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Earned income taxed twice as heavily as capital gains for some in UK, study finds
(www.theguardian.com)
this post was submitted on 20 Aug 2023
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UK Politics
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This is the best summary I could come up with:
In a separate example that also emphasises the gap between the mainly older people who generate an income from property and shares and those who rely on employment, a person receiving £60,000 a year in the form of capital gains or dividends pays less tax than someone aged 16 to 64 in a job earning £35,000.
The momentum behind calls for the equalisation of capital and employment tax rates has grown in recent years.
The former Conservative chancellor Nigel Lawson set the rates of CGT at the same level as income tax in 1988, saying: “In principle, there is little economic difference between [earned] income and capital gains ... And in so far as there is a difference, it is by no means clear why one should be taxed more heavily than the other.”
The authors said the current system allowed for significant levels of avoidance by those with income from capital gains who were allowed to smooth the declaration of their income to make sure it fell under the tax threshold over a period of years.
“Those who can manipulate the tax system in their favour tend to be those with high incomes or high levels of wealth, leaving a larger tax burden on younger people and those on lower incomes, further perpetuating inequalities between and within generations,” it added.
The tax privileges granted to those with unearned income in the UK are also over- generous by European standards, the report said.
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