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It is basically forcing them to dilute more, which is better for them on average because the shares expire worthless so often anyway. That said a higher percen

by NewJazz 11mo ago

It is basically forcing them to dilute more, which is better for them on average because the shares expire worthless so often anyway. That said a higher percentage of positive outcomes does not mean much when the majority of significant wealth is in that small percentage of high value firms founded.

skybrian 11mo ago
That's how progressive taxes work? It's generally considered a better outcome when the taxes are paid by people who can more easily afford them.
jjmarr 11mo ago
> It is basically forcing them to dilute more, which is better for them on average because the shares expire worthless so often anyway. Well no, because VCs might not give you money to buy chunks of the business as they want the money to go into the business. An unrealized capital gains tax forces VCs to give founders money during funding rounds to cover taxes, money that is refunded to the founder in the event of the business going under. This means you no longer lose everything in an unsuccessful exit, because you get a refund on the capital gains that you didn't end up having.
- spwa4 11mo ago
  This is assuming no reaction from people to this tax going into effect. And that's of course stupid. This is trivial to game and for that reason it will rapidly turn into a money pit for the tax agency. After all, it's real easy for entrepreneurs to be unsuccessful. You get some nonzero valuation by having a friend bid or give some investment and thereby set the valuation, and then you go bankrupt.
  - jjmarr 11mo ago
    You still have to pay the tax in the first place to go bankrupt.
    - spwa4 11mo ago
      No, someone else has to pay the tax in the first place. Am I reading it wrong?
  - skybrian 11mo ago
    The money comes from investors, goes to the tax agency, and comes back again. (Or maybe it doesn’t if it’s just a credit towards future taxes?) This scheme depends on winning the trust of investors and then defrauding them. Sure, it can be done, but there are other ways. The simplest would be paying yourself a higher salary. Presumably, investors are aware of the risks and are willing to take them.

by NewJazz 11mo ago

skybrian 11mo ago

That's how progressive taxes work? It's generally considered a better outcome when the taxes are paid by people who can more easily afford them.

jjmarr 11mo ago

> It is basically forcing them to dilute more, which is better for them on average because the shares expire worthless so often anyway. Well no, because VCs might not give you money to buy chunks of the business as they want the money to go into the business. An unrealized capital gains tax forces VCs to give founders money during funding rounds to cover taxes, money that is refunded to the founder in the event of the business going under. This means you no longer lose everything in an unsuccessful exit, because you get a refund on the capital gains that you didn't end up having.

spwa4 11mo ago
This is assuming no reaction from people to this tax going into effect. And that's of course stupid. This is trivial to game and for that reason it will rapidly turn into a money pit for the tax agency. After all, it's real easy for entrepreneurs to be unsuccessful. You get some nonzero valuation by having a friend bid or give some investment and thereby set the valuation, and then you go bankrupt.
- jjmarr 11mo ago
  You still have to pay the tax in the first place to go bankrupt.
  - spwa4 11mo ago
    No, someone else has to pay the tax in the first place. Am I reading it wrong?
- skybrian 11mo ago
  The money comes from investors, goes to the tax agency, and comes back again. (Or maybe it doesn’t if it’s just a credit towards future taxes?) This scheme depends on winning the trust of investors and then defrauding them. Sure, it can be done, but there are other ways. The simplest would be paying yourself a higher salary. Presumably, investors are aware of the risks and are willing to take them.