Mark Cuban has a blog post up where he shows that he thinks the government should encourage people to work at steady 250k a year jobs rather than getting a job in a potentially successful start up where they are often paid via high capital gains. He tries to justify this by calling it "earned money" vs. "found money" but his definition of "found money" sounds awfully similar to something that would impact early employees in a successful start up.
The disparity in wealth in this country does not come on the backs of people making 250k, or even 500k or 1mm per year FROM THEIR JOBS. The ever increasing delta between the rich and everyone else does not come from EARNED INCOME at all. It comes from found money.
Found money is when an internet bubble hits and the options you got for 1 dollar are sold for 250. It comes from buying a stock for $1 and seeing it turn into a “10 bagger”. It comes from hitting the lottery. It doesn’t matter whether you were smart or lucky, it is money you FOUND based on good fortune.
He seems to assume that everyone making enough income from multi-hundred percent capital gains for it to be called "found money" is in league with him or Steve Jobs.
When I sold broadcast.com does anyone seriously think I would have cared if the tax on my FOUND money was 10pct or 20pct more ? Hell no. Would I have made any decisions differently, HELL NO.
But he sets the bar to impact people much lower than that level.
For long term capital gains, it would be more difficult, but I would tax it at a gain greater than $1mm or a basis equal to the compounded CPI for every year held, against a 300pct increase and reduce the GOT LUCKY percentage to 20pct..
He'd have to raise the bar much higher if he wants good people to continue focus on building companies. I know a lot of people who have had to choose between the start up world and the corporate consulting/finance world. Passing a law like this would make it much easier for them to decide to avoid start ups.
But even with a higher bar, that would only incentivize founders of moderately successful companies to focus on generating cash flow for income and dividend payments sooner than they would otherwise chose to because they would be hit hard by high "Found money" gains if they let their capital appreciate by too much. If raising taxes is the goal, raising it from some of the most productive people by calling it "found money" or a "lucky tax" might sound good but it probably won't work out in practice when the second order effects beyond its impact on Steve Jobs and Mark Cuban are considered.