Am I crazy or the guy who wrote this LTTE?

[sinkingfeeling]

http://www.washingtonpost.com/opinions/why-capital-gains-deserve-a-lower-tax-rate/2011/10/10/gIQAYKqHiL_story.html

You can read the full LTTE at the above link, but here's just a taste of it:

Why capital gains deserve a lower tax rate

"But capital gains is not income. It includes an inflation component. If I buy stocks for $1,000 when bread is $1 a loaf, and sell them for $2,000 when bread is $2 a loaf, I haven’t increased my real wealth. But I am taxed on the dollar difference. This particularly harms retirees, already at risk of losing their savings to inflation, by taxing whatever their investments can claw back from rising prices.

Perhaps it may be necessary to tax wealth as well as income."


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So how's it any different that being paid $1,000 when bread is $1 a loaf and then being paid $2,000 when bread is $2 a loaf? I haven't increased my wealth at all, but will still be taxed on the full $2,000.

[The Velveteen Ocelot]

1. An increase in stock value may have nothing to do with inflation.

Sometimes inflation is very low and a stock's selling price can nevertheless increase significantly, or vice-versa. So it's a bogus argument.

[ProgressiveProfessor]

2. Technically there is some merit to this since the invertor has no actual profit

However, historically the tax code does not consider inflation.

[On the Road]

3. Capital Gains Does Include an Inflation Component

It's one reason not to tax captial gains at the same rate as wages. Of course, it can also be used as an excuse to undertax the wealthy.

[sinkingfeeling]

4. But nobody's explaning how that is different from wages.

[On the Road]

7. Wages are Paid in the Year they are Earned

Capital gains are the difference between when you buy and sell an asset. The most important groups are stocks and real estate.

It's easier to see over the long term: A nest egg of $50,000 in savings would have gone a long way towards financing your retirement in 1964. If those savings just kept pace with inflation, they would be worth over $300k today. Yet you would be taxed on $250k+ of capital gains. Without captial gains, that $50,000 would have lost over 80% of its real value.

In other words, captial gains taxes you even if you're making nothing in real terms on a house or long-term savings.

[Aerows]

5. "My main goal in life is to make money"

"Therefore, I am vigorously opposed to anything and everything which requires I pay my fair share."

That might as well be what he says because it's the truth.

[PA Democrat]

6. The interest earned on a bank savings account is taxed as regular income

even when inflation exceeds the rate of interest.

Alternately, capital gains are taxed at a lower rate, especially for people in lower tax brackets. Investing in the stock market is a risk, and you can't guarantee people that their "wealth" will be protected if they make an investment whose value does not out pace the rate of inflation. You don't even give that guarantee to people who choose less risky investments like bank CDs.