Comment Don't worry, the government still gets its cut (Score 1) 307
First of all, it's not true to say that it costs Facebook nothing to give shares to employees redeeming stock options. Those same shares could have been sold on the open market for a lot of money and Facebook is giving that up. Also, every time an employee exercises an option and Facebook gets a tax deduction, the employee pays the government in the form of capital gains tax. Finally, it's silly to say that capital gains should be taxed the same as ordinary income because capital gains have a huge hidden tax which is capital losses -- you have to put money at risk to have a capital gain and often people end up with a capital loss instead, especially with a new business. It takes a long time to deduct a big capital loss (only $3,000 per year) unless you also have big capital gains to offset. Earned income doesn't have this risk. You get paid as you go and even if the company goes bankrupt you still get to keep the salary you were already paid. A lower capital gains tax incents people to invest, especially in new business which are more likely than not to fail.