[chimeracoder]

> Startup stock options, if you exercise before a liquidity event, are given a cap gains tax based on the de facto market cap.

That's not really the same thing. ISOs are taxed (as income) because you're purchasing something for below-market price, so the difference between the market price and the price you pay is income. If you hold onto it for long enough, you may then be able to qualify for capital gains tax when you sell it, but that's different.

And in addition, that's the individual who's being taxed on it (the value of their own income).

If you think of how this works similarly for publicly-traded companies, it's easier to understand.