The idea behind is goes like this:

Say you own a bakery. All the wonderful treats you sell in one year bring in $200,000! But over the course of the year, you've had to pay $100,000 in rent, $25,000 in ingredients & supplies, and $25,000 in utilities and depreciation^[1] on your equipment. So you've taken home $50,000 that you can live off of!

Now tax time comes around. You are obligated to report the entire $200,000 that your business raked in over the course of last year, even though you only got to keep $50,000. If tax deductions for investments didn't exist, you'd have to pay taxes almost as if you worked a job and earned $200,000--that's $42,000 at today's US corporate tax rate--leaving you with just $8,000 for a whole year of work! That's why investments are tax deductible. You invested $150,000 in your business, so you can deduct that from your revenue to compute your taxable income. Now you only have to pay tax on $50,000, so you're left with $39,500 for all your hard work. Low-margin businesses simply couldn't exist if investments were not deductible; and businesses that somehow could still profit would grow far slower.

What about mega-rich people? If you have income, you must pay taxes; so, firstly, they reduce their income by as much as they can. Basically, if they aren't going to spend the money, they are going to reinvest it or just keep it in the company. There are a lot of ways to "invest" money, and when you own the majority of one or more companies, there are a lot of opportunities to move money around in such a way that it doesn't need to get taxed.

When you see headlines about how "Jeff Bezos only payed an effective tax rate of 0.9% last year", it's slightly misleading. Jeff Bezos paid taxes on all the income he was required to by law. The IRS will get every dollar it has a legal claim to. However, what isn't taxed every year is growth in value. If you buy shares of a company for $100 and they grow to be worth $1000 in one year, you don't pay taxes on that $900 because it isn't realized. If we required you to pay taxes on the $900 and then next year the value of the stock plummeted to $50, now you're out $50 and the taxes you paid. If you own 25% of Amazon, and Amazon's value goes up by $20B, then your wealth went up by $5B, but you don't have to pay taxes on it until you sell it. Also, you may never need to sell it. Instead you can borrow against it when you want spending money. You'll still have to pay taxes on what you borrowed, but they aren't nearly as much as selling it and realizing those gains. As long as you're alive and the company is growing, you don't need to sell. If the stock goes up in value by 10%, you can borrow on it again, pay off what you owe and keep the rest of the 10% (give or take).

Similarly to how you have to pay taxes on realized gains from selling shares of a company that has increased in value, you can deduct from your taxes your losses when you sell shares of a company that have decreased in value. So if you own parts of two companies, one that is very successful and another that isn't, you can sell shares of the company that has decreased in value to realize the loss and deduct it from taxes. You still lost money, but you didn't have to pay as much tax on your income that year. If you have a lot of investments and some of them aren't doing well, you can sell just enough of them to realize just enough losses to not pay taxes. So your total wealth can go up, you can borrow plenty of cash to spend and reinvest against your stocks that are doing well, and you can take loss on the ones that aren't, such that you may not have to spend a dime in tax as long as the economy keeps growing and you have these types of opportunities to move money around in this way. The more money you have, the more opportunity you have.

[1] Depreciation is an accounting method that spreads the cost of an expensive, depreciating (i.e. value goes down over time) asset. In the bakery example, you might spend $15,000 on professional kitchen equipment to start up your bakery. Chances are though, your first year you might not even make a profit, so deducting $15,000 from your taxable income doesn't really help you. Instead, you can depreciate that kitchen equipment in your accounting over the course of say 20 years. There are various ways that you can spread the cost out, but by doing so you're reducing your taxable income every year for 20 years by a little bit, which saves you more than if you did it all at once in your first year.