurance, as the PRC laws on
this subject are still too ambiguous.

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6thSigma
So the IRS wants Google to get taxed to buy the food and then the employees to
get taxed for eating the food?

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alexkus
Given how mean my employer is I'd be in line for a substantial rebate!

