When Britain’s Labour government took power a year ago, it quickly reverted to class warfare by cutting the annual tax-free deduction for capital gains in half, from $16,600 to $9,000. It also raised capital gains tax rates to between 18% and 32% – up from a band of between 10% and 28%.
The first returns are in and the tax hike has predictably backfired big time. Receipts from capital gains taxes are down 18%, with indications that future revenues will fall even further.
The revenue shortfall will increase pressure on Treasury Secretary Rachel Reeves to plug a growing annual budget deficit of between $27 billion and $54 billion.
In a move that seems akin to searching under the couch cushions for small change, Reeves may have to sell off a $5 billion hoard of cryptocurrency seized from criminals to help pay the bills. The Brits would be smarter to cancel the money-losing cap gains tax.