He said: “As with capital gains tax, the result is that capital (farmland and equipment) is used less productively, and the whole economy suffers.”
This weekend, the Chancellor signalled she would agree to above-inflation pay rises for public sector workers, which estimates suggest could cost £8bn.
However, Ms Reeves has not detailed how the Government would pay for the wage increases. She also warned the Government has “tough decisions” ahead as she claimed that the Conservatives had handed the Labour party a toxic economic inheritance.
Former chancellor Jeremy Hunt hit back at claims, accusing the Chancellor of exaggerating the country’s economic woes in order to justify tax increases.
The Adam Smith Institute’s Mr Butler said capital gains tax was particularly damaging for economic growth.
He said: “A small rise in capital gains taxes can make a large difference to whether people decide to build capital goods such as factories and equipment, or instead devote their money to present-day consumption.”
Ms Reeves previously suggested that capital gains should be brought in line with income tax when writing in a pamphlet entitled the Everyday Economy in 2018.
However, she also acknowledged that any reform should factor in the risk of savers locking up their capital in “old investments” out of fear of paying high capital gains tax.
