I don't understand the theory behind reduced rates for passive (cap gain and dividend) investment income, as compared to the ordinary income tax imposed on work. Intuitively, I don't believe people would stop investing their money in stocks, bonds, or their own businesses if investment income were taxed at the same rate as earned income. The mattress would still not be a better alternative! It seems perverse to tax work more heavily than non-work. Or to tax working for someone else more heavily than working for oneself. And equalizing investment income rates would be more progressive than merely reducing deductions for upper-middle $250K people, as Obama is proposing, because it would impact primarily the very rich. Is there good evidence that reducing the investment income tax rate really stimulates investment?