A 33%, not 15%, Capital Gains Tax

Joe Ascroft from the Taxpayers Union writes:

The working group is expected to recommend that the capital gains tax simply extends the current income tax regime; capital gains will be treated as income, so the tax rate will be the income-earner’s marginal tax rate.
Given how low our top tax-rate kicks in at $70,000 per year, the vast majority of income earners paying capital gains tax will therefore pay 33 per cent tax on any capital gains.
This is an extraordinarily high capital gains tax rate. In 2011 and 2014, the Labour Party campaigned on a capital gains tax with a rate of 15 per cent – and arguably lost both elections on the policy’s unpopularity.
Now the working group is literally doubling-down with a tax rate more than twice that of those proposals.

And people will pay that 33% tax on nominal, not real gains. If your asset merely increases in line with inflation, you’ll still get taxed 33% on it. Basically the higher inflation is, the more tax you pay.

In Australia, for example, long-term capital gains (capital gains on assets held for longer than a year) receive a 50 per cent discount – so taxpayers pay half their marginal tax rate on any capital gains.
The result is that their top capital gains tax rate on assets held for longer than a year is 22.5 per cent – approximately a third lower than our proposed 33 per cent rate.
Canada has a similar policy of only half-taxing capital gains. While the United Kingdom and the United States don’t apply a discount multiplier to capital gains, they simply pay less tax on capital gains compared to regular income.
The top tax rate in the United Kingdom is 45 per cent, but taxpayers only pay 28 per cent on capital gains from property, and 20 per cent on capital gains from all other assets.
Taxpayers in Britain also receive a capital gains allowance; they only pay tax on capital gains exceeding approximately $22,000.
In the United States, the top capital gains tax rate is 20 per cent – and that only kicks in if you earn more than $625,000 per year. If you earn less than that, you’d probably pay 15 per cent – less than half the Tax Working Group’s proposal.
Why do each of these countries tax capital gains at a reduced rate?
They acknowledge the risk to investment posed by a punitive tax on capital. More investment in small businesses, new farm equipment, larger buildings and innovative technology is the pathway to stronger economic growth and higher wages.

So is Labour going to try and pass a Capital Gains Tax that would be possibly the highest in the developed word?

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