That would also incentivize companies to pay dividends, which I think is good for various reasons.

That’s not Biden’s plan. Biden’s plan is to limit the tax preference for capital gains by setting the top rate for LTCG equal to the top rate he has proposed for income taxes, with the top LTCG rate kicking in at $1 million+, while the same rate for normal income would at ~$400K.

> On the other hand, it disincentivizes long term investing.

Even if we assume an actual elimination of the preference, it would only “disincentivize” long teem investing to the same extent that taxes on normal income disincentivize income-producing activities generally, and still less than the even higher taxes on labor income (thanks to payroll/self-employment taxes) discourage labor and its employment.

And yes, I generally agree with your last paragraph. But that said, it is worth noting that taxes on normal income do discourage people from making money. (I'm not saying this to support a reduction in income tax, just as an interesting note.) So I think it is worthwhile to consider incentives. For example, income at x%, short term cap gains at x+10% and long term cap gains at x-5%.

Of course, if you really want to go all the way regarding fairness and incentives, you'll tend towards entirely different systems (Georgism, for example)