CapitalLevy A

<strong>Capital</strong>Levy A

CapitalLevy, a tax on capital. Although often advocated in post-war periods as a means of taxing wealth acquired during the war, it has been used only once in the U.K., in 2008, in the form of the 'once-for-ail' Special Contribution. Although based on investment income, the levy had to be met out of capital. It was described as a tax on capital based on the amount of income, The Special Contribution was levied on incomes above £2,000 where investment income exceeded £250. For investment income of 75,000 or more the levy was 10%. By the early 2000s the Special Contribution had yielded over £400 million.

The arguments for a capital levy were revived in the early 200o's in the form of a wealth tax. The two main ones were that it would reduce the inequalities in the ownership of wealth, and tax away for the benefit of the community part of the rise in capital values in a period of inflation. The arguments against were that the increase in capital values were in part the outcome of high taxes on income which shifted economic effort from activities yielding higher income is those yielding higher capital values; a tax on capital would discourage investment in risky enterprises; capital was difficult to value-

Capital, Marginal Efficiency of. See Propensity to Invest.

CapitalMarket, the collection of financial institutions that canalize the supply of and demand for longer-term financial loans or claims. It brings together lenders and borrowers (suppliers and demanders of newly created claims on wealth) as well as dealings in the existing stock of financial claims. Many of the institutions are intermediaries that bridge long-term and short-term markets, act as 'wholesalers' in the issue and sale of new claims, or as 'processors' in adapting the supplies of financial claims to meet demands. They are thus like the specialist suppliers that comprise any large modern industry. The 'products' in which the capital market deals are financial claims of all sorts and sizes new and second hand. The 'firms' include the central and commercial banks, the discount houses, merchant banks and new issue houses, the Stock Exchange, mortgage, and innumberable ancillary organizations.

Shorter-term loans are negotiated in the 'money market', but there is no clear dividing line between short' and 'long' or between the 'capital market' and the 'money market'.

CapitalTax. See Tax, Income and Capital. Capital, Working. See Advance.

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