Economist Daniel Waldenström advises India to tax capital income

Economist Daniel Waldenström, a professor at the Research Institute of Industrial Economics, has recommended that India focus on taxing capital income rather than wealth or inheritance to address inequality.

Waldenström argues that taxing capital income—such as corporate profits, dividends, and realized capital gains—allows the country to tackle wealth disparity without creating significant obstacles to investment and savings. He suggests that capital should be taxed similarly to labor, but cautioned against levies on the underlying value of wealth.

According to Waldenström, wealth and inheritance taxes have historically proven difficult to implement effectively, noting that many countries have previously abolished or weakened them. He proposes that the most effective way forward is to tax capital income, profits, revenues, or interests alongside taxes on labor and consumption.