1 - I have already paid tax on the money. 2 - In making the investment, I stand to lose (or gain) 3 - The lost money is not an expense

Given all of this, I expect that the capital gain rate is specified as lower to encourage me to invest.

If the capital gain rate were higher than the income rate, I would not make risky investments. I could use my money to invest in my own business -- where I have expenses available. And, take an income. Any loss would then be an expense.

I just wouldn't invest in other business.

How would you encourage investment behavior?