My understanding is, to encourage people to invest their money, rather than sick it in a mattress. "The asset price should reflect the inherit risk..." How? The risk of investing is losing everything. How do you add that to the price?

Perhaps income should be income. It would definitely simplify the tax code. But money needs to circulate, that is how you have a booming economy. You asked how is a dollar earned from an investment with more than a dollar from labor. Well that dollar from labor might only exist because of the dollar from investment.