How Steve Jobs pays only 15% taxes instead of 35% on $48 Million annual income | Hacker News Reader

How Steve Jobs pays only 15% taxes instead of 35% on $48 Million annual income

seekingalpha.com

16 pointsck219 comments

There's no tax strategy here. Perhaps if Jobs found a way to pay less than the tax rate for dividends, this exciting headline would make sense, but he didn't. The two percentages have nothing to do with each other.

I realize the author wants to show that dividend investing lets one keep more of one's money in the long run than by taking out a large salary each year, but Jobs could do that because he bought Pixar at low prices and grew it (if he bought it when it was really expensive, he would have to come up with the money which means income or capital gains events.) He didn't really choose between income and stock each year.

It could arguably be a tax strategy if he received a dividend from his Apple shares in lieu of a salary, although that ignores the fact that dividends have been taxed already because they're paid from post-tax profits. Even that isn't a new thing, directors in the UK (and no doubt the US too) have been doing that for years to avoid national insurance contributions.

Also, becoming the single largest stock owner of a company like Disney is probably not a strategy that generalizes well.

But most investor-billionares are also in the 15% area, Warren Buffett admits he only pays 17% taxes.

Having your company pay you only $1 to avoid paying taxes is definitely a strategy when other equivalent CEOs are getting paid millions per year.

No it's not, because even if he took a salary from Apple, that would be on top of his income he's getting from Pixar dividends. So it's no 'strategy' because there is no trade off - the two income streams are independent. (I guess it could be called a 'strategy' if the goal is to pay as little tax as possible, but it's not - the goal is to maximize net income, otherwise one could 'win' by not making any money at all).

Receiving a nominal sum is a symbolic gesture by the CEO to show that the CEO's interests are entirely aligned with the company's, and usually only taken in times of crisis or when the company is/will be making buckets of money (Jobs, Eric Schmidt, etc.)

This is a very muddled and misleading article. It reads like this is a clever way for Steve to dodge tax on his Apple compensation. He isn't paying only 15% on his Disney dividends "instead of" 35% on his Apple compensation. They've got nothing whatever to do with each other. Apple pays no dividends and his Disney holdings are completely independent of his Apple holdings or compensation.

Since when is Steve Jobs known for a 'very lavish lifestyle'? I thought he was known for being quite frugal, did I miss something there?

you mean this kind of frugal ?

http://www.gizmodo.com.au/2010/09/exclusive-the-plans-for-st...

The article describes and understated 5br home replacing a 13br monstrosity at a price tag of around 1/3 Larry ellison's.

I live in Germany and run a software company. My company pays 31% taxes on its profits and when I transfer the remaining money to myself, I pay another 25% Taxes on that. So in the end I pay 48% taxes. Anybody in a similar situation? Any suggestions how to improve it?

You just explained why Germany isn't bankrupt.

My first advice would be that Hacker News is not the best place to get tax advice specific to Germany, but I'm sure you already know that :-)

You could register your company in Ireland and pay 12.5% corporation tax, pay yourself a low salary and make the company buy/rent things you need (a car, office + living space, etc).

But I guess a German tax advisor would be a wonderful investment for you.

Yes, especially for software there are many ways to pay much less, but you'll need to find specialized people to do that and maybe be willing to make some trade offs. I'm not comfortable talking details, but search for companies who specialize in offshore companies and go talk to them - first talk is usually free. Also look across the borders (West, in your case - there are some hidden gems there).

I'm not aware of the tax structure in Germany, but if you pay yourself a salary as an employee of your own company, shouldn't you should be paying corporate tax only on the portion left after you've deducted your salary from the profits?

Yes, and he's probably already doing that in part, but the total tax pressure doesn't go down all that much because income tax is high in the higher brackets, and they have low floors.

I pay 42% on the money i pay myself as a salary. So salary has a slight advantage over paying out profits. But you cannot pay yourself as much salary as you like. You can only pay whats "reasonable" for a CEO and have to tax the rest as profit.

I wonder why the article doesn't mention that his DIS shares are worth 5.3B$. 1% doesn't sound that great I guess

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