Rudedog, Re:Despite Austin's reputation as a mini-silicon valley - IBM, CPQ, DELL, and a host of smaller tech companies all have facilities there - it is hardly in a league with the California bay area as a high tech mecca. Some of the DELL middle managers I have talked with in the last year say that it is increasingly difficult to attract quality talent that wants to build a career with DELL in Austin
I find this surprising. I would have thought Austin would be an easy sell, assuming pay scales are even remotely competitive with Silicon Valley. High tech employees in Silicon Valley face 3 severe hardships:
1. Housing prices, which seem more suitable for someplace like Tokyo, Seoul or Hong Kong than the US.
2. Punitive capital gains taxes collected by the state of California. This rate is 9.3%, and it applies to anyone with a decent income. For example, if you are single and have a taxable income of $34,548, you will pay a 9.3% state tax on long term capital gains. For a married couple filing jointly, this 9.3% rate kicks in at an income of $69,096. In both examples, the long term capital gains rate is 29.3%, compared to the 20% rate applicable to high-income residents of Texas.
3. Punitive state income taxes when employee stock options are exercised. Incentive stock options (ISO) are subject to California's alternative minimum tax. This rate is officially 8.5% (though actually closer to 10%). ISOs are also subject to the federal AMT, of course. But if you live in California and you exercise ISOs, expect to pay a total of about 40% of your options gains in taxes (federal plus state). In comparison, Texans who excercise their ISOs pay only the federal AMT. The federal AMT officially is a two rate system , 26% and 28% (but actually 30%, or above, when fully computed).
Conclusion: Incomes in Silicon Valley, which often appear high in nominal terms, are much lower in real terms for anyone heavily dependent on options income or gains on appreciation from the sale of stocks. |
