The GOP tax plan will offer considerable benefits to the Silicon Valley tech economy, including tax cuts and an opportunity to bring money back from overseas at a lower cost, as well as tax breaks for many Bay Area workers, according to a Reuters report. Despite heavy criticism from state officials such as Governor Jerry Brown, who called the plan “evil in the extreme,” it could represent a boon for employers, workers, and venture capitalists in one of the nation’s most economically vital areas.
According to tax experts, a new 10,000 dollar limit on deductions for state and local taxes will not have as negative an impact as critics have predicted, since the AMT (alternate minimum tax) already stipulates that high-income individuals pay a minimum of 26 percent in taxes.
The tax plan dramatically reduces the number of people who must pay the AMT, from more than 5 million to roughly 200,000, according to the Tax Policy Center.
A married couple with a combined income of 150,000 dollars could expect a reduction of 3,900 dollars in taxes, according to Annette Nellen, director of San Jose State University’s master’s degree program in taxation.
Benefits for lower income workers would be much more modest, however, and critics are concerned over the longer term impacts of the bill for these groups. Individual tax cuts expire in 2025, with many of the tax cuts ultimately benefiting corporations and the wealthiest Americans.
California health insurance premiums have been forecasted to rise, a result of the tax plan’s repeal of the mandate to obtain coverage in the Affordable Care Act, and the resulting fines.
However, certain provisions are likely to specifically benefit the technology based economy of Silicon Valley, including a measure that allows employees of startups to put off paying taxes on exercised stock options. If a company is still private, these workers must pay tax before ever seeing income from selling shares, so this provision is a significant boon.
Employees at startups will now be more likely to be able to exercise “incentive stock options” without owing the alternative minimum tax, according to Mark Setzen, a certified public accountant in Silicon Valley.
Independent contractors, which can include a range of professions, will see a new 20 percent deduction for business income.
Limitations of capital gains taxes, and the preservation of tax breaks for venture capitalists will also benefit the economic climate of Silicon Valley.