The new federal tax reform is going to create awkward discussions at review time in 2018.
Take a look at a typical senior engineer, who makes $340K (if you don’t believe that salary, you can find a full list of Google salaries here). Last year, he would have paid about $85K in federal taxes, mostly because of the ability to deduct the high California taxes (about $30K). In 2018, his federal tax will increase by $10K to $95K.
Where is the money going? Large corporations are getting the bulk (at least 2/3) of the tax cuts ($1 trillion out of $1.5 trillon over t10 years). Guess who is a large corporation? Google, of course.
In other words, starting in 2018, each Google engineer is giving $10K to Google. And again every year after. Forever.
If you were in that engineer’s shoes, what kind of raise would you ask for at review time? Do you think Google will make you whole by giving you an extra-raise of $10K? Or is it more likely that most of Google’s tax break will go to tax dividends and higher stock price?
Here’s a quick back-of-the-envelope calculation: if Google returns half of its tax breaks to shareholders, and Google engineers receive half of their compensation in stock, that means that the employee will get 1/4 of its money back ($2.5K in our example). That employee will still be $7.5K short.
We won’t really know for sure how the math plays out until the end of the year. But it sure will lead to interesting discussions with your manager!