Optimal rate of tax on income from capital is zero.
Going through some old papers to refresh my memory on capital gains tax (CGT) debates, I found reference to a note I’d written back in 2011 headed “A Capital Gains Tax for New Zealand: Ten reasons to be sceptical”. Unfortunately, I couldn’t find the note itself, so you won’t get all 10 reasons today. But here are some of the reasons why I’m sceptical of the sort of real world CGTs that could follow from this year’s election. Mostly, repeated calls for CGTs – whether from political parties, or from bodies like the IMF and OECD – seem to be about some misplaced rhetorical sense of “fairness” or are cover for a failure to confront and deal directly with the real problems in the regulation of the housing and urban land markets.
Anyway, here are some of the points I make:
- in a well-functioning efficient market, there are typically…
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