The IPPR says we should tax income from wealth the same as income from working. Except, obviously, Sir John Mirrlees had things to say about this. Which they acknowledge and good for them. It’s actually a rather fine piece of working out of what a tax system should be.
It has one great flaw in it. The assumption that doing it properly will raise more revenue. Properly being to do it as Mirrlees said of course. There should be a rate of return allowance. It’s only economic rents that should be taxed, not normal returns to capital.
Great, then they model the 10 year Treasury yield at 2.6%. Which, in this era of QE, it is. But as it hasn’t been outside QE. At more normal long term rates of perhaps 5% – outside excessively inflationary periods that is – the Worstall Calculator (here, simply a guess) says that such capital gains taxation would reduce revenue.
Oh, and the Mirlees rubric applies to income as well as capital gains. And we’d have to get rid of the double taxation of dividends as well. And lower the top rate of income tax.
But, you know, it’s a great report because it does get the basic economics of the discussion right. It’s just the sums it gets wrong.