Robert Reich: Medicare isn't the problem. It may be the solution.

[Yo_Mama]

7. But then you would be taxed on income you did not get

If you live in a house for 20 years, and then sell it, inflation will generally assure that you have a hefty theoretical "profit".

But if you sell it because you need/want to move to another place, you may well find that a new comparable home costs even more than the price you got for the home you just sold. So in effect, selling your home has cost you a great deal of money if you had to pay capital gains on what is really inflation.

Inflation at even 2% a year (the Fed's long term goal) ensures that assets you have for a long time will rise in dollar value, even if the comparable value hasn't changed.

I mean think about it. Suppose a couple bought a home 30 years ago for $60,000, maintained it, paid down the mortgage, and now they are retiring and want to move south to retire. Well, the home they are looking at in AZ costs $200,000, although it is no palace. They can sell their current home for $270,000, leaving them capital "gains" of $210,000. Income that year is $50,000. With the exclusion, that moves their income into the "rich" bracket, so by your theory and Obama's recommended rates, they'd pay 35% on some of the house money. But even 28% leaves they paying taxes of $58,800 on the home sale.

I don't know why anyone would ever buy a home except for short-term speculation if they were going to be taxed like this. It's an utter loser - you wind up so much worse off than you would be if you had rented.

In the long run, lower capital gains taxes for the long term capital gains bring in more tax revenue, not less, because assets that would be unsaleable start changing hands.