The problem (other than double taxation)is that people whose wealth is predominantly held in a diversified portfolio will be able to avoid this sort of tax much

The problem (other than double taxation)is that people whose wealth is predominantly held in a diversified portfolio will be able to avoid this sort of tax much more easily than people who have more concentrated holdings. Someone who sells a $2 million business is rich, but they aren't that rich. The rules for houses and incentive equity compensation are complex. But this would generally be bad for people who get equity compensation in companies whose value is very volatile (read early stage startup workers). This is very problematic for Silicon Valley's current economic model.