If John and Mary start a company and sell stock in it to you, you have made an investment. If later I buy that stock from you at more than you paid John and Mary, I'm not making an investment in John and Mary's company; I'm providing you with liquidity for your investment. John and Mary have gained nothing from my purchase of your stock. Well, not quite, the liquidity I have provided to you makes it easier for them to sell new stock if they need to expand.
If purchase of stock on the open market is truly an investment, then why are you taxed at the full rate on the whole amount that you withdraw from your IRA or 401k? You are not taxed on the sale price minus the cost basis as you would be if you had bought stock for a regular account.
In either case, we have not done much work for our gains, unless you count biting nails when the stock goes down as work. The people who have done the actual work are John, Mary, and their employees. They have sweated and worried as we watched on the sidelines. And for this, we tax them at a higher rate. That does not sound like an incentive to get people to work.
Worse, we expect them to pay for all the infra-structure that makes their company successful: education, streets and sewers, police and fire, courts, and many other public goods. Those who pay a smaller portion of their income for public goods are free riders; without public goods they would have much smaller incomes. If you don't think public goods matter, consider that more large corporations tend to have their headquarters in "high-tax" states than in "low-tax" states. The public goods in the "high-tax" states made the corporations possible and the CEOs like the quality of life in these states. See "The fallacy of ranking states by 'tax burden'".
