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1 freetoken  Mon, Sep 19, 2011 7:15:51pm
If the tax code specified that there would be no distinction for capital gains from other income, the taxpayer would have to pay tax based upon a $9,000 gain. I think that result would fall within the 'insult to injury' genre.

In an effort at mitigating the inequity, Congress legislated that capital gains would be treated differently from other income.

Is it really an "inequity"?

Why should the investor not have to bear the risk of decline of real value over time?

2 mikiesmoky2  Mon, Sep 19, 2011 7:42:47pm

re: #1 freetoken

Is it really an "inequity"??

Of course.
You don't understand the "inequity" of paying taxes on a nominal gain of $10,000, when there was an economic loss of $5,000?

Why should the investor not have to bear the risk of decline of real value over time?

'Eh?
Sorry, but I do not understand your question.

The investor does bear the risk of decline.

Please explain your question with a wee bit more specificity.

Thank you,

mz

3 freetoken  Mon, Sep 19, 2011 8:46:22pm

re: #2 mikiesmoky2

The investor does bear the risk of decline.

Please explain your question with a wee bit more specificity.

Correct, I did not mean to imply that the investor bears no risk. However, trying to scale (i.e., via CPI or any similar means) the taxable amount essentially tries to scale the risk and thus shield the investor from the full consequences of a poor performing asset.

This gets down to the whole idea of why we "tax" and how we do it in our society.

I propose a proper way to approach the taxing of "gains" is to realize that only the present and future matter as far what can be changed in life - the past cannot be changed.

For example, which is more important: lost value due to inflation, or, other opportunity costs?

Income from wages are taxed on face value - even if wages become less valuable due to inflation over the period of the tax year (something we've not had to worry about the past few years because of very low inflation, but in previous times where double digit annual inflation manifested.) More important still, taxes on wages are really taxes on time, since the hours expended in labor can never, never, be returned, unlike so called "capital" assets which, even if depreciated due to inflation, can be sold for some value.

In other words, I question how we have come to value our lives when we tax life expended rather than tax negotiable and tradable "assets".

And life is the ultimate depreciating asset since we only have some finite quantity of hours to expend.

I'm trying to make the case that "capital" really ought to be taxed and that tax ought to be seen as an important way that we pay for our civilization. This is contrary to the current winds blowing the "conservative" pundits and politicians, who seem to think that there should be no inheritance taxes or capital asset taxes, but only wages and retail (or wholesale via VAT) commerce ought to be taxed.

I realize that you didn't call for total elimination of capital gains, however the political operatives who are trying to stir up the populace for a major tax system overhaul are strongly intent on ending capital gains and inheritance taxes.

4 garzooma  Mon, Sep 19, 2011 9:01:30pm

How would this proposal affect Warren Buffett's tax? I believe that the 50% reduction mentioned above is largely responsible for him paying a smaller percentage of his income in taxes than his secretaries (I could be wrong). If the proposal eliminates this reduction, I'm all for it.

5 mikiesmoky2  Mon, Sep 19, 2011 9:34:45pm

re: #3 freetoken

Very esoteric and thought provoking.

You must afford me some time to collect my thoughts.

I will respond.

mz

6 mikiesmoky2  Mon, Sep 19, 2011 9:53:18pm

re: #4 garzooma

How would this proposal affect Warren Buffett's tax? I believe that the 50% reduction mentioned above is largely responsible for him paying a smaller percentage of his income in taxes than his secretaries (I could be wrong). If the proposal eliminates this reduction, I'm all for it.

Regarding Mr. Buffett, during the recent past, long-term capital gains have been maxed @ 15%. I think he still only takes a salary of $100,000, thus his composite tax rate is a mix of the 15% (heaviest) and around 20% (assuming he has some itemized deductions) resulting in a tax around 17%.

The so-called "Buffett" tax is triage, at best.

mz

7 mikiesmoky2  Mon, Sep 19, 2011 11:54:58pm

re: #3 freetoken

re: #3 freetoken

REGARDING: Correct, I did not mean to imply that the investor bears no risk. However, trying to scale (i.e., via CPI or any similar means) the taxable amount essentially tries to scale the risk and thus shield the investor from the full consequences of a poor performing asset.
RESPONSE: I am not sure that I agree with your thinking without further explanation.
The measurement should be objectively precise.
The cost is simple. The translation from cost period dollars to current dollars should be similar to converting non-dollars to dollars; vertically, rather than laterally. And the sales price is defined. I.e., I don’t see a problem with the measurement of economic gain or loss by applying the CPI ratio, and assessing the economic gain or loss at normal rates.

REGARDING: This gets down to the whole idea of why we "tax" and how we do it in our society.
RESPONSE: Here, we have a heavy-duty concept worthy of serious discussion. This could be a complete chapter within a book on taxation.

REGARDING: I propose a proper way to approach the taxing of "gains" is to realize that only the present and future matter as far what can be changed in life - the past cannot be changed.
RESPONSE: I am listening (reading). lol
By the way, only the future can be affected.
The past was, i.e., is unchangeable.
The present is, i.e., is unchangeable.
The future will be.

REGARDING: For example, which is more important: lost value due to inflation, or, other opportunity costs?
RESPONSE: “Opportunity costs” cannot be rationally codified within any tax code..

REGARDING: Income from wages are taxed on face value - even if wages become less valuable due to inflation over the period of the tax year (something we've not had to worry about the past few years because of very low inflation, but in previous times where double digit annual inflation manifested.)
RESPONSE: The assumed value of a wage is the wage itself, at the time earned.
The storage of that “energy” is another situation.
Theoretically, an adjustment should be made to the stored value in the form of interest, which would be equal to inflation and which not be taxed.
Unfortunately, we do not exist within a theoretical world.
We, each, must assess where and how we want to store our energies.

REGARDING: More important still, taxes on wages are really taxes on time, since the hours expended in labor can never, never, be returned, unlike so called "capital" assets which, even if depreciated due to inflation, can be sold for some value.
RESPONSE: Time is of great value. Each of us must assess what we want to do with those precious moments. The conversion of our valuable time is not solely dependent upon our demands, since our demands must be accepted by the remunerating party. Much of our time is assessed to be more valuable to us when we are engaged in non-remunerative endeavors.
Each of us must assess and decide upon how we allow our time to be expended.
Not all capital assets are subject to depreciation.

REGARDING: In other words, I question how we have come to value our lives when we tax life expended rather than tax negotiable and tradable "assets".
RESPONSE: You are highlighting a very important concept. Net rewards for labor are burdened much more than earnings from assets, e.g., a single person making $50,000 per year will pay around 35% in income and other payroll taxes, while a $50,000 long-term capital gain will be assessed 15%.
Our “leaders” say that they want to promote the work ethic. Their legislation belies that fantasy.

REGARDING: And life is the ultimate depreciating asset since we only have some finite quantity of hours to expend.
RESPONSE: Absolutely. Assuming 45 years @ 2,000 hours per year = 90,000 productive hours.

(continued.........................)

8 mikiesmoky2  Mon, Sep 19, 2011 11:56:19pm

re: #7 mikiesmoky2

(continued............................)

REGARDING: I'm trying to make the case that "capital" really ought to be taxed and that tax ought to be seen as an important way that we pay for our civilization.
RESPONSE: All forms of passive or unearned income are less burdened than income from labor. This situation should be changed, but Congress would have to acquire a sense of balance, equity, and morality to affect the requisite changes, and that possibility is, sadly, remote, at best.

REGARDING: This is contrary to the current winds blowing the "conservative" pundits and politicians, who seem to think that there should be no inheritance taxes or capital asset taxes, but only wages and retail (or wholesale via VAT) commerce ought to be taxed.
RESPONSE: Eliminating inheritance taxes is antithetical to capitalism.
One of our greatest problems that has been a massive contributing factor to our current economics has been the shift of wealth from the middle-class to the top 0.1% of income recipients.

REGARDING: I realize that you didn't call for total elimination of capital gains, however the political operatives who are trying to stir up the populace for a major tax system overhaul are strongly intent on ending capital gains and inheritance taxes.
RESPONSE: It would be, absolutely, criminal to end either.
The taxation of capital gains I have proposed is equitable and should be established.
Inheritance taxes should be increased and the past ten years has cost our Nation a tremendous amount of lost revenue due to the treatment of taxes upon estates.

I hope I have adequately responded to your comments. Please keep in mind that I am very, very tired. lol

mz


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