Taxable capital gains are income. They’re taxed at a different rate, but it’s still income. You report them on your federal income tax return, and you pay an income tax to the federal government because you had income. If you win a lottery, that’s also income, even though there isn’t any question of its being earned or in some way merited. And it’s taxed. As income.

The difference is that capital gains, the long term ones that are taxable at the lower rate, are measured with long-ago dollars as inputs, and current, depreciated dollars, as output. Ideally, capital gains would be indexed for inflation, and then taxed like any other income. Instead, we just tax them at a lower rate, in the hope that it’ll come out in the wash. Or in the hope that it will induce people to invest, because capital is one of the ingredients of an advanced technical civilization.

Somebody who has modest capital gains on a stock held for a long time has not had any income at all, but a loss, and is taxed anyhow. Somebody who has enjoyed rapid growth in a stock held for just two years has not seen much inflation and with a more accurate tax law would pay nearly the same rate as ordinary income is taxed at. Most people fall somewhere in the middle.