Over at the Chicago Boyz Mr David Foster opines that a 15% Capital Gains tax could turn out to be much more, once you account for inflation, as projected by the BLS.
I know that this isn't China and we are not [yet] facing galloping inflation, but yet inflation is its own form of tax and one assumes that most investors consider it when placing their money. Regarding inflation (and the Fed), the Chicago Boyz have this post.
Regards — Cliff
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ReplyDeleteAnd the tax is paid in those same inflated dollars... Rich folk crying a river over capital gains taxes are profoundly tiresome.
ReplyDeleteOK, so here is an explanation that convinces me inflation is it's own little tax.
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[I]f you hold an asset whose price exactly keeps pace with inflation: say the inflation is 40% and your asset appreciates by the same amount. Obviously, you haven’t really made any money by holding the asset; however, the IRS will charge you 6% of the sale price (15% time 40%). Even though the money you use to pay the 6% tax is indeed devalued…, it is obvious that you are paying a real tax on a completely imaginary gain. Basically, this is a retroactive wealth tax.
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Thanks to David Foster, from the Chicago Boyz.
Regards — Cliff