It's simple, you tax an activity that you want LESS, and then you'll get more of that activity. It's one of the reasons people delay marriage these days, you get more government goodies by staying single, especially single mothers... But that's a discussion for another time.
Let's take a look at the past, since there are many lessons to be learned. When Reagan became President, the Economy was in a full blown tail spin. We had record unemployment, record inflation, housing was practically worthless and the morale of the U.S. was an an all time low. One of the effects of the Recovery Act of 1981 was not only to lower the top marginal rates from 75% to 50%, but it also created a MAJOR loophole to where income derived from Real Estate Investments were not taxable as long as the profits were reinvested in Real Estate.
The problem wasn't that it didn't work, the Reagan Revolution created over 2 MILLION Jobs a Year! Compare that to these days' anemic job numbers, such as last August where there was effectively Zero job growth for the entire month and at best we've seen no more than 100,000 jobs created per month (with a THIRD higher level of population!). The real problem was that there was so much jealousy created towards the few people who didn't pay taxes that they destroyed the whole system, along with an entire banking sector, just to make sure that a small minority of people were paying their "Fair Share" of taxes, instead of putting that money into the evil pockets of their employees, construction workers, delivery men, bankers, the Furniture guys and anyone else who profited from the massive construction boom under way. The 1981 Tax Act was responsible for DOUBLING Federal Revenues by the end of Reagan's term, yet was considered a failure because a few people didn't pay taxes. Incredible.
The same is happening today, where even Obama famously said in response to a question on Capital Gains taxes, that even if the economy was negatively affected by higher taxes he would still increase those taxes because it was the FAIR thing to do.
If we can put these types of idiotic reasoning's behind us and pass a tax reform act that makes investments in Real Estate and Manufacturing a tax free enterprise, we would put MILLIONS of people back to work. Let's face it, manufacturing and real estate is where the real money is. Both of these industries are dying anyway and so you can't sit there and say that we would "Miss Out" on taxing these guys, because the truth is that the government would be better off collecting taxes from all the employees, than giving them unemployment benefits as they're doing now. Let's take the handcuffs off, forget about the fact that YES, there will be some people that won't be paying taxes, but who cares, those same people will be putting their capital to good use and employing millions. To me getting more people OUT of unemployment is the FAIR thing to do. So let's DO it!