President Joe Biden’s proposed 15% minimum tax on the book income of certain corporations is estimated to raise $110 billion over 10 years when combined with other corporate tax proposals. But much of that revenue would come from penalizing corporations paying employees stock-based compensation, according to the Tax Foundation, a nonpartisan Washington, D.C.-based think tank.

Because stock-based compensation makes up about 30% of corporations’ book-tax differences, it would almost certainly lead to such compensation arrangements being curtailed if the Biden tax is enacted, said Garrett Watson, a senior policy analyst at the foundation, in a new analysis.

According to critics, the tax treatment of stock-based compensation adds to the gap between a company’s book income for accounting purposes and its income for the tax authorities, which often diverge. This compensation also exacerbates worries about executive pay and income inequality. President Biden wants to target the book gap with the new minimum tax.

But the creators of the tax ignore the rationale behind corporate taxation and the role that stock compensation plays, Watson said.

“Stock-based compensation is a useful tool to help align incentives between employees and their employers, not a loophole,” Watson said. “Raising taxes on stock-based compensation through a book income tax will disadvantage this form of compensation and produce more complexity in the tax system without providing benefits to workers,” he added.

It is also not true that only executives benefit from stock options and stock-based compensation, Watson said. In fact, “78% of stock-based compensation now goes to employees below the executive suite,” according to a recent study from the National Bureau of Economic Research.

Watson added, “The growing use of stock-based compensation may explain much of the gap between wage growth and labor’s share of corporate earnings since the 1980s.”

Under financial accounting rules, employers generally deduct the fair market value of stock-based compensation when it is granted to calculate book income, which is reported on a firm’s financial reports to shareholders.

However, to calculate taxable income, stock-based compensation is not deducted until employees are vested or stock options are exercised, potentially creating a difference between the amount deducted for book and tax purposes, Watson said.

“For example, take an employer who grants $10,000 worth of restricted stock units or RSUs to an employee in January, which is deductible from book income at the original $10,000 value. If the RSUs vest in December at a fair market value of $15,000, the employer deducts this fair market value when calculating taxable income. This creates a gap between taxable income and book income of $5,000,” he added.

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