The United Kingdom has big economic problems. Growth is largely stagnant, inefficient spending on bloated welfare programs is out of control, and taxation as a percentage of GDP is at the highest level since World War II. But things seem set to get even worse.Wes Streeting, a governing Labour Party parliamentarian and front-runner to replace deeply unpopular Prime Minister Keir Starmer, has proposed equalizing capital gains tax rates with ordinary income tax rates. He argues that a pound (equivalent to $1.34) earned from assets should not be taxed less than a pound earned from work. Streeting supports taxing capital gains at rates of up to 45% for “high earners” (those earning more than $168,000 annually).Streeting’s proposal is economic insanity.
If enacted, the policy would deepen the U.K.’s economic malaise. The country already suffers from chronically low levels of business investment. Raising capital gains taxes would only worsen that investment deficit and discourage entrepreneurship. The United States is experiencing massive investment in artificial intelligence, semiconductors, and energy infrastructure. In contrast, higher taxes on investment would make it far more difficult for the U.K. to invest in the industries that will define the global economy over the next several decades.
