If Biden increases the long-term capital gains tax rate from the current 23.8% up to a new cap of 43.4%, it could neuter America& #39;s entrepreneurial ecosystem. (1/6) http://www.bloomberg.com/news/articles/2021-04-22/biden-to-propose-capital-gains-tax-as-high-as-43-4-for-wealthy">https://www.bloomberg.com/news/arti...

Founders and early employees shoulder pay cuts and increased risk when they leave an established company for a startup. They do this in part because there is the potential for a big payday at the end, at an advantageous capital gains tax rate. (2/6)

It will be harder for startups to recruit bc the tax system will punish their employees. A Googler making $400k/yr for 10 years will pay less tax vs a startup employee making $100k/year for 9 yrs, plus a $3m payday at year 10, despite the Googler earning more total income. (3/6)

I ran the numbers. A Googler earning $400k/yr in CA pays 38% of income over 10 years in taxes. Today, the startup founder pays 36% of her $3.9m 10-year income. Under Biden& #39;s plan, the Googler& #39;s taxes don& #39;t change but the founder& #39;s rate shoots to 46%! (4/6) #gid=0">https://docs.google.com/spreadsheets/d/11qxXByoCMDeIiTT5x4IUmyXD88Z3wEy_95YLnMpl-i0/edit #gid=0">https://docs.google.com/spreadshe...

Today& #39;s tax code effectively incentivizes people to take pay cuts and risks associated with building the next generation of companies. If entrepreneurs start to take home less of their total income vs salaried workers at mature companies, the startup ecosystem will suffer. (5/6)

This is compounded by highly graduated income tax rates in states like CA, which make no distinction between cap gains and ordinary income. Founders with lumpy income ("exit" years interspersed with lean years) have long paid higher state tax rates vs salaried employees. (6/6)