If I own a bunch of market funds which hold securities from secondary capital markets (stock and bond markets), am I partaking in unearned income/economic rent?
Let me clarify what I my question is NOT about:
It is NOT about IPOs. I know that when you trade your capital for ownership/debt that is providing productivity and value to the economy and cannot be considered unearned.
It is NOT about active management and trading where your actions provide efficiencies and price discoveries which provide valuable information and also is not considered unearned.
I am specifically talking about those who have their savings in a market fund (who bought their holdings off the secondary market) and provide basically nothing while they earn income/returns.
Is this thinking correct? Would this be considered unearned income?
Separate from but related to this question is: are capital gains taxes the same as corporate taxes? If they are different, and if the answer from above is "yes, savings held in secondary capital market funds are a form of unearned income", then wouldn't capital gains taxes be an efficient tax?
My thinking is that because taxing unearned income doesn't deter people (taxing a lottery winner won't stop them from claiming their prize), then taxing their capital gains seems to not have any effect on the saving rate of people.
EDIT: I am adding this edit to clarify (for my bounty) what type of answer specifically I am looking for.
I'll first say that the first part of this question is the part I want answered satisfactorily, but is more hypothetical or theoretical so it may be more difficult to answer. The second part can probably be answered with evidence or research as it is much more of a practical question.
Anyway, my first question is asking if owning market funds which hold securities from secondary capital markets is equivalent to an economic rent of sorts, i.e. is the gain in value of these assets "unearned" since no "work" was put in? When investing in an IPO or lending money, there is real productivity being done as your capital is being used to fund a project and there is an associated opportunity cost which means any value gain is "earned". Contrast this with owning these funds which rise in value at no action of the owner's. This is similar to earning an income from renting out land which many economists do view as economic rent.
To make it perfectly clear, this is part of the NOT about how a country might view income for tax purposes. I am talking about if the income gained from owning the market funds I have specified is equivalent to economic rent because no "work" is being done. I know that the holdings in market funds are not factors of production (unlike land) which is a requirement for income earned from ownership of those types of assets to be actually considered economic rent. However I am still asking if it is considered unearned income because if it is unearned, it is basically free money, no?
This is where the second part of question comes in. If it is considered unearned, would capital gains (and dividend) taxes be as efficient as a land tax? I ask this specifically because if income earned from these types of funds are "unearned", then it would mean any amount of taxation wouldn't be a deterrent, at least until the point where owners of these funds would rather do something more useful with their capital and actually invest.
I hope that clarifies my question.