Yes, but it very much matters why you're doing it. Someone who doesn't have enough money to functionally retire, even if they're wealthy, is doing it to get closer to a retirement number. "Rich" people as described here, that make a majority of their money on investment ROI, are playing an entirely different ball game with the same mechanics.

Specifically long term investment, which is why you only get the benefit of lower taxes after a year.

And we need to reward this behavior SO MUCH that we'll drop more than half of the taxes?

People will invest as long as the taxes aren't worse than income taxes. We don't need this much "encouragement" because stock market returns are high enough already.

I don't see how that follows.

A salaried person has to bootstrap a company using income-taxed money, whereas a business person can engage in creative accounting whereby an existing business can invest in a new business practically tax free.

If your average income tax is 35%, you're paying a ~50% premium to acquire the same assets as someone who rolls over money from business to business. This includes real estate and everything else.