The argument is essentially correct but flawed. Earning income and
paying taxes on it is a separate transaction from paying taxes on
capital gains. If a person makes money on dividends then that is
additional income that he pays taxes on.
The only real issue is that we have the highest corporate tax rate in
the world and dividends are taxed twice, not three times. The net tax
rate on dividends is around 50% and possibly much higher if Obama gets
his way. .
I say treat capital gains and dividends as ordinary income but abolish
or reduce corporate taxes. Corporations don't pay taxes. People do.
Corporate taxes end up being paid by the shareholders or the customers
with higher prices.
You could argue that you want to tax foreign corporations operating in
the U.S., in which case you would want to keep some corporate taxes
and keep the current tax on dividends.