Investment is not how you "create wealth". An actual worker somewhere performing their job is what creates wealth. Yet when that worker is paid for the wealth actually produce, we tax that heavily. So if you want to encourage productivity, regular income ought to be taxed higher than passive investment.
The argument for low capital tax is that if it's high, the people with the capital - who, crucially, need someone else to use it to make money from it - will just hoard it. For one thing, the obvious glaring issue with it is that however high the capital gains tax is, so long as the owner of capital in question still gets to pocket some of the wealth produced using it, they still have an incentive to continue - something is better than nothing. The actual, real world threat is that some other jurisdiction sets the tax rate lower than you will, and capital will then move there. But this same threat applies to many other taxes, capital gains aren't special in that regard.
This is the kind of semantic argument about words that makes anything other than flat personal taxation an endless rabbit hole.
When people talk about wealth creation they mean the creation of new wealth. Filling potholes isn't normally described as wealth creation because it's sustaining activity. You can choose to define wealth creation differently, that's fine, but it makes the term useless because it'd become synonymous with any kind of work.
Additionally, there's no real world difference between investors and workers. The idea you can separate capital as a class of people from workers is a Marxist concept that doesn't make any sense outside that broken ideological framework. The classical example: if someone owns a food stall, are they capital or a worker? If they pick up that stall and cart it to a bigger town down the road, is the act of them hauling their cart along the road work or an investment? You could argue equally well both ways, which makes the distinction just a distraction.
> however high the capital gains tax is so long as the owner of capital in question still gets to pocket some of the wealth produced using it, they still have an incentive to continue
Not at all! This is the kind of weird prediction that false distinctions between capitalists vs workers causes. It's why Marxist economies always fail. Investment is work and it also requires taking a lot of risk. If you confiscate 99% of someone's ROI nobody is going to say oh well, at least I got 1%. They're going to give up investing at all because the act of making the investment not only took effort, but also meant they could have lost the whole shebang.
People aren't clearly separatable into "owners of capital" vs "workers", you're right, but they don't have to be. You just need to recognize that the role that they play at any given moment can be so categorized. And sometimes they play many roles at once - for example, a company owner who is also its CEO is both a capitalist and a worker, and fair wages that he receives as the latter (fair here meaning that an equally capable manager hired from the side would ask for this much on average) is not a problem.
If there was no difference between capital and labor, then capital gains and labor income would be taxed at the same rate. That's just the empirical argument. The theoretical is left as an exercise to the reader.
I feel like you have only a cursory understanding of finance, economics, and taxation. If you didn't, you would't ask questions such as
if someone owns a food stall, are they capital or a worker?
It reads like you're trying to find evidence that reinforces your priors while dismissing whole swaths of empirical and theoretical work that would immediately challenge it.
For context, I spent a decade as an M&A banker, so as far from a Marxist as one can be.
> If there was no difference between capital and labor, then capital gains and labor income would be taxed at the same rate.
There's a distinction between capital and labor when the terms are used in an accounting sense but when "capital" is used as a shorthand for a class of people, there isn't. Once someone starts talking about "actual workers" vs "owners of capital" they're drawing that distinction.
The argument for low capital tax is that if it's high, the people with the capital - who, crucially, need someone else to use it to make money from it - will just hoard it. For one thing, the obvious glaring issue with it is that however high the capital gains tax is, so long as the owner of capital in question still gets to pocket some of the wealth produced using it, they still have an incentive to continue - something is better than nothing. The actual, real world threat is that some other jurisdiction sets the tax rate lower than you will, and capital will then move there. But this same threat applies to many other taxes, capital gains aren't special in that regard.