We should be taxing productive activity less and income earned through simply owning things more. The balance has moved too far in the opposite direction.
The distinction is that mere ownership of capital, especially common goods (such as land and natural resources) excludes other members of society from access to that resource. It does not create value, but merely holds claim to existing value, seeking rent for allowing others access to it. This should be taxed. OTOH, productive activity takes that capital, adds labor and ingenuity, and creates goods or services which benefit society--such activity should be taxed less, or not at all.
This is why I'm disappointed with the current-era Republican party. There are so many things that could be solved with true market-based solutions - for example, carbon markets and other major externalities. But nearly everyone would rather ignore evidence-based solutions for ideologically correct ones.
If you tax owning things a lot, then you tell people that there is no point being very productive as savings throughs higher income go all into taxes. Then people don't have much incentive to be productive.
Most of these ideas have been tried before and you eventually arrive to picking up lesser of many evils kind of situation.
Allocating ones capital (simply owning things as you say) is a productive activity in itself. Without people competing to allocate capital for higher returns, a lot of things we all love wouldn't exist.
You're correct, but I think capital may still be distinguished by the degree of value added by labor. Ownership of land and natural resources is a different form of capital than ownership of shares in an company or a factory building, but both would be considered "capital" broadly. I think the distinction is in how much labor and human ingenuity has been added to create that capital.
People should own what they create (organizations, buildings, goods, and services), but the natural geography of the world should belong to all. If one wishes to lay claim to a stretch of land, and prevent all other equally born humans from entering or making use of that land and its resources, one should pay a tax to society for that privilege.
As you say, "people competing to allocate capital for higher returns" is a great thing. However, I dispute the fact that some people should even have the right to decide how to invest their land without first paying a societal price for it (much higher than current land tax levels--high enough to cover a corresponding decrease in most other taxes on labor or production).
