Really? Here in Australia, we don't get a tax break for buying stock (AFAIK). When you earn the money, you pay tax, and then you buy stock with what's left over. (though there's tax breaks for investing via superannuation)
in my country, the capital gain tax is only 0.1%, automatically included when one sells stock (0.15% fee for buying and 0.25% fee for selling any amount any time); however, income tax from working is 35% top
but the trend is ... tax on investment is substantially lower while it's much higher on working income ... social control perhaps?
But note that you only get taxed on capital gains if you realize them (ie. if you sell the stock). If you just sit on it, and take the dividends, you don't get taxed on the capital appreciation. Over time, the dividends (usually!) increase reflecting the capital appreciation (so you are getting something out of that capital appreciation), but you're not taxed on the capital appreciation itself.
The distinction between this and starting a business yielding the same dividends is that you don't pay tax on sweat equity; whereas you were taxed on the $ equity (that you bought the stocks with) when you earnt it.
hmmmmm, they are both instances of capital appreciation which you don't get taxed on - until you sell the stocks/business. It's just that the business starts closer to $0, though there is always some $ investment in starting a business - even if only in the form of your living expenses).
Yes, it's deliberate encouragement of investment (which creates new employment, new wealth... new taxable income), but which flows naturally from the nature of capital appreciation. And it's easier to police the event of a sale. But truly, if they really wanted to tax capital appreciation (without a sale), they could. It's a decision to not tax it, to encourage investment.
PS: you mean 0.1 capital gains don't you? (ie. not 0.1%, but 10%)