Lib Dems to target capital gains

Lib Dems to target capital gains

Cable set to transform Liberal Democrat tax policy

Capital gains would be hit hard by a Liberal Democrat government, after the
party announced that it would scrap its 50p in the pound starting rating of tax
for high earners.

The Lib Dems said they would also increase environmental taxes – especially
on airlines – to pay for the changes, and allow for a cut of two pence in the
pound for basic rate income tax, if the package is accepted by the Autumn’s
party conference.

Capital gains, such as sales of second homes or shares, would no longer
receive more favourable tax treatment than income under the plan currently being
fine-tuned by Cable and his team. There would be more generous tax allowances at
the lower end of the income scale.

The party’s shadow chancellor Vincent Cable said his proposals would be
‘fiscally neutral’ and be more progressive.

New Lib Dem leader Sir Menzies Campbell has given his blessing to the package
but Tories and Labour said their figures would not add up.

Mr Cable believes the 50p rate – which he accepts is a ‘totem’ for many MPs
and activists – has alienated many middle class voters, and hopes that by
proposing tax cuts for ordinary earners he will trump the other two parties who
are now shying away from such measures.

The Lib Dem proposals would be paid for by replacing the current flat rate
levy on plane tickets by taxing the environmental effect of the aircraft raising
£3bn – half the cost of the policy package.

The climate change levy would rise by at least the rate of inflation under a
Lib Dem government, and drivers of gas-guzzling cars would be hit by a sharp
rise in excise duty.

Cable said the slogan would be ‘Fairer not higher’, adding: ‘The debate will
now be about the structure of the tax system, not the level of public
spending.’’

He hopes higher ‘green’ taxes would both raise revenue and have a ‘major
impact on people’s behaviour’.

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