ATorontoVtr: A lot of capital gains income doesn't come from new productive investment. Rather, a lot of it results from speculation, particularly in the real estate market. What the government should be doing instead of changing only the capital gains rate is to examine the treatment of various kinds of investments. The "principal residence" capital gains exemption, for instance, could be capped and/or subject to a lifetime limit. I do tend, however, to agree with your argument that the government needs to look for efficiencies in its own operations.