The stock market is getting close to its all-time highs. House prices are surging upwards, and in London they have gone crazy. Companies are rushing to list their shares publicly again, minting a new generation of multi-millionaire entrepreneurs.

You hardly need to be a fully paid-up devotee of the French economist Thomas Piketty, and his controversial if little-read work on wealth distribution, to notice that capital is making itself some handsome returns right now.

So you might expect the tax collected on all that money to be going up. Capital Gains Tax (CGT), which takes a share of whatever people make on booming asset markets, should be going through the roof. A few houses sold in Kensington and another internet company floated on Nasdaq, and half the national debt should be paid off.

Except, in fact, you’d be wrong. The amount of money the Government collects from CGT is actually going down. Four years ago, the Government lifted the rate from 18pc to 28pc. And what happened? Less money came into the Treasury. If ever there was a clear example of a tax needing to be reduced to raise more revenue, then this is it. In truth, CGT needs to be cut radically and quickly before it dries up completely.

A tax on capital gains was first introduced, as you might expect, by the Labour Party: it was James Callaghan who first brought it in as Chancellor in 1965 to try to stop people reducing their tax bills by re-defining income as a capital gain. But, oddly enough, it has been Labour Chancellors that have been more interested in cutting it than Tory ones. Gordon Brown, in a rare instance of easing the burden on taxpayers, reduced it by allowing the rate to come down the longer you held an asset. And his successor at Number 11, Alistair Darling, made the bold move of scrapping all the fiddly reliefs, and introducing a single, lower rate of 18pc.

It was practically a flat-tax, and one of the lowest rates in the world. Germany taxes capital gains at 25pc, while France taxes them at the same rate as income, which pushes the rate up to 60pc once social charges are included. And even the US taxes gains in line with income, which means the charge can easily be close to 40pc for well-off families. At 18pc, Labour left us with one of the most capital-friendly tax regimes in the world, and one that was raising an increasing amount of money.

But it was too good to last – and Nick Clegg and the Liberal Democrats made sure it didn’t. Their 2010 election manifesto had promised that CGT would be equalised with income, so rates would quickly climb to 40pc or 45pc. The Chancellor, George Osborne, did not quite want to go that far. But in his first emergency Budget, he lifted the rate to 28pc, one of the steepest tax hikes in British history. It was a misjudgment.

David Fuller's view

The full column is well worth reading and not just for those of us in the UK tax zone.  The principles apply in most countries.