By that reasoning, why tax the rich at all? They'll always find a way around it.
In fact, the rich are not all powerful and don't get carte blanche when it comes to hiding their money.
Do you remember all of those secret Swiss bank accounts which were widely used to hide money? Well, in recent decades, the US has managed to force the legendarily secret Swiss banking system to become much more transparent, precisely in order to go after tax evaders. Tax evasion has also become a really serious issue in Europe. Governments are in fact going after the rich to get their due.
That doesn't mean there aren't loopholes, or that the rich can't manage to hide some of their money (at least temporarily, while the law catches up with them). But that doesn't mean they can hide it all or that there'll be no consequences for at least some of them. It certainly does not mean that we shouldn't try to tax them more.
I'm just saying that during the era of 90% 'income tax' for high earners, they would simply declare their income as capital gains. It's just what they did. And what people do.
No, you do not get to simply recategorize earned income as unearned. And also at the time of these high rates there was no seperate capital gains tax. The income tax rate applied. What would not have applied is FICA tax, i.e. Social Security and Medicare, which is only assessed on earned income ( i.e. wages from a job).
"There's no reason why capital gains couldn't be taxed at the same rates as income."
Sure there is -> risk.
It's why everywhere in the world cap gains are taxed lower than income.
Cap gains + income tax at 90% and economy would collapse instantly as risk premium goes up, most equities and probably most bonds would drop quite a lot and people moved into real-estate, cash, commodities, gold. etc..
In fact, the rich are not all powerful and don't get carte blanche when it comes to hiding their money.
Do you remember all of those secret Swiss bank accounts which were widely used to hide money? Well, in recent decades, the US has managed to force the legendarily secret Swiss banking system to become much more transparent, precisely in order to go after tax evaders. Tax evasion has also become a really serious issue in Europe. Governments are in fact going after the rich to get their due.
That doesn't mean there aren't loopholes, or that the rich can't manage to hide some of their money (at least temporarily, while the law catches up with them). But that doesn't mean they can hide it all or that there'll be no consequences for at least some of them. It certainly does not mean that we shouldn't try to tax them more.