I think a proposal like this, if implemented, would essentially end solo staking (with the exception of some very large solo stakers, and some altruists willing to lose money for ethos). We have already seen a number of ways where solo stakers are underperforming (see, eg https://timing.pics/). They have more missed proposals, they cannot play timing games effectively, etc. Making staking profits marginal will ensure that the only validators left are those that are most effective at extracting value – this is extremely different from those that are most effective at securing the chain (I would argue there’s a negative correlation).
I wanted to highlight two comments from above that I think really hit the nail on the head: