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I'm Bob, I write a check for $50K to exercise my stock options. They might be worth something some day, I'm taking that risk and working my ass off to see that they are.
The year I exercise the options, the gov sees that I've made a $1.5M "paper gain", and they want their taxes. Call it $300K.
If Bob doesn't have $350K in the bank, he is stuck - he basically needs to wait until said company goes public to make a zero-cash sale, or forfeit his options when leaving (either by quitting or getting fired).
Not to mention if Bob exercised the stock and payed the $350K - the company could never IPO, or it could and tank. Bob wouldn't see any of that money back.
Bob's upside for working at said risky startup is severally limited.
This is a surprise to most employees, who accepted the risk and assumed they would be able to participate in the upside of the startup (kind of the whole point). These employees find out that, in many cases, they can't actually become shareholders, or they do and lose everything.
In concept, this bill would have Bob write the $50K check for the options, and then only pay taxes once and if actual liquid gains were realized.
How does this only affect the rich or somehow incorrectly incentive people to work for startups?
I'm happy for Bob.