Capital Gains Taxes Destroy Wealth

On this episode of Common Sense Soapbox, Florida Man finds the capital gains tax unfair, as it punishes his financial acumen. Although Sarah argues it forces the rich to pay their ‘fair share,’ Seamus explains it’s anything but — especially when it comes to inflation.
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CREDITS:
Written by Sean W. Malone, Seamus Coughlin, and Lou Perez
Animated by Seamus Coughlin
Produced & Edited by Sean W. Malone
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LINKS:

[ReaIHuman]

Imagine trying to convince the government to not steal more money from you.

[quarlic]

Washington State’s government recently approved the capital gains tax as constitutional. So that state is screwed.

[Strangedream]

I think everyone who pays any kind of tax deserves a printout of exactly where every cent of their money was spent

[screenname]

I got paid for work.
That money was taxed.
I bought food and water, and paid a tax for using the money that was taxed.
I bought my neighbor's car, which they had paid taxes on. The money I had paid taxes on which I gave them for the car was then taxed, and I paid a tax for the car.
I got a notice that the IRS had taken too much money in taxes from my pay, so they sent me a check for the amount they owed me... minus a tax for the money they were giving me back.

[kjullthedemon]

Where I live, shares are taxed a whopping 42% if they're worth above 7360 dollars. If they're below that, it's "only" 27%. it's still insane. And everyone is alright with it here, cause they apparently have faith the state will use our taxes properly, like they've proved so well the past 20 years.

[anthonyminimum]

The tax man just ate a baby gator, they really are heartless creatures

[mustang]

The voracious tax predator eating the cute baby alligator was a nice touch.

[jamestarbet]

And then you have state and federal governments claiming they don't have enough tax revenue. Problem isn't tax revenue. It's just that they overspend beyond their means to an extraordinary degree.

[mustang]

If you buy a stock for $5000 and seven years later sell it for $10, 000 your subject to a capital gains tax payable to the government. Mostly caused by government monetary inflation which reduced the purchase value of the dollar by half.

[Gottaculat]

You just explained in 3 minutes what took my dad 3 hours to explain. He was a banker for over 30 years, commercial lending executive. If you were looking to start a business, but needed a loan to purchase assets (machinery, inventory, buildings, etc.) necessary to the business, my dad would have been who you talked to at the local community bank.

Understanding different forms of income, including stock market stuff, was part of the job, as it was his duty to make sure the bank's investment in a new or expanding business would be a wise investment. If the borrower's business model/plan seemed sketchy, or just not well thought out, it made my dad's job easy, as he would deny the loan. If they presented a solid business plan, seemed trustworthy, and the bank was likely to get their money back, plus the interest, the loan would be approved.

Cash is a commodity like anything else. My dad always compares it to a car rental agency. You rent a car for an agreed upon time, at which point you are expected to return it, and a fee is payed for having used it. Same with money in a bank; you rent a quantity of money for a period of time, and you're expected to pay for that rental - they just call it a loan instead of rent, and interest instead of a fee. It's the same. Thing is, cars gain milage, and eventually don't have the same performance as a newer car. Kinda the same with a bank in that inflation occurs, so the money lent out loses spending power, as does the interest/fee. So the bank runs into this same problem as the stock market where the money they make later has less value than it did when they approved the loan.

Inflation hurts small community banks a lot. Couple that with federal regulations and fines up the ass, and a small bank can get crippled financially, just like any other business or investor.

Like any investor, a bank takes risk every time they approve a loan. That's why, like investors, banks need to make a lot of loans, because most people pay back the money owed, and when you have people who fail to pay back their loans, that loss has to be compensated for. The bank does this by either laying-off executives (happened to my dad, and he was out of work for 3 years), implementing a hiring freeze (they won't hire anyone, even if they lose employees), and if it gets really bad, they'll also raise the interest rates on loans.

If you want to see the economy collapse, you'd support loan forgiveness. Loan forgiveness is like if you bought a whole bunch of stocks, and even though the company you invested in is doing well enough, they bitch and moan that they have to pay you, the investor, so they have the government step in and be like, "How dare you prey upon this tormented soul." Never you mind you made a business agreement that they return the money you loaned/invested, plus interest, nope, you're shit out of luck. "Take the loss, you capitalist pig, " is how they see it. They don't care that the borrower knowingly entered into a fair contract.

Anyway, capital gains tax is insane. Why would anyone want to discourage investors, unless their goal was to consolidate all wealth and power to the state?

[bobowon]

I get taxed on my income. that money that's already been taxed gets taxed again when i spend or invest it. If i try to get ahead with investments i get taxed again. And as a canadian, in return I get told to take a tylonal after being taken to the emergency room two days in a row because the hospitals my taxes pay for are so poorly funded.

[steelshepherd]

-Capital Gains- Taxes Destroy Wealth.

There, fixed it. All taxes directly on you and your property are meant to destroy you. If our commerce is so huge then let it support the government through transactions of sales instead of both income and sales.

[fictiontheorizer]

Imagines Seamus doing a whole series on unfair taxes.

Do self employment taxes next.

That right there is a huge load of bull.

[Zundfolge]

The only thing worse than capital gains tax is property tax ... in essence we already own nothing. Everything we think we own we're just renting from the government. And if we get behind on that rent they can take it from us and we lose everything.

[canisblack]

The longer I live the more I realize how evil the people behind the school systems are. This is the sort of shit my parents learned in high school. It wasn't even REQUIRED learning when I went to College. Where I had to take a whole bunch of "General Education" courses that had nothing to do with my major. (Which incidentally was business/finance focused so I did learn this stuff in college.)

[Scarycatman]

I like common sense soapbox, you show me new views of things I had a different view on. Thanks.

[Mechazoid]

We literally founded this nation on a desire to not have high taxes that we did not ask for among other things. The Tree needs fed.

[ZadakLeader]

I agree, double taxation by taxing capital gains is fucked up. Denmark is the worst in this category

[marcusmoonstein]

Don't forget that inflation itself is a kind of stealth tax. So you pay tax on your income, have what is left taxed by inflation, and then still have to pay capital gains tax on your investments. The government complains that people don't save enough, but then do things that make saving pointless. PS : I can always sh*t myself when people trot out the old "pay your fair share" line when the rich are actually already paying far more than their fair share.

[Aurora]

To be clear, although the money has already been taxed via income tax, if instead of investing you were to start a business with those funds, any profit from there would also be taxed. So there's not really any functional difference between capital gains taxing appreciation versus taxes on profits generated from using that money directly for your own business. It just feels worse because the profit feels more "active" from a business venture versus from investing (though this is still very much "work").