> You missed a major reason long-term capital gains rates are lower than income tax rates: they are not indexed for inflation in the US and inflation on income

> You missed a major reason long-term capital gains rates are lower than income tax rates: they are not indexed for inflation in the US and inflation on income is negligible. As a matter of tax policy, it is much simpler to reduce the rate than to compute a very large inflation deduction, but you can find countries that go both ways. Very interesting point.