[nradov]

The level of capital investment people are willing to make is proportional to the expected return, net of taxes. So, you are essentially arguing about the shape of the curve. Would society be better off if dividends were taxed at 10% or 20% or 80%? The reality is that no one really knows because it's impossible to conduct controlled experiments and the system is too complex to model accurately. We're left to make policy choices based on intuition, ideology, and low-quality macroeconomic "science". Anyone who claims that a certain large-scale change in the tax code would definitely produce positive results is simply ignorant or arguing in bad faith; the reality is that we lack the ability to accurately predict second-order effects.

For example, consider the 10% federal luxury tax imposed in 1991 to reduce the budget deficit. It seemed like a good idea at the time, but it devastated several domestic manufacturing industries and destroyed many jobs. Whoops.