This is at the heart of what Labor argues is a distortion in the tax system, favouring some investment income over wage income.There are reasons why a capital gains tax discount exists Someone with a 15 per cent annual rate of return in this scenario, who has doubled their $1 million investment in the space of five years, pays just over 38 per cent tax.That's nearly double the current rate, although this is an unusually high rate of return, likely to be associated with a very risky investment.Labor's argument is that people in this situation should pay tax that is closer to the tax paid on wages