The inequality with which a tax of this kind might fall upon the owners of different ground-rents would arise altogether from the accidental inequality of this division. But the inequality with which it might fall upon the inhabitants of different houses would arise not only from this, but from another cause. The proportion of the expence of house-rent to the whole expence of living is different in the different degrees of fortune. It is perhaps highest in the highest degree, and it diminishes gradually through the inferior degrees, so as in general to be lowest in the lowest degree. The necessaries of life occasion the great expence of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expence of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be any thing very unreasonable. It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion.House-rents are idle incomes. They are useful in their role as information, directing tenants towards frugality and landlords to improvement, but contrasted with profiteers, rentiers need direct no productive activity to maintain the luxuries and vanities which they possess.
My undergraduate training is in finance, so I carry with me an affinity for the 'underlying asset', the thing that is represented by a contract. My graduate training is in economics, so my affinity extends well down the rabbit hole, bobbing somewhere in the murky depths of, ugh, 'utility'. This is only to say that paper assets like financial instruments are puppets that stand in for freight cars full of coal, which in their turn hold the potential to create crayons, which in their turn are pointless sticks of colored wax until a toddler scribbles a likeness of the dog inside daddy's Fundenberg and Tirole Game Theory textbook.
Once that picture is there and daddy sees it and smiles outwardly while fuming inwardly, the tiny sliver of the mutual fund that contained a small proportion of that futures contract written against that coal delivery to the power plant that supplies the grid that the crayon factory draws from to process its raw materials finally delivers its modest contribution to human flourishing. Once you wade through the clacking reeds of finance, you end up with something actually delivered: people dig rocks out of the ground so that my kid can deface my textbooks. So capital gains taxes applied to common stock, corporate bonds, or derivative instruments thereon tax productive activities.
But what of capital gains taxes on government debt? Well, let's check with the US Treasury Department. From the outlay report for 2013:
Most of these are transfer payments. "Health" is probably productive. "National defense," even when it's not a total misnomer is still perhaps only marginally productive. "Other" includes line items like the Farm Bill, which are actively destructive. On net, after the reeds, holding Treasury instruments is a lot closer to Smith's House-Rentier than to being a productive factory owner or etsy shop curator.
A tax upon T-Bills, therefore, would in general fall heaviest upon the unproductive rich; and in this sort of inequality there would not, perhaps, be any thing very unreasonable. It is not very unreasonable that the rich Treasury bondholders should contribute to the public expence, not only in proportion to their interest income, but something more than in that proportion.
Towards a more euvoluntary tax code.