Reducing the capital gains tax discount would make the tax system fairer, raise much-needed revenue and have little effect on housing supply, given how constrained that supply already is.

A fundamental principle of taxation is that it should be fair. To the extent that people gain from extra income, that income should be taxed at the same rate whatever form it takes.

After all, the benefits of an extra dollar of income is the same whatever its source. For example, $100 of wages provides the same benefits and capacity to pay tax as $100 from a bonus, a contract payment or dividends.

The only reason why capital gains are different is that they are only taxed when realised, and that means that they are typically accumulated over several years, whereas all other income is taxed in the year it is generated. But because capital gains have typically been accumulated over several years that means that at least part of that gain reflects the impact of inflation, and to the extent that the capital gain matches the inflation impact then the taxpayer is actually no better off than when they made the original........

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