Cap gains is genuinely different from earned income in that you have to risk your capital to get it, and you have to risk your capital in a way that at least on some margin has social benefits.<p>Like, if I invest $10k for a year in the hopes of getting 6% return, that&#x27;s a thing!  I could&#x27;ve gone on a really swank vacation for that $10k, or I could&#x27;ve bought a really nice TV or whatever.  Instead, I took that $10k and I said, okay, maybe this will give me $600.  Or maybe I&#x27;ll lose $1k instead.<p>But let&#x27;s say it pays off, and I get $600.  But it&#x27;s taxed.  If it&#x27;s taxed at 20% (current cap gains), I get $480.  If it&#x27;s taxed at ordinary income (and my income is high), I get $360.<p>That&#x27;s not <i>irrelevant</i>.  I might pretty reasonably say &quot;Man, in order to get a chance at $360, I&#x27;m tying up $10k for a year?  And maybe I lose some of the $10k instead?&quot;<p>And it&#x27;s particularly relevant if this belief that cap gains should be taxed as ordinary income is paired with a belief that the top marginal tax rate for ordinary income should be higher than it is.<p>We&#x27;ve seen, all over the place, recently, that the financial sector responds to incentives.  When it becomes hard to generate a return through traditional means, the financial industry chases returns no matter what.  Sometimes the consequences of that are kind of scary.  Now, if someone understands all that and has a considered opinion that none the less capital gains should be taxed as ordinary income, well, okay.  But I&#x27;ve never actually seen anyone tackle all that.  Instead, it&#x27;s always one pithy sentence like &quot;it should be treated as income, since it is.&quot;