I think the bottleneck to increased startup formation is people, not exits or tax rates.
If exits were the problem, then LPs would stop putting money into venture funds as expected returns diminish. Fred Wilson (and many others) have said that lack of money is not the problem. I believe them. So exits can’t be the problem (For startup formation, that is. Exits are certainly a problem for the VC funds.)
From the point of view of the money, lowering capital gains taxes–much as I personally enjoy lower rates–is not going to increase the rate of startup formation. As previously noted, there is already plenty of money looking for a home with the current returns. Increasing the returns would only draw more money into an already overly funded pool.
From the entrepreneur’s point of view: while I hate to depart from economic orthodoxy and I do believe that incentives matter, I don’t think that the entrepreneur we want to encourage (the one creating a large company that employs a lot of people, not home-based businesses and restauranteurs) thinks much about the after-tax difference in the amount of money he’d make in a success. Ventures are generally binary: the company fails or the company succeeds. In a success the entrepreneur hopes to come out of it with quite a bit of money, and whether it’s $10 million or $12 million is not really the point. The change in after-tax return is completely swamped by whether there is a return at all.