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I want to repeat a point that I read in one of Jim Roger's books. He was in favor of repealing all capital gains taxes simply to allow individuals an option in

I want to repeat a point that I read in one of Jim Roger's books. He was in favor of repealing all capital gains taxes simply to allow individuals an option in the fight against inflation. The example is of a person who has enough cash for 100 cheeseburgers. They decide to put that money in something like gold. The government prints lots of money causing inflation and the nominal value of the gold is now much higher. If the investor sells the gold he still has enough money to buy 100 cheeseburgers. However the government will say that he has a net capital gain and must pay tax. Jim Roger's point was that without capital gains tax people could put their money into any form that they thought would preserve their wealth better than fiat currency. With capital gains we all become speculators trying to beat inflation and still realize a net profit after taxes.

srgseg 16y ago
Capital Gains Tax is also a form of triple taxation. If you invest in a company and make a capital gain of $100 million, the capital gain is valued at $100m because that's the expected increase in profit take of that company over its lifetime. That profit will be taxed once through corporation tax, and then a second time through dividends tax. Capital gains tax is a third tax on these profits.
- asdf333 16y ago
  slightly inaccurate. The dividends tax is the same as the capital gains tax in the sense that they are both applied only once at the shareholder level. so unless i have something wrong, its a double tax. not a triple tax. (corp tax + cap gains or corp tax + dividends)
  - srgseg 16y ago
    You're correct about (corp tax + cap gains or corp tax + dividends). What I'm pointing out is that this theoretical future $100m in value is being taxed once through capital gains tax for the person that created the value, then a second time via corporation tax when that value manifests itself as a profit, then a third time when someone tries to take that profit as a dividend. And possibly fourth when estate tax is paid. That's a lot of tax.
    - ewjordan 16y ago
      ...and before the coin drops into the company's coffer, it's already been taxed as income against the person that earned it to spend, and before that as corporate tax against the corporation that employs that person, and as income tax against the people that bought that company's products, and so on. Income tax taxes every transfer of wealth from one entity to another. That's just the way it works, the government takes a cut of the profit that anyone realizes at every hop. I can't fathom any reason that income I obtain by betting on Apple should somehow magically be more exempt from taxation than income I obtain by betting on poker, working a dead end finance job, or selling my old crap on eBay, all the money from any of those sources has already been taxed dozens of times.
lowkey 16y ago
I get the point, and agree with it somewhat. However, this truly seems like a perfect example of treating the symptom while ignoring the cause. Since this is all theoretical, wouldn't it make more sense to just stop governments from stealing the wealth of the people through the hidden 'inflation tax?'
- ramchip 16y ago
  stop governments from stealing the wealth of the people You're appealing to emotions, not logic. It's not a good way to make decisions.
- goodside 16y ago
  Vague complaints about "inflation tax" do not contribute anything constructive to monetary policy discussions. No one disputes that excessive inflation is a regressive and unsustainable tax. Currency collapse is almost always caused by, or at least mediated through, governments using inflation to pay debt (or, more accurately, to partially default on debt). Preventing this is the primary reason modern central banking exists. Even those opposed to this solution still support its goal; the "End the Fed" movement wants less inflation, not more. Nobody--whether left, right, liberal, or fascist--thinks inflation is a good way to finance government. The only disputes are how to prevent it from doing so, as those in office have constant incentive to favor short-term stimulus over long-term stability, and how to balance such restraints against other goals like preventing deflationary shocks and making monetary inflation reflect growth in the real economy. Suggesting we stop taxing with inflation instead of minimizing its drawbacks is no more helpful than saying, "We should start preventing murders instead of building prisons," or, "Let's reduce the violence in Afghanistan instead of endangering more of our soldiers."
- jackfoxy 16y ago
  The fatal flaw in democracy, as identified by Ben Franklin, Alexis de Toqueville, and Karl Marx, is the mass of voters will eventually elect to raid the treasury. This is a systemic problem. The short-coming of republican government is the humans entrusted with preserving it will undermine the rule of law in various ways, suggesting this ideal form cannot be achieved. Modern western representative democracies today face a two-pronged problem. The people have voted themselves an ever-more-generous welfare state and the state bureaucracies, for many complex reasons, have failed in their oversight responsibilities. The most likely scenario is we muddle through it somehow and life goes on.

srgseg 16y ago

Capital Gains Tax is also a form of triple taxation. If you invest in a company and make a capital gain of $100 million, the capital gain is valued at $100m because that's the expected increase in profit take of that company over its lifetime. That profit will be taxed once through corporation tax, and then a second time through dividends tax. Capital gains tax is a third tax on these profits.

asdf333 16y ago
slightly inaccurate. The dividends tax is the same as the capital gains tax in the sense that they are both applied only once at the shareholder level. so unless i have something wrong, its a double tax. not a triple tax. (corp tax + cap gains or corp tax + dividends)
- srgseg 16y ago
  You're correct about (corp tax + cap gains or corp tax + dividends). What I'm pointing out is that this theoretical future $100m in value is being taxed once through capital gains tax for the person that created the value, then a second time via corporation tax when that value manifests itself as a profit, then a third time when someone tries to take that profit as a dividend. And possibly fourth when estate tax is paid. That's a lot of tax.
  - ewjordan 16y ago
    ...and before the coin drops into the company's coffer, it's already been taxed as income against the person that earned it to spend, and before that as corporate tax against the corporation that employs that person, and as income tax against the people that bought that company's products, and so on. Income tax taxes every transfer of wealth from one entity to another. That's just the way it works, the government takes a cut of the profit that anyone realizes at every hop. I can't fathom any reason that income I obtain by betting on Apple should somehow magically be more exempt from taxation than income I obtain by betting on poker, working a dead end finance job, or selling my old crap on eBay, all the money from any of those sources has already been taxed dozens of times.

lowkey 16y ago

I get the point, and agree with it somewhat. However, this truly seems like a perfect example of treating the symptom while ignoring the cause. Since this is all theoretical, wouldn't it make more sense to just stop governments from stealing the wealth of the people through the hidden 'inflation tax?'

ramchip 16y ago
stop governments from stealing the wealth of the people You're appealing to emotions, not logic. It's not a good way to make decisions.
goodside 16y ago
Vague complaints about "inflation tax" do not contribute anything constructive to monetary policy discussions. No one disputes that excessive inflation is a regressive and unsustainable tax. Currency collapse is almost always caused by, or at least mediated through, governments using inflation to pay debt (or, more accurately, to partially default on debt). Preventing this is the primary reason modern central banking exists. Even those opposed to this solution still support its goal; the "End the Fed" movement wants less inflation, not more. Nobody--whether left, right, liberal, or fascist--thinks inflation is a good way to finance government. The only disputes are how to prevent it from doing so, as those in office have constant incentive to favor short-term stimulus over long-term stability, and how to balance such restraints against other goals like preventing deflationary shocks and making monetary inflation reflect growth in the real economy. Suggesting we stop taxing with inflation instead of minimizing its drawbacks is no more helpful than saying, "We should start preventing murders instead of building prisons," or, "Let's reduce the violence in Afghanistan instead of endangering more of our soldiers."
jackfoxy 16y ago
The fatal flaw in democracy, as identified by Ben Franklin, Alexis de Toqueville, and Karl Marx, is the mass of voters will eventually elect to raid the treasury. This is a systemic problem. The short-coming of republican government is the humans entrusted with preserving it will undermine the rule of law in various ways, suggesting this ideal form cannot be achieved. Modern western representative democracies today face a two-pronged problem. The people have voted themselves an ever-more-generous welfare state and the state bureaucracies, for many complex reasons, have failed in their oversight responsibilities. The most likely scenario is we muddle through it somehow and life goes on.