There are two different things going on here though - one is whether we offer incentives for investors.
The other is how the tax system works when people receive options / equity.
The problem with 'receiving' equity is that 1) Current laws treat equity as if it was cash - but it's not. 2) Whether employees should be compensated and recognised for their potential opportunity costs - essentially given a similar deal to investors.
Keep in mind that many startups will offer equity in lieu of the salary that they would otherwise command.
Also, if you're offered a significant portion of equity in a startup, then taxes currently make a large disincentive for people to accept and join the startup.
on 2) I think if investors are rewarded for the risk they take, then other stock holders should also be rewarded for the opportunity cost they've sacrificed. So specifically, in terms of 'a similar deal' I'm talking about tax incentives.
At the very least, I think tax shouldn't apply until you cash out - this just makes sense.
Perhaps the system could also offer a tax incentive for lower returns for non-investor shareholders to recognise sacrificed opportunity cost as well.
The other is how the tax system works when people receive options / equity.
The problem with 'receiving' equity is that 1) Current laws treat equity as if it was cash - but it's not. 2) Whether employees should be compensated and recognised for their potential opportunity costs - essentially given a similar deal to investors.
Keep in mind that many startups will offer equity in lieu of the salary that they would otherwise command.
Also, if you're offered a significant portion of equity in a startup, then taxes currently make a large disincentive for people to accept and join the startup.