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> 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.

What I find interesting about this is that that seems to be the route Google was going anyway. I remember reading a while back about Google building housing near Mountain View to house employees.

In a way, it's not too different from the old company towns of the industrial revolution (see Pullman Strike) and there is a certain logic to it:

If you want to retain people, hire them right out of college and drop them into a situation that is very much like the university experience. Long hours, lots of work, but free food and you can more or less walk to work and see your friends on a regular basis. It could be pretty attractive to someone straight out of college.

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

I'm sure the IRS has a few bigger fish to fry, but this one seems pretty big. A few thousand dollars a year multiplied by several thousand employees, multiplied by hundreds of companies adds up pretty fast.

>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.

> 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.

Where do you draw the line? No free stationery? No free coffee? What about company events?

Chairs with wheels, AC, guest wifi...

Stationary is directly used in working, it isn't a perk. Coffee and company Christmas parties seem completely reasonable to tax; they are part of the compensation that the company is giving you, not an intermediate product or tool used to achieve work. Reasonably the company should cover the tax just like they are covering the base purchase price.

If you do work and you only get paid in room and board you currently have to pay income tax based on the value of that room and board. I don't really see how this is different; these generally don't sound like working lunches but rather only a form of compensation.

It's probably best to not get lost in the details. The solution to this is real simple and can be very effective and hassle-free for everyone. The IRS will hardly care about the coffee or water or the private phone calls you are allowed to make on your company phone. The easiest solution to this is to just have a reasonably high cutoff point for such perks, like "companies can only spend $150 per month per employee on such perks and leave them tax free".

Problem solved. Now most companies offering only small stuff that has traditionally been offered to many employees (coffee, water, ...) are no longer affected and only those who offer substantial perks are included. This is also less work both for the companies and tax collection agencies.

I don't know if you could say the IRS will hardly care about coffee if they are considering caring about lunches. What is a lunch a day, $10? How much do a few "barista" coffees a day cost? I actually don't know, I'm not a coffee drinker, but I can see that easily topping $10/day.

Well, if it’s “barista” coffee then the IRS has every right to care about it. I’m talking mostly about coffee out of one of those machines. That can’t cost much more than ¢50 per cup or something like that, even if you have a fancier machine.

When I'm a contractor and I go out to lunch with my clients I get to write that off as a business expense and it is effectively untaxed. Same for travel. However, the company paying for my meals or travel to and from work should be taxed? This argument goes well behind just a few large corporations.

The line for when something is business related and when it isn't is very blurry. I probably socialize a lot more with my coworkers because the company provides us free food and a place to socialize. Previously, when I worked at companies that did not provide meals I ate a significantly higher number of meals at home, alone, or with non-company friends. These meals have a business value to the company, so aren't they a cost of doing business? You could argue that the company also gives me a computer that is more powerful than strictly required to do my job and I can even use it for browsing HN during breaks. Should that be taxed as a perk then?

You make it sound like everything is so cut and dry.

Do you really think every corporate event is a perk? One friend of mine was just bemoaning the beginning of baseball season because he has to spend so much time at games with his bosses (tickets paid for by the company). Declining the invitation is considered rude and politically unsound.

As far as room and board go, someone staying at an "extended stay" hotel or apartment paid for by the company owes income taxes on it? It certainly isn't compensation from the employee's perspective.

Even your view on coffee is ridiculous- it is clearly a product or tool used to achieve work.

Also, how does the company just "cover the tax" as you so simply put it? Did you consider that not every employee is in the same tax bracket? What if Joe, in bracket A, drinks 4 cups of coffee a day and Jane drinks none at all?

Companies like Google already give their employees an estimated amount to cover the taxes of holiday gifts. The amount it's presumably sometimes less than the actual taxes, but employees get to deal with the difference (or they can decline the perk).

I don't see your other complaints as relevant to taxes. Just because you prefer to do less work and get less compensation doesn't make something not compensation. Using your line of argument, if you ask your boss to go golfing because you think it will l help your career, you should deduct that from your taxes.

I really cannot see the rational argument that says a migrant worker who is being paid in room and board should pay income tax but someone else doing the exact same thing while also collecting a salary and paying for an apartment in another city shouldnt be taxed on the room and board. The hotel seems completely unambiguous as compensation to me.

About coffee being an intermediate product; you might be right.

Did not know about Google's bonus for covering taxes. So they leave it to the employees to declare whatever they think the value of their holiday gifts were? I wonder if this leaves Google liable for underreported compensation like restaurants. [1]

"Just because you prefer to do less work and get less compensation doesn't make something not compensation."

I lost your train of thought. (Really, not trying to be facetious.)

"Using your line of argument, if you ask your boss to go golfing because you think it will l help your career, you should deduct that from your taxes."

Only if he's not really your friend. [2]

"The hotel seems completely unambiguous as compensation to me."

Your intuition and the law differ. The hotel is deemed an ordinary and necessary cost of doing business for the employer. Putting your employee in another place for a period of time is just the nature of the biz. For some reason, putting up a migrant worker is not?

"About coffee being an intermediate product; you might be right."

Really, I'm just trying to point out that taxes are an arcane, complex issue. Going with whatever you think is intuitive is not necessarily how they work.

[1] http://ledgerlink.monster.com/training/articles/102-irs-goin...

[2] http://www.irs.gov/pub/irs-pdf/i1040sca.pdf (see 4th point on page A-11)

Yeah, honestly it makes sense. Right now firms in CA are incentivized to provide perks as compensation to employees in lieu of cash because it isn't taxed. Implementing a tax on these perks will probably reduce perks, but it should have the result of higher wages.

Right.

This is pretty much the conclusion I came to when trying to figure out why this would make sense.

the optimum financial endgame for a company like Google is to basically turn into some mega corporation that pays its employees almost minimum wage

The pay for Google engineers is certainly not trending towards minimum wage.

It's called double taxation. In your examples, Google is paying the house and alcohol sales taxes when they purchase them.