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Comment by endisneigh | Hacker News Reader

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?

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).

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.

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