Your income comes from a company which pays it with pretax money, you pay taxes on that money and then invest it in shares, companies earn money, pay taxes on t

Your income comes from a company which pays it with pretax money, you pay taxes on that money and then invest it in shares, companies earn money, pay taxes on the profits, and gain value (dividends/share buybacks/self-investment). The sum of corporate taxes and gains taxes are close in magnitude to income tax. So a dollar goes into a corp, it either: (1) gets paid to you, you pay your marginal income tax rate on it (say 28%), the corp doesn't pay a tax on it because you're an expense they deduct. or (2) they pay corporate tax on it (21%) and then it turns into gains for you and you pay LTCG on it (15%) = ~33%. (and no, it's still automatically lower than your marginal income tax rate when you're in a higher tax bracket: LTCG goes up to 23.8% when you have sufficiently high investment income) ... and if you don't qualify for LTCG on that cap gain, you get taxed at your income tax rates on it even though you, as a (tiny) owner of the company, already paid corp taxes on.