Why is it the government's job to encourage the creation of job creating watering holes? Why can't it just curtail rent seeking? It's much easier to identify bad behavior as you see it than encourage good behavior of a yet unknown form.
The real problem instead is unearned rent extraction. Lot of rent which is unethically taken away from workers and business is given to the extractors at the expense of those workers and businesses who provide it. Largely through taxes on labor, but also through increased prices.
There is no such thing as passive income without work. It's just that the profit is collected by someone else than who provided the labor.
Example 1. open source community building free stuff resulting in near trillion dollar valuations of cloud providers.
Example 2. taxes collected from labor (income and sales taxes) used for public works and new infrastructure resulting in increase of land and real estate value in vicinity of the new construction. Common with a new subway or highway systems.
Example 3. Communication, Pharma industry and other network systems. Any innovation funded by public money or other individuals can only benefit those who already operate the network infrastructure, because of the impossibility to compete with these established monopolies. Especially when regulations are set up to protect the incumbents from new entrants to their markets.
These cases illustrate not only redistribution of value from those who provide it to those who sit on it. It also shows that the goods these people helped to create then become even more expensive for them. The more of it they produce, the more expensive it gets - higher living rents, more expensive drugs, more expensive railroad services, etc.
This phenomenon is called the paradox of progress and poverty. You get it every time you set up the society in a way where the profits are extracted from the laborers and redistributed to the rentiers.
Blame the system I guess. Don't tax the workers, tax the rentiers collecting their results.
But I'm wondering, how do you think we distinguish between good and bad income streams? You seemed to be making a moral distinction.
I don't think we need to make the distinction between good and bad incomes. However we as a society should be concerned about giving somebody certain privileges without getting any compensation for it. That makes the society inherently unequal, because one group of people is forced to provide the privileges or services for another group of people.
Eg. people born in generation 2 are forced to accept and maintain private property privileges on land for those born in generation 1 even though they were never invited to discussions of land distribution in gen 1.
Simply stated, the infinite-length land rights are unethical to people in later generations. Continuous payment system would be ethical.
This alone could then help resolve other issues in other monopoly related problems as people would have more options to decide how to allocate their life, as you well know it is the case of basic income and when people are not stifled by excess taxes and excess rent payments.
But people want to add new things all the time. If you make it less difficult, more new things get added. If you decrease the rent-seeking of existing stuff, that makes it easier (less expensive) for people to create new things.
So you can encourage growth just by removing (or even reducing) rent seeking by existing entities.
(and if you think about it for a minute, if the government can't do that, it shouldn't exist at all. Politics is about defining what is pragmatic and what effective means.)