November 29, 2025
Is the IRS your co‑founder now?
Dilution vs. Risk taking: Capital gains taxes and entrepreneurs
Founders split: Don’t tax my dreams vs I want a safety net in the unrealized gains fight
TLDR: Study finds taxing paper gains cuts average founder ownership but could triple the number who get paid—if refunds exist. Comments split between fairness outrage (“don’t tax what I didn’t sell”) and safety‑net fans, plus Swiss‑tax irony and “delulu” rants over America’s tax chaos.
The comments came in hot: are you Team Exception (bet it all and don’t touch my equity) or Team Rule (I’d like some insurance, thanks)? A new study on taxing “unrealized” gains—value on paper you haven’t sold—says founder outcomes are wildly skewed: 84% end up with zero, the top 2% grab 80%. Switching from sell-only taxes to “pay-as-it-rises” taxes would shrink average founder ownership by about 25%, but—if refunds exist—boost the number of founders who walk away with something from 16% to 47%. Cue the brawl over capital gains and fairness.
The fairness crowd fumes: “Don’t tax phantom money!” One commenter calls the whole U.S. tax debate “absolutely delulu,” sparking a pile-on about California rates and broken budgets. Another drops the Swiss mic: some authors are from Switzerland—where even realized gains often aren’t taxed—so why pitch taxes on paper gains? Meanwhile, pragmatists cheer the safety net: as jjmarr paraphrases, it could be “better for more founders,” with VCs fronting the tax and refunds cushioning flops. Memes fly about the IRS as a surprise co‑founder and “Government taking a Series A.” Bonus twist: a 2% wealth tax causes similar dilution but no refunds—so no safety net. The vibe? Passionate, polarized, and very, very online.
Key Points
- •Accrual-based taxation imposes advance taxes that dilute successful founders but offers insurance via refundable tax credits to unsuccessful founders.
- •Founder returns in U.S. venture-backed startups are highly skewed: 84% get zero exit value; the top 2% capture 80% of total value.
- •Accrual-based taxation would reduce average founder ownership at exit by 25%.
- •With refundable tax credits, accrual-based taxation increases the share of founders with positive payoffs from 16% to 47%.
- •A 2% annual wealth tax creates similar dilution as taxing unrealized gains but provides no risk-sharing benefits due to the absence of refundable credits.