Should the government increase capital gains tax?

There is widespread speculation that the new Chancellor, Rachel Reeves, will raise capital gains tax in her first Budget. Increasing capital gains tax is one option that wasn’t ruled out in the Labour Party manifesto. It is easy to see the unfairness that comes from taxing capital gains at substantially lower rates than earned income. But simply raising rates would discourage investment and risk-taking. And even before accounting for that, current official estimates suggest that a significant rate increase could reduce revenue.
At this online event, IFS researchers laid out the case for reforming capital gains tax by changing both tax rates and the tax base. This drew on a new report being published as part of the IFS Green Budget that lays out specific options for reform of capital gains tax. It showed how, regardless of how much revenue the government would like to raise, it could raise it in a way that was fairer and less damaging to economic growth.