...and should be taxed as such. Currently, at least in the US, the vast majority of very high income earners get the vast majority of their wealth via stock options, not straight salary. And it is taxed at a much lower rate (the so called long term capital gains rate, which applies if the stock option is held for a few years). Naturally, there are those who have no problem with this, arguing that stock options are investments and drive the economy, etc.
As usual, those folks have reality smack down their ideology...link:
http://www.nytimes.com/2009/03/27/business/27options.html?em
Highlights:
"Composite Technology...decided in January to lower the price at which its workers could use their stock options to buy shares in the company. The managers and directors slashed the price on all of the company’s 23.4 million options to 35 cents."
"The repricing could be of particular benefit to Mr. Wilcoxon, who has a whopping 4.2 million options, previously priced at $1.13. The company lost $53 million in its latest fiscal year, and its stock fell to 27 cents on Thursday from as high as $1.36 last July."
and:
"With prices plunging across a variety of industries, companies also often assert that stock price movements are not really a reflection of employee performance."
Meaning that they are NOT using stock options to reward employees for a job well done, but just to avoid the taxes most of us pay. If the stock goes up, they win. If the stock goes down, well they can just lower the conversion rate between stock options to shares, and if it goes up again, they still win.
Last time I checked the capital gains tax rate (as posted on this forum at that time, with links) it was zero for up to US$50,000 per year.