We study the optimality of taxing capital income by the Rate-of-Return Allowance (RRA) proposed by the Mirrlees Review. In a mean-variance framework with constant returns to scale in private investment, the optimal tax on risk-free returns is zero, but positive (negative) with decreasing (increasing) returns. The optimal tax on excess returns to risky assets is positive if the stochastic tax revenue is returned to the household by variable public good provision. If it is returned as a stochastic lump sum, the optimal tax on excess returns is irrelevant with only aggregate risk, and approaches 100% if there is also idiosyncratic risk.