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Comment by djt | Hacker News Reader

cognitively it probably makes more sense. ie Im on the same wage but i can brag Im getting $300k extra. If they offered them market rate and an extra $100k it wouldnt sound so great and wouldnt make as much blog traffic ;)

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I wonder if there was some kind of accounting reason behind it as well.

I think salary is taxed at a higher rate than bonuses, which could be part of it.

Not true. http://www.thestreet.com/story/990258/1/when-the-tax-bullet-... (though you said the reverse). "It doesn't matter whether your salary is $90,000 and you get a $200,000 bonus or your salary is $290,000"

Bonuses are generally withheld at a higher rate but in the end they're taxed as ordinary income.

As mason55 said, a bonus will typically be reduced a lot when paid out (so that a $5k bonus ends up being more around $2.5k in your bank account), but in the end, when you do your tax return, you're taxed the same rate on your salary than on your bonuses.

Think about it this way: on your W-2, (assuming the US here) gross bonus and salary are not separated into two different categories. Thus, it can only be taxed at the same rate.

That being said, I'm surprised you'd say that salary is taxed higher… the typical misconception is to think that bonuses are taxed higher for the aforementioned reason.

Not sure if it's the case here, but in some sports (NFL iirc) players don't have guaranteed contracts. If a player makes no bonus but is supposed to earn $10 million a year, he gets nothing if he's cut. If he gets a $3,000,000 signing bonus and a $7,000,000 salary, he keeps the 3 because he got it up front.

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