Letters to the Editor

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TAXES: Baird’s right on taxing capital gains

Letter by Helmut Kellermann, Puyallup on Feb. 6, 2012 at 2:26 pm | 20 Comments »
February 6, 2012 2:35 pm

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

The one who “is naive or deliberately misleading” is the letter writer, not Katie Baird (column, 2-1). What he fails to understand, or purposely distorts, is the fact that it is the gain on his investment which is taxed, not the after-tax money he originally invested. Hence the name, capital gains tax, which is not double taxation as he states.

Gain on investments is the same as putting money into the credit union and earning interest which is taxed as ordinary income while the investment income receives a favorable tax treatment, typically enjoyed by those in the higher income brackets.

A lower-income person, holding an identical investment in a 401(k) plan, will not enjoy the lower capital gains tax but instead will have pay taxes at the ordinary income levels upon withdrawal.

The letter writer propagates the fallacy that it is the investors who are the job creators, and they should enjoy the lower rate. It is demand that creates job, and no factory, no matter how low the taxes, would manufacture a single extra item if it did not expect demand for that product.

By the way, investors incurring a loss from investments, would expect to be able to deduct that loss at ordinary income level.

I don’t like to pay taxes any more than the next guy but I agree with Warren Buffett that it makes little sense to give capital gains a favorable tax treatment.

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