Re: Capital and Taxes

[tcmay@got.net (Timothy C. May)]

At 8:27 PM 8/14/96, Greg Hopper wrote:
>When you consider that capital gains tax rate schedules are not indexed for
>inflation, the situation's even worse than Tim's analysis implies.  Since
>you pay tax on the nominal rather than the real capital gain, the effective
>capital gains tax rate is really higher than the quoted rate.
>----------------------------------------------------------------------
>Greg Hopper                     |Disclaimer:  The opinions expressed are
>
>Research Department             |my own and not necessarily those of
>Federal Reserve Bank            |the Federal Reserve Bank of Philadelphia
>of Philadelphia                 |or the Federal Reserve System.

I certainly agree with Greg here, and find it too bad that his views do not
actually express the views of the Federal Reserve. (Actually, they may, as
I remember reading Alan Greenspan's stuff in Rand's books in the late 60s,
e.g., "Capitalism: The Unknown Ideal.")

Not only is there inflation to consider, there is the double taxation I
should've emphasized more than I did.

Wages are typically corrected for inflation (for competitiveness reasons),
but capital gains are not. That stock I bought for $20 in 1975 dollars and
am now selling for $40 in 1996 dollars, and paying 40% in taxes on the
"gain," is clearly not really a doubling.

--Tim May

Boycott "Big Brother Inside" software!
We got computers, we're tapping phone lines, we know that that ain't allowed.
---------:---------:---------:---------:---------:---------:---------:----
Timothy C. May              | Crypto Anarchy: encryption, digital money,
tcmay@got.net  408-728-0152 | anonymous networks, digital pseudonyms, zero
W.A.S.T.E.: Corralitos, CA  | knowledge, reputations, information markets,
Licensed Ontologist         | black markets, collapse of governments.
"National borders aren't even speed bumps on the information superhighway."