Take that away and I have no incentive to invest in stability but have every reason to disrupt the market and take advantage of the swings. I'm not sure you want that.
> The reason long-term investments are taxed at a lower rate is because you want to incentivize long-term investing as it increases stability.
Since most equities are held by tax exempt entities (whether that is domestic or abroad, e.g. pension funds or hedge funds in a tax haven), this argument doesn't make sense. The stock price of AAPL or YELP is not going to tank because an individual investors sells (barring perhaps the CEO).
The tax rate is lower generally to account for inflation. But not all countries have sliding capital gains tax rates. The UK has a 28% rate, most capital gains are exempt in Belgium and the Netherlands (but the latter has a small wealth tax), France just introduced a 30% rate, etc.