Twitter didn't make a bunch of dudes "paper" billionaires today without a helping hand from the government. But Senators John McCain and Carl Levin decided this is the week to burst their IPO bubble. The stock option tax loophole that let Twitter take an estimated $154 million tax deduction, they declare, "ought to be closed."
Yesterday, the Senators issued a statement calling the corporate stock option loophole, which lets companies report stock option compensation expenses differently on their financial statement versus the way companies report them to the IRS, a prime example of an "inequitable special-interest tax loopholes."
“For example, when Twitter goes public later this week, the company may avail itself of this existing tax loophole. Under this loophole, the company will be able to take an estimated $154 million tax deduction for a stock option compensation expense which its own books show cost Twitter only $7 million.
This tax deduction, which is 20 times larger than the actual business expense, is not unique to Twitter.
Levin, a Democrat from Michigan, and McCain, a Republican from Arizona, serve as the chairman and ranking member of the Senate Permanent Subcommittee on Investigations, respectively. To make the case for closing the loophole, they offer a pretty compelling figure for the amount it would raise—and drop the s-bomb:
“Given the deficit and damaging sequester cuts facing this country, this corporate stock option tax deduction is the kind of tax loophole that ought to be closed. The Joint Committee on Taxation has estimated that ending this tax break would raise $23 billion for the U.S. Treasury.”
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