[nickff]

In earlier times, I might have agreed with you.

If you look at the systems which recent advances have allowed humans to produce, you can easily see that the most valuable and desirable goods require highly integrated sub-assemblies and components, and the end products have high part counts. Your cellphone or computer alone is made up of hundreds or thousands of components, each requiring highly complex R&D and production, your car has 10k parts, an airplane 500k parts, and a space shuttle has 2000k parts. As a result, creating modern goods requires an ever-increasing number of 'steps', which in turn requires ever-increasing capital investment in R&D and production. We should be encouraging this investment if we want to continue to make more advanced and complex products available to everyone (including consumers).

[tthomas48]

Sure, I was trying to create a simplistic system here though. Clearly if we spent years we might come up with something sort of elegant and sort of fair, just like our tax code.

The point is it's easier to figure out what you're contributing to the economy via sales tax than it is via investment. It's difficult to tell the difference between the guy who has invested $2 billion in 10,000 different startups, and the guy who is generating no revenue sitting on $2 billion in non-productive land in the middle of nowhere. Clearly we don't want to tax investment in startups just so we can see who's investing.