If we close the worst of the loopholes in our income tax system we’ll not have to collect as much tax from salary and wage earners. Taxation will become more fair and capital will become more productive.
I agree with this. I support a tax system with a broad base and low rates. If we broaden the base, then we can lower the rates. What I’m against though is new taxes being imposed, without other taxes being reduced. Labour for example campaigned to both introduce a Capital Gains Tax and to increase income tax.
The report sets out in detail how to close these tax loopholes. In essence we assume that all assets generate a minimum 5% return, and tax on that basis.
I support a comprehensive Capital Gains Tax but this is effectively a wealth tax and politically would be lethal.
If you are retired on a pension and have used your life savings to get a $1 million house, then you will be deemed to earn $50,000 a year on the house and pay $16,500 or so tax on it.
Taxing capital gains is one thing. But assuming all assets produce a 5% return is another.
UPDATE: Gareth has commented below a couple of times.