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TAXES: Capital gains are profit, not income

Letter by Teresa A. Hoyer, University Place on Feb. 6, 2012 at 1:32 pm with 7 Comments »
February 6, 2012 2:28 pm

Re: “Baird’s naive about tax rates” (letter, 2-4).

The writer sees capital gains as income, but they are actually profit. Yes, some people invest using ordinary income received as wages, which they have already paid tax on. The capital gain on these investments (dividends, etc.) is not taxed twice; it is profit, which has never been taxed.

Taxpayers who lose money on investments are allowed to declare a loss on their tax returns because the loss is viewed as lost profit, not lost income.

Many people invest with money they don’t receive as ordinary income or wages, especially the very rich. As one example, compensation packages for CEOs are weighted so most of their income is from stock options (investments), not wages. This allows them to pay a much lower overall tax rate.

The “twice-taxed income” idea promulgated by Republicans as justification for the unfair tax code is a lie.

Leave a comment Comments → 7
  1. beerBoy says:

    You say eether and I say eyether,
    You say neether and I say nyther,
    Eether, eyether, neether, nyther,
    Let’s call the whole thing off!
    You like potato and I like potahto,
    You like tomato and I like tomahto,
    Potato, potahto, tomato, tomahto!
    Let’s call the whole thing off!

    from the Gershwin brothers

  2. aislander says:

    To say that investment losses are deductible is almost a complete lie. Such deductions are limited to $3000, no matter how large the loss. Taxes, obviously, are collected for ALL the gains.

    I thought we WANTED people to invest in the future. The freest economies in the world, such as Hong Kong, Singapore, and Switzerland have little or no capital gains taxation.

    Besides, the last time capital gains rates went up, revenues went down, which raises the question: what is the purpose of taxation?

  3. nwcolorist says:

    aislander, I always thought the purpose of taxes was to raise revenue for the government, and I was confused as to why the Dems consistently opposed lowering capital gains taxes. The CG tax cuts by Kennedy, Reagan, and Bush2 all produced increased in revenues.

    What I finally realized is that the Left’s policy is to use taxes as an instrument of social engineering, to keep individuals from becoming too powerful.
    The extra money created by reducing the CG tax puts more money in people’s pockets, and gives them more power relative to government.

    Liberals would prefer lower tax revenues with a heavy tax burden on citizens than the opposite. It’s all about control.

  4. sandblower says:

    With tax rates already low, the Laffer Curve theory says that raising taxes will more than likely increase revenue. 50% is the supposed threshold of diminishing returns, but we have not been there for a long time so no one knows for sure. I say give it a try for top earners and include capital gains.

  5. aislander says:

    You don’t HAVE TO sell an asset if the tax rates seem too high, but, hell: why should we believe history and experience? Let’s raise those rates to the sky and punish somebody, even it’s only ourselves!

  6. aislander and nwcolorist: Your most recent post are humorous in view of the actual facts.

    aislander says that when capital gains tax went up, government revenues went down and speaks of history, expierience and the fool-hardiness of punishing people by implementing higher tax rates, while nwcolorist says that he’s confused as to why the Dems oppose lowering capital gains taxes and states that the Left’s policy is to raise taxes as an instrument of social engineering and control.

    Both of your posts would make Ronald Reagan a liberal, a lefty, and a controling, social engineer. By today’s conservative’s terminology, Reagan would certainly be a RINO Republican.

    In 1981, Reagan cut taxes, but unlike his conservative descendents, Reagan learned quickly that federal revenues were suffering a dramtic reduction, so took much of those cuts back in 1982 in The Tax Equity and Fiscal Responsibility Act . Reagan stated that “they were going to close the unproductive loopholes that allow some of the truly wealthy to avoid paying their fair share.”, but his purpose was to raise revenue to halt the projected deficits. In 1983 Reagan reformed SSI, which required self-employed people (job creators) to pay the entire payroll tax rate on their income, rather than just the portion previously paid by employees.

    Reagan took away the ability to deduct state sales tax, which deduction, Washingtonians had previously enjoyed since around 1917. Reagan raised capital gains taxes from 20% to 28% in 1986. The tax increases I mentioned here are the ones that affected me, and I’m sure there are quite a few more increases I’m unaware of.

    Did I mention that Ronald Reagan, the controlling, lefty, social engineer raised capital gains taxes from 20% to 28%?

  7. Bandito says:

    The Bush Tax Cuts did all the social engineering that interest Republicans. “Ask not………….. oh forget it. That was sooo yesterday.

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