Canada

One way it was explained to me many years ago was that the partial rate was supposed to very, very roughly account for the fact that capital gains are very often not earned entirely in the course of a single tax year so that the math doesn't get horrendously complicated.

For example, you buy into a bunch of mutual funds, let it sit for like 2) years then sell for like $200k profit. You didn't earn that $200k in a single year, you earned it over the course of 20 years. For this simply example you could compare to how much taxes would you have paid at your marginal rate on an extra $10k income Evert year for 20 years, say your marginal rate is 30%, $3k x 20 years = $60k in taxes you could have paid otherwise. (Versus if the assumption was that you made $200k in one year your average tax rate on that might be 40% you'd pay $80k in taxes)