Hacker News Reader

Comment by karl11 | Hacker News Reader

Absolutely. But really there should not be capital gains tax as it is double taxation - you have already paid income tax on the same dollar.

View on HN

"Double taxation" as a concept is complete nonsense. You pay sales tax, property tax, VAT, etc out of money (or assets bought with money) that has already been subject to your income tax. You pay both federal and local income taxes on the same money. Tax systems are naturally layered, and have been since the beginning of civilization.

There are good arguments against capital gains tax, but this is not one of them.

Double taxation is more about how if if I own a c corp it pays a tax on profits, and then distributes that remainder of that profit to me and I pay the dividend tax on the same money. Thus the corp tax + the dividend tax should be close to the individual tax rate. When they aren't, you are tax advantaged to run an s corp.

Double taxation increases tax complexity. If possible we limit ourselves to as few taxes as possible but make those we keep count.

I don’t think you understand how capital gains work...

If you invest a dollar today and get ten dollars tomorrow you’ve gained 9 dollars. When were you taxed for that?

I think his point was the initial dollar you invested was at some point subject to income tax to get it.

The (now gray) comment talks about being double taxed. That is, taxed twice for the same money.

If I invest $100 (post-tax money) and sell the investment at $1000, I do not pay taxes on that $100. There is no double taxing. I do pay taxes on the $900 gain.

The problem is the gain may exist in nominal terms only. It’s possible to make a 100% nominal gain, which will be taxed, even if in inflation adjusted terms you lost 90% of the actual value in the process.

The double taxation that some people talk about is actually corporate profits being taxed, and then that money being further taxed as capital gains / dividends - but I don't think that 's a fair criticism either.

That’s a bad point, because the first dollar won’t be subject to cap gains, so there is no double taxation happening.

Yes, but the capital gains tax doesn't apply to that dollar (it's right in the name).

There is no double taxation here.

There is a more nuanced question as to whether or not inflation should be incorporated into the calculations, but there are pros and cons there also.

They're saying if that growth occured over 60 years then you've just kept up with inflation. Might as well have just put it in a standard savings account and NOT get capital gains tax. *Well, maybe a standard money market account or bond.

Bonds also incur capital gains tax) The point of the capital gains taxes/inflation is specifically to incentivize people spending money over saving (if too many people saved money the economy would contract). It's not a perfect tool, but it works somewhat.

Income from bonds issued by the federal government and its agencies, including Treasury securities, is generally exempt from state and local taxes.

Earned interest is taxed as income at the federal level.

Oh, I know. Should it be taxed at the state level too?

Wait, wouldn't you get taxed capital gains on a standard savings account? I'm genuinely curious even though right now saving accounts are not saving anything at all.

Tax on interest is at a different rate than capital gains tax.

Which one is higher?

I’m pretty sure that interest income is taxed, at the federal level, like wage income. In other words, at a higher rate than capital gains.

Long-term capital gains are taxed at a lower rate than ordinary income and short-term capital gains (which are taxed at income rates).

You pay capital gains on the nominal profit (versus real profit, which may actually be a real loss as in the example). You have not paid double the taxes unless you screwed up and selected a cost-basis of $0 versus the actual non-zero value.

Please read up on the difference between 'profit' and 'revenue'.

Reply on news.ycombinator.com