This is in a Telegraph email this morning. I am reproducing it because this is not behind their paywall:
Andy Burnham is considering increasing capital gains tax to fund a giveaway to the lowest earners.
He and the Chancellor are reviewing proposals to raise taxes on wealth to increase the income tax personal allowance, giving the bottom fifth of taxpayers a £600-a-year boost.
The strategy to pay for it, put forward by Dale Vince, a Labour donor, is a £14bn raid on investors that would align capital gains tax rates with income tax, alongside ending the interest paid on central reserves held by the Bank of England.
It would allow for a £3,000 increase in the personal allowance, which has not gone up since 2021 despite rising costs.
It would also allow Burnham to prove his commitment to tackling high living costs amid rising inflation.
No final decision has been made, but the Prime Minister has already strongly hinted at his desire to raise the allowance, saying it was the number one issue in his constituency before he entered No 10.
The question is, will it work? Some think tanks say it will – with additional tweaks to the system to mitigate avoidance. Economists, however, are likely to seize upon the policy, with HMRC's own figures suggesting that raising the duty could cost more than it brings in.
I wonder, first of all, where Dale Vince got these ideas from? I am aware he follows my work.
Then I wonder whether Burnham is really considering this, or if the Telegraph is just spinning a submission for their own advantage.
And then I wonder just who those economists the Telegraph is talking to might be. The claim in the related article is that HMRC's own data shows equalising capital gains tax rates will reduce yield, but those are Treasury numbers, and they got us into this mess, so I put little weight on their belief in the Laffer curve. I suspect the others are in Tufton Street.
It would, I admit, be good to see further progress on the proposals in the Taxing Wealth Report.
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It seems like a very good move, but it’s in the Torygraph and ‘economists’ are critical. I have about ten per cent confidence that this is not ‘kite-flying’ by the newspaper.
As for the laugher curve(sic), I believe no self-respecting economist would give it any credence. There must be a lot of them who don’t keep up with their subject. It was discredited years ago. Science abandons a theory once it has been refuted.
Well, it was a Tory Chancellor, Nigel Lawson who equalised them last time as he saw no reason for Capital Gains Tax and Income Tax to be paid at different rates as they are in effect the same thing.
Agreed
But he gave an allowance for inflation. I would not.
So we end up with Corporation tax being paid on taxable company profits followed by Capital Gains Tax being paid at the same rate as income tax when the business is sold, but without an indexation allowance.
I can give worked examples where this would mean a gross tax rate of over 100%, which would be basic state confiscation of the taxpayer’s property. Which is what happens under communism.
It is a pity you have no clue what you are talking about.
CT is on profits, past.
When a business is sold, the gain is based on future profit potential.
They are not the same. You cannot add them up. Basic error.
Stop trolling.
Might the AI Overview statement that £30 billion to £50 billion (2.7% to 4.5%) per annum would be added to tax revenue by “making the U K tax system equitable by removing preferential treatment for wealth and high earners” be of interest/relevance?
”If you don’t read the newspaper, you’re uninformed. If you read the newspaper, you’re misinformed.” (Mark Twain)
1. 3 cheers for Dale Vince (I import energy from & export energy to Ecotricity, who pay no shareholder dividends but invest all profits in renewables generation).
2. Reform UK Ltd. have “promised” a large hike in the personal allowance.
3. You did all the hard work leading to TWR 2024.
4. Will “they” ever permit such fiscal heresy to be part of an actual budget?
I am not sure, re 4
There’s good reason to think that these policies may move forwards, and that’s it’s one of the few areas that Reform seems to have more sensible policy. They want to raise the tax allowance by more than this, and have raised things like paying interest on Bank of England deposits.
It’s unsurprising, therefore, that the Telegraph would attack the capital gains tax fund-raising element.
If Burnham does do this, then effectively the part of the threshold freeze announced by Labour under Reeves will have been abandoned, leaving only the Conservatives as the only party to actually inflict this economic pressure on workers. That would make it much harder to claim to be a party for workers rather than for the rich – especially if the main bit they’re attacking is the Capital Gains Tax element.
It constantly suprises me that language such as “ fund a giveaway” can pass as descriptive (though all imcomore tax-payers benefit from a higher personal income tax allowence) when the policy is actually one of equalization of tax rates. The telegraph doesn’t seek to report news anymore, it seeks motivates indignation from its readers.
In their pathetic, poxy, uninformed little world, the adherents to the myth that taxes pay for things could help release some interesting outcomes and this is one of them.
Talking to neighbours who are pensioners, raising the current allowance would be very welcome – and I’m talking about working class pensioners. It is after all about moving the tax ‘burden’ (I honestly don’t see fair tax as a burden at all BTW) around fairly to those who need more disposable income in the economy (which of course will generate tax revenue anyway). It’s more likely to be money in circulation to cope with inflation – and boy do we need that!
As I keep saying repeatedly to anyone who will listen, Australia taxes capital gains and income together. They have far more thriving small businesses on the high street than the UK.
I suspect the real opponents to CGT equalisation are people who work for their own companies and fund their living with buy backs.
That really does not work in small businesses.
From a story in the Time about the same topic:
A £3,000 increase in the personal allowance would leave the lowest fifth of earners £600 a year better off and cost the Treasury £20 billion, according to research by the National Institute of Economic and Social Research (Niesr) commissioned by Vince.
Raising the allowance benefits all income taxpayers, but the Niesr estimates that £15,570 is the level that has the most benefit for low earners and is the least expensive for the Treasury. Any higher than this level would exceed the incomes of the bottom 20 per cent of earners.
What is desperate there is that 20% of people earn less than £15,570, and the implication is we should be OK with that.
Richard, please forgive my (probable) ignorance but were not the big banks effectively given the money upon which they are receiving interest under QE?
In effect, they were.