Capital gains tax will not raise extra money, economists say - Telegraph.
The Telegraph reports:
The Adam Smith Institue, studing CGT changes in America from 1955 to 2006, has calculated that every time the rate was cut revenues went up, and every time.
Now I wonder why they looked at the USA when the proposal being made here is that CGT be changed so that it is paid at the taxpayers highest marginal income tax rate.
Nigel Lawson did that in 1988. As a result we have a case study on whether it worked or not reasdilty available.
The stats are here.
The yield rose by 68%.
Odd that the Adam Smith Institute didn't spot that.
And odd that a body that campaigns against tax should so vigorously oppose an increase that they say will not increase yield.
Could it be that the ASI aren't letting on to what they really know?
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[…] Guess who? Now I wonder why they looked at the USA when the proposal being made here is that CGT be changed so that it is paid at the taxpayers highest marginal income tax rate. […]
“The yield rose by 68%.
Odd that the Adam Smith Institute didn’t spot that.”
Yeah, and then it dropped for the next few years until the mid ’90s.
Odd that you didn’t spot that.
This comment has been deleted as it did not meet the moderation criteria for this blog specified here: http://www.taxresearch.org.uk/Blog/comments/. The editor’s decision is final.
The ASI have a rotten record on predicting the revenue generated by tax rises – they always argue they will reduce revenue: http://www.touchstoneblog.org.uk/2010/05/could-the-adam-smith-institute-be-wrong-yet-again/
@SadButMadLad
Try the words “Tory created recession” as a complete and wholly adequate explanation
Believing there are no external variables in tax yields reveals a staggering poverty of analytical ability
I hated every minute of Gordon Brown being in office, but one of the few sensible things he did was to offer tapered relief on assets that qualified for CGT. Removing that relief promises to penalise thrifty savers and those who have invested money in a little property to assist with their retirement. Short-term (say, one-year) gains on the stock market may be expected to attract 40% tax, but to punish people who have held property for ten years or more with the same rate is sickening.
There are a lot of people who have owned property for many years, never intending to be greedy or selfish, but to take responsibility for themselves and their money; and stay away from the label of state-dependency in old age. They are not responsible for the fact that prices rocketed…..that was due to the speculators.
As for the CGT, if you tax too highly, people will NOT relinquish their assets, but merely sit on them and wait for better times. Lower rates are more readily accepted (a little) and subsequently assets are more likely to be released.
@Christopher
I’ll be candid I think you have a lot to learn about CGT
Sorry to say it
But your argument lacks logic
Nice try Richard, but you used the wrong table.
Yours shows Revenue receipts, i.e. the amount of cash collected by the Revenue in the given year, not the amount of tax that relates to that tax year. Because CGT is collected in arrears, the money collected in 1988/89 (your 68% increase) was actually mostly for the tax year 1987/88 – i.e. under the old lower rates.
What you need is this table, which shows the tax collected depending on which year the disposal happened:
http://www.hmrc.gov.uk/stats/capital_gains/table14-1.pdf
As you’ll see, for 1988/89 (the first year taxed at the higher rates), the amount of tax collected FELL by 17.6%. It then fell by a further 7.5% in 1989/90.
Both of those were before the recession, which didn’t really kick off until later in 1990.
@Richard Teather
As usual your grasp of statistics and tax is remarkably weak
I am doing a full analysis of this data which shows (how can I put this kindly) that you’re wrong. There is no Laffer effect, at all
This will be published shortly