"What difference does it make if a German investor contributes capital to a U.S. business and as a result makes money that doesn't get taxed by the U.S.? (And could be taxed by Germany.)"
That business is still benefiting quite a bit from being in the US. They're employing workers that were educated by the US education system, they're sending goods and services on roads built and maintained in the US, and they're benefiting from police, fire, and emergency medical services provided in the US. Quit pretending that a company is an island.
"The U.S. government could perfectly well fund itself by taxing only the income of its residents, who are the ones benefiting from its sovereignty."
As I just pointed out, that's not true. The German investor is benefiting quite a bit from the services the US is providing to the business they're investing in.
"but only in a way (capital investment) that also directly benefits U.S. businesses and investors, which in turn will pay more salary, dividend, and capital gains taxes."
That business is still benefiting quite a bit from being in the US. They're employing workers that were educated by the US education system, they're sending goods and services on roads built and maintained in the US, and they're benefiting from police, fire, and emergency medical services provided in the US. Quit pretending that a company is an island.
"The U.S. government could perfectly well fund itself by taxing only the income of its residents, who are the ones benefiting from its sovereignty."
As I just pointed out, that's not true. The German investor is benefiting quite a bit from the services the US is providing to the business they're investing in.
"but only in a way (capital investment) that also directly benefits U.S. businesses and investors, which in turn will pay more salary, dividend, and capital gains taxes."
Not if all investors suddenly are overseas.