Democracy 3: Capital Gains Tax February 12, 2013 cliffski I’m mulling the possibility of a capital-gains tax policy for Democracy 3. The key thing is to get the effects of such a policy right. I’m thinking it makes broad sense to link the money raised by the tax to GDP. The better the economy, the more the tax will raise. I also wonder if it’s worth making this a relationship that skews upwards, so when the economy is really poor, CGT brings in nothing, but when it’s really booming, it should bring in a bunch, as clearly the equity market and asset values should be going up. Regarding it’s effects, I reckon CGT would represent a drag on the economy to some extent. Why invest all my money in a country with a high CGT if it takes a chunk of my profits, rather than a country with no CGT? For the same reason, I assume it should also upset capitalists a bit, and the wealthy especially, who are the only actual voters who will lose out financially from it. Socialists should love it, as it is a brake on inequality, and effectively a tax on the rich. I think the self-employed 9think small business owners) should dislike it because it potentially cripples the income they take from their business through dividend payments and eventual exit strategy stuff. In gameplay terms, does this differ that much from corporation tax? possibly not by much, although CGT should possibly be more unpopular with the wealthy and more popular with the socialists, as it is a far more direct attack on what some people would call ‘unearned income’. Anything I’ve missed? Apart from the existential hell of coming up with an icon that automatically makes people think ‘Capital gains tax’ On a related note, this makes interesting viewing (UK data): CGT Doesn’t bring in much cash, in the grand scheme of things. Also makes you realize just how trivial the climate change levy is right now.