Taking advantage of capital gains might be tax avoidance from a certain point of view, but it's also a useful for helping grow wealth and the economy in general.
Having large sums of private capital helps the economy-- how does it help it? By making it easy to borrow money, like the VC that so many HNers are seeking.
So the argument for differential taxation of income versus capital gains is to incentive investment. However, I'm not sure investment needs to be incentivized right now. There is a ton of private capital floating around right now looking for productive investments in the US, and they just don't exist. So the money goes overseas, or into elaborate, questionable financial instruments.
It is not even clear that it is tax avoidance. In most situations the capital gains preference is meant to mitigate, and in fact only partially mitigates, income taxation at the corporate level.
Preferences for real estate and investment managers in the form of carried interest...well, that's another story.
If capital gains were taxed as regular income, that would mean a whole lot more money would be flowing into the governments coffers, and as such the income tax rate could be lowered as a result for all parties. You'd have to run the numbers to see but it seems reasonable.
Another problem with taxing capital gains heavily is that it distorts investment by discouraging dividends and buybacks in favor of risky attempts at growth. Companies irrationally choose to grow and make high risk acquisitions rather than simply pay out big dividends. This contributes to business cycle instability, as well as inefficient allocation of capital; the incentive is to keep capital locked up in a conglomerate.
Having large sums of private capital helps the economy-- how does it help it? By making it easy to borrow money, like the VC that so many HNers are seeking.