> capital is what makes future productivity improvements possible. If you took a risk investing your capital, but that return is taxed the same as wage income (which has zero risk associated with it), you would be discouraged from investing that capital, and instead consume more of it (ala, why invest in your business buying plant and equipment, when you could just go on a lavish vacation!).
The fairy tale that no one would invest if, instead of 100%, they were only allowed to keep, say, 50% of the profits is far-fetched. The game would go on, only with more (in the optimal case) redistribution and less accumulation among the already well-off. The issue here is the relative inequality caused by capital gains, which in the long run tears societies apart, because the middle class can no longer afford apartments/houses and vacations, and the lower class can no longer afford basic needs (food, health care, mobility).