Bernie Sanders introduces a bill that would tax stock options at vesting, not at exercise, for those making $130K+ and vesting $100K+ worth of stock per year
'Sens. Bernie Sanders (D-VT) and Chris Van Hollen (D-MD) introduced legislation that would tax nonqualified stock options at vesting …
AxiosDan Primack
Context & Ripple Effects
This bill revives an idea Congress already tried and abandoned: the 2017 Senate tax reform draft would have taxed stock options and RSUs at vesting, and it was stripped out within days after the startup community warned it would devastate equity compensation (the provision was dropped). Sanders is reintroducing the mechanism with income and vesting thresholds — $130K+ earnings, $100K+ annual vests — aimed squarely at senior tech employees rather than rank-and-file startup staff.
High-earning tech employees vesting six figures of nonqualified options annually would owe ordinary income tax at vest, before any sale — creating a cash-tax liability on illiquid paper.
Startups relying on large option grants to compete with Big Tech salaries would see those packages become tax-riskier for exactly the senior hires they most need.
Second-order effects
Companies would restructure compensation around the thresholds — shifting value into RSUs, cash, or earlier/lower vesting tranches — just as they mobilized against the 2017 version, which lawmakers dropped after that pressure.
The contrast with expanding QSBS benefits sets up a two-front fight over startup equity taxation: one side widening founders' and VCs' tax-free gains, the other taxing employees' options sooner.
Third-order effects
If vesting-based taxation keeps resurfacing each political cycle, equity-heavy compensation loses its assumed tax deferral as a structural feature, pushing startups toward cash-heavy pay and narrowing the ownership-spread model Silicon Valley runs on.
Tax treatment of startup equity hardens into a partisan dividing line — employee-side taxation versus investor-side breaks — making every future tax bill a referendum on who captures startup upside.
The trend: Equity compensation is becoming a recurring target of tax policy, with vesting-based taxation proposals returning each cycle even after prior retreats while investor-side breaks expand.
New Sanders tax plan would really screw over a lot of startup employees — would tax options at vest, rather than at exercise. Many employees would be unable to pay — forcing them either to give up options or take out loans. https://www.wsj.com/...
The irony of Sander's tax proposal re: options is that it would be really good for VCs / investors / the real SV 1%. Companies would need to raise more cash from VCs to pay employees & cap table /upside would shift to founders + VCs alone! #thxBernie! https://www.axios.com/...
One more note on this Bernie tax story. In Nov 2017, Republicans proposed the same thing and dropped it after companies freaked out. That's a big $15B deal and I don't remember writing a word on it then because so much other TCJA stuff was happening. https://www.wsj.com/...
This is a genuinely terrible idea. Options aren't malicious, they're a two-way agreement that the team member understands the company's stage, believes in their vision, believes they can help achieve that vision and wants a piece of the pie if/when they do. https://twitter.com/..…
I don't have much sympathy for executive deferred compensation programs but Sanders is nuts to want to tax stock options upon vesting rather than on exercise. This would force immediate exercise of options when vested to pay tax https://www.wsj.com/...
Horrible policy that would be harmful to hardworking Americans just like the FTT. We should be helping America's small businesses & startup employees achieve their dreams by closely linking their hard work to ownership not taxing their equity away before they can even get started…
This all-out attack on 1 of the few *working* systems for “workers to own the means of production” — which napalms the entire startup ecosystem to ding a few greedy F500 CEOs — shows what you're really getting. Not Swedish Social Democracy, but convulsive Hard Socialism of Chavez…
this... seems like it will lead to more wealth inequality? the only employees who will be able to benefit from their options will be those who already have the money to pay taxes on them https://twitter.com/...
For background: @BernieSanders tax plan for options is likely influenced or even based on the work of @Lazonick Bills work on buybacks, options & exec compensation was perhaps in part popularised by this 2014 @HarvardBiz article https://hbr.org/... Cc @danprimack @paulg https://t…
Sanders during last week's debate: employees should own more of businesses Sanders today: proposes a tax plan that discourages equity compensation https://twitter.com/...
Taxing options would mean low level employees would get burned when a company (most) struggles. It would then be better for employers to not give them which would result in employees then not participating in the success of the company - this consolidates the wealth even more. ht…
@jonathanvswan @JackiePressley2 “this legislation would likely result in companies shifting more from stock options to restricted stock units (RSUs), and also changing vesting periods to quarterly or yearly” https://www.axios.com/...
For over twenty years, I've called for higher tax rates on realized capital gains. But this proposal from Bernie Sanders is beyond stupid. It would end entrepreneurship in America. Just clueless to tax phantom income, not real income. https://www.axios.com/...
I voted for Bernie in 2016—but won't be doing so again Tuesday for this reason. Silicon Valley's practice of broad employee equity is one of the strongest manifestations of the American Dream still remaining. Taxing illiquid employee equity would squash social mobility for many h…
If your goal was to destroy the Silicon Valley ecosystem of creating new companies, this would be an effective way to do it. Taxing stock options at vest doesn't hurt execs, it would only hurt normal people who can't pay that tax bill with outside wealth. https://www.wsj.com/...
If you are in the startup ecosystem and not speaking out against Bernie, you should really see what he's up to regarding stock options. This impacts workers and prevents future wealth of these workers. He wants to tax on *vesting*.
Isn't this what Indian startups were complaining about? Looks like Silicon Valley and Bengaluru will have something in common after all! That is, if this plan actually becomes law. https://twitter.com/...