Consider long-term capital gains as normal income for "high-income" taxpayers. One could argue that passive income should not be taxed significantly less than income from "an honest day's toil" but that's how the rules are written. I guess you can tell who wrote the rules?
It may be more complex than this. If long-term were taxed as short-term there would be no incentive for long-term holding. Thus, increasing short term trading which would have some effect on the market. Likely that of increasing volatility.
The idea of reducing taxes on long-term held assets makes sense. Also, this would affect everyone. Even retirees planning on selling their home when downsizing to retire.
