Take it a step further and just remove income tax and tax wealth at rest.
That would be incredibly regressive.
That would depend on your definition, but I think that's unlikely
Only taxing wealth "at rest" makes it avoidable for those who have the means to pay accountants to keep it moving in productive ways and thereby non-taxable. You then end up only taxing the people who can't afford that, which is the middle class.
If it's productive, it's contributing to society. If Alice's $100 goes to Bob's wages, which buys Charlie's shoeshine service, which pays for a week of TV dinners, I don't think those 100 dollars should be taxed more than David's 100 dollars that just sat in his bank account. But I do agree, we should prefer taxes that can't be avoided, LVT being the best option.
It’s not nuts, it’s actually quite purposefully thought through. Profit gets taxed once at 15-20% in the form of corporate income tax, the taxed again at LTCG tax rates. The combined total is similar to the individual tax rate for high earners.
If you tax LTCG at income rates, then you will just start incentivizing other schemes to return profits to shareholders, which is going to be economically inefficient, harder to manage, lead to consolidated ownership structures, fewer liquidity events for small shareholders, greater inequality, and less prosperity.
Long term capital gains having lower tax rates isn’t feature, not a bug, for everyone not just wealth managers.
"but then taxes would be too high!" yes, so we should also reduce income taxes when we do this.
Quit flogging the upper-middle class to pay for the technically unemployed rich.