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Since stock plays such an important role in the tech sector and its compensation and finance I feel the following issue will effect everyone in the tech sector, whether they own stock or not. The accounting rules under the new tax code may be set to command a first in, first out rule. Under this rule, when you sell stock you have to sell the shares you have had the longest or the first in. Typically these shares have the highest tax load since you have held them the longest and they have the highest appreciation. In effect, the government is seizing control of your property to extract the highest tax load. Imagine instituted similar rules on all classes of assets. Seizing control of assets to take the largest cut is an unconstitutional way of taking property and is a very dangerous slope. Imagine if a tech company was required to sell its latest IP first, before selling any old IP. This could have many bad consequences such as lowering the value of current stock holdings and lowering the price of the first shares a company issues making funding of all ventures more expensive. Unless these rules are changed this is due to take place January first. The ramifications of the government seizing control of stock assets will introduce a whole host of problems for the tech sector that relies on stock valuations for financial needs from compensation to funding. This sets a very dangerous precedent if the government is allowed to seize control of property without just compensation and change rules in mid stream. The tech sector stands to suffer the most as it already has from a tax system out of control. I'm also wondering how many adverse consequences this will have on the start up scene which relies so heavily on stock for funding and compensation. This rule will also lower your investment returns and your margin limits by taking money before it has a chance to compound, further reducing your total returns. This was a major topic of discussion on the financial channel(CNBC) today.
I haven't heard of first in first out. This is part of the new tax code? When I take capital gains I do it on my cost basis, which is the average price I've accumulated the stock in my account. First in first out will make accounting a nightmare because I'll be forced to keep track of and match up every single buy/sell as opposed to just updating my cost basis whenever I buy.
If this passes Congress, you will have to submit to first in, first out. I hope Congress comes to their senses and thinks about the damage this will cause or at least grand father existing shares into the current system. Even then, this policy will do a lot of damage, especially in the tech sector that uses stock as currency for literally everything, but the government needs the money to do with as it pleases.
I'd rather see the money go towards the tech sector than an oversized military (1st in cost, can't win a war), prison system(world's largest prison population, most related to drugs less dangerous than alcohol and tobacco) , failing educational system(ranked 29th) and medical(ranked 37th in quality and 1st in cost). Just about any thing our government touches recently raises costs, lowers quality and harms the people.
What makes this even worse is that funds and ETFs which were written into the FIFO bill have used their influence to now be ruled exempt. So much for integrity in government.
Very good news, this very destructive abuse of the tax code that could have caused devastation to the tech sector has been taken out of the latest version of the tax code as of Friday evening.
