It's the exercise and hold that gets you. If you do a same day sell, you have the money to cover the taxes immediately, since you sold. If you exercise and hold, you pay the money to exercise, and now owe taxes on the asset at fair market value of the assets when exercised, which you might not have because your bank account is actually decreasing. In the future, if the asset loses value, even if you sold all of it, you may still be left with a tax bill you can literally never repay.
.. Although it is handy to have had an education, healthcare, police service, fire service, roads, libraries etc. But other than that stuff, it's very unfortunate.
The OP said due to tax policy, not taxes. Due to perverse incentives (pandering to various classes of voters) and unintended consequences, tax policies have become byzantine horrors.
Very broadly, it seems like tax policy fails to cope (pleasantly) with anything other than totally standard earnings.
If you earn a steady wage, or simple capital gains, things go fine. Anyone dealing in options, variable hours, contract work, or anything else unconventional faces totally irrational outcomes unless they're exceedingly careful.
