If a person makes $500k in a good year, they will get hit with higher taxes, but they're probably going to invest a lot in order to hedge against not so good years. Taxing their capital gains is a double whammy.
Just imagine Income Tax + Sales Tax... get taxed on what you earn, then taxed again when you go to spend it!
This is a clever way to reduce purchasing power without making it seem as bad, ie. nobody really considers the tax on a new car purchase until they're signing the final paperwork... or even on a new T-Shirt. Depending where yo live, this sales tax is non-trivial too, sometimes up to 10%+.
Yes, it is trivial to add 10% (or 30% for waited restaurants) to a number. Even if people did not for small purchases, with so many people living paycheck to paycheck, surely they notice an extra $50 to $150 for a TV or $3,000 for a car.
One of Amazon and other online only retailers’ biggest advantages until 2018 was that it did not have to charge sales tax to people in states without a physical Amazon presence. That meant you saved 7% or more buying from Amazon instead of locally. Basically everyone I know used to buy online to skirt sales tax.
