One drawback of taxing capital income at a lower rate than labor income is that it gives people incentives to relabel income that policymakers find hard to categorize as "capital" rather than labor".
Responses
Despite relabeling concerns, taxing capital income at a permanently lower rate than labor income would result in higher average long-term prosperity, relative to an alternative that generated the same amount of tax revenue by permanently taxing capital and labor income at equal rates instead.
Responses
Although they do not always agree about the precise likely effects of different tax policies, another reason why economists often give disparate advice on tax policy is because they hold differing views about choices between raising average prosperity and redistributing income.