Reading the other comments, I looked closer at your choice of professions.
1) Engineers at Google earning 400K+ USD per year are receiving a large chunk in stock grants. I guess 1/3 to 1/2. (And the last 10 years have been very, very good for equity prices in tech majors.) I assume those receive capital gains tax treatment when sold. If held for at least one year, you receive generous tax savings. Is that fair?
2) Radiologist is probably paid 100% cash or part in deferred (cash) comp. I doubt their receive equity in their public/listed hospital group. Dear Reader Doctors: Please correct me if I am wrong! Also: Are you aware of incomes for highly-skilled specialists in other high-developed countries with good national healthcare systems? I guess about 50% less. Look at Germany, Netherlands, France, Japan, etc. The US is a global outlier on healthcare costs and incomes.
3) Investment banker is a loose term, because you can be a very senior quant on Wall Street can earn 500K USD. Or you can be a M&A i-banker or trader or portfolio manager and easily earn more than 500K USD in good years, but a good chunk will be equity. I guess 1/4 to 1/3. If you make crazy money (millions), surely 50% equity. That said, equity in an investment bank isn't a very good investment. Look at the last ten years compared to big tech. Big tech is killing ibanks on equity returns. Still... that equity grant will get beneficial tax treatment. In this narrow scenario, what benefit does this serve for the wider economy? I see little.
4) Lawyers: Probably paid all cash, possibly deferred comp (cash). Most white shoe law firms that can pay 400K+ USD are not public/listed, so equity isn't the same, even if there is /some/ measure of profit-sharing. Please correct me if I am wrong about public/listed law firms. Just before I hit reply, I thought of another type of special case: corporate counsel. If you work an in-house counsel in New York City, you can easily make 400K+ USD as a senior lawyer. And your company probably pays you some equity. (We can all this i-bank/legal hybrid job.)
5) Small business owners: These are essentially small-time executives who can structure all kinds of non-income payments to themselves and reduce their tax burden. Important: I would also separate intellectual property-heavy businesses (high-value services) vs traditional mom-n-pop shops, like chain of gift shops or pizza restaurants. The return-on-equity is hugely different. That said, in most developed economies, small-to-medium enterprises generate the lion's share of new jobs. (Huzzah to that.) Still, the same tax benefits the owner can structure for themselves will not also be arranged for the "normal workers". Again: Is this fair?
1 - RSUs are taxed as earned income from the time they vest.
That means - if I was granted $75k worth of Google stock to be paid this year - but it has quadrupled in value... Upon vesting - I'll receive $300k worth of Google stock this year...
I pay "earned" income tax on all $300k of that - meaning, after taxes, I get about ~$185k of that.
If I should hold that for a year - and it goes up 20% in value - I would pay capital gains tax on that 20% / ~$37k just like anyone else who bought and held Google stock for a year.
RSUs and such don’t have capital gains treatment like you might be imagining. If you sell the day you vest, you get income taxed. If you sell a year later, you get income taxed. You will only get capital gains on that which you earned above what you got when you vested. (No different than just selling the stock and buying it again immediately - you will owe income tax even if you still hold the stock btw) Only ISOs and other private equity will get that preferred treatment. (Which is far more risky and the stock is not tradable after all and typically bordering on worthless anyway)
Interesting. Does your company not withhold shares for taxes when they vest for you? I thought this was required.
Meaning - your second option isn't really an option.
Your company withholds some shares when they vest (usually less than you actually pay in taxes). Then, regardless of whether you sell or hold - at the end of the year - the IRS comes after the rest of the "earned income" taxes you owe.
IFF you do hold the shares - for say another 2 years - you pay only capital gains on your stock appreciation for those 2 years (if there is any). You already paid "earned income" tax on the shares the year you received them from your company.
1) Engineers at Google earning 400K+ USD per year are receiving a large chunk in stock grants. I guess 1/3 to 1/2. (And the last 10 years have been very, very good for equity prices in tech majors.) I assume those receive capital gains tax treatment when sold. If held for at least one year, you receive generous tax savings. Is that fair?
2) Radiologist is probably paid 100% cash or part in deferred (cash) comp. I doubt their receive equity in their public/listed hospital group. Dear Reader Doctors: Please correct me if I am wrong! Also: Are you aware of incomes for highly-skilled specialists in other high-developed countries with good national healthcare systems? I guess about 50% less. Look at Germany, Netherlands, France, Japan, etc. The US is a global outlier on healthcare costs and incomes.
3) Investment banker is a loose term, because you can be a very senior quant on Wall Street can earn 500K USD. Or you can be a M&A i-banker or trader or portfolio manager and easily earn more than 500K USD in good years, but a good chunk will be equity. I guess 1/4 to 1/3. If you make crazy money (millions), surely 50% equity. That said, equity in an investment bank isn't a very good investment. Look at the last ten years compared to big tech. Big tech is killing ibanks on equity returns. Still... that equity grant will get beneficial tax treatment. In this narrow scenario, what benefit does this serve for the wider economy? I see little.
4) Lawyers: Probably paid all cash, possibly deferred comp (cash). Most white shoe law firms that can pay 400K+ USD are not public/listed, so equity isn't the same, even if there is /some/ measure of profit-sharing. Please correct me if I am wrong about public/listed law firms. Just before I hit reply, I thought of another type of special case: corporate counsel. If you work an in-house counsel in New York City, you can easily make 400K+ USD as a senior lawyer. And your company probably pays you some equity. (We can all this i-bank/legal hybrid job.)
5) Small business owners: These are essentially small-time executives who can structure all kinds of non-income payments to themselves and reduce their tax burden. Important: I would also separate intellectual property-heavy businesses (high-value services) vs traditional mom-n-pop shops, like chain of gift shops or pizza restaurants. The return-on-equity is hugely different. That said, in most developed economies, small-to-medium enterprises generate the lion's share of new jobs. (Huzzah to that.) Still, the same tax benefits the owner can structure for themselves will not also be arranged for the "normal workers". Again: Is this fair?