Did you know that you sometimes pay taxes on profit that isn’t profit at all? The government might be taxing you on inflation.
Pretend I’m saving for a new violin. Yes, this entire post will be a “pretend” because I bought a violin a year ago, and I love it.
What if I find an instrument I like for $8,000? I only have $3,000 saved. I buy gold with my $3,000 and keep saving. Or rather trying to save. You know how it goes. Emergencies keep coming up, and I just can’t squirrel away any more money.
Finally, I check the value of my original investment and see it has doubled. Now my gold is worth $6,000. I’m excited until I find out that the price of the violin has also doubled. It costs $16,000.
I’m no closer to my goal. And when I sell my gold, I have to pay capital gains taxes on its “increased” value. If the capital gains tax rate is 15%, I’ll be sending $450 to the government.
Alan Blinder, a former member of the Federal Reserve Board, admitted that up until 1980 most capital gains taxes were paid on increased prices due to inflation and not on true increase in value. See "Capital Gains Taxes" by Stephen Moore.
The Economic Effects of Capital Gains Taxation makes a similar point. The table at the top of page eleven shows how much investors would pay in capital gains taxes due to inflation if they bought stock in certain years and sold it in 1994.
When the price of everything goes up, it isn’t profit. It’s inflation. Don’t tax it.
Monday, November 28, 2011
Sunday, November 20, 2011
Capital Gains Taxes – Part 2
I will now prove how good I am at debate. I am so good that I can argue both sides of an issue. I will proceed to argue against my last post.
It is sometimes true that capital gains taxes are double taxation. Corporations pay high taxes on their profits. This negatively affects the price of their stock. The little bit that the stock increases in value is taxed again if the investor sells it and reports capital gain.
But not all capital gains are from stocks. If someone invests in gold and sells it at a profit, it’s pure profit. No corporate taxes have been paid.
Or is it pure profit? There is that awful word inflation, but I’ll leave that for my next post.
It is sometimes true that capital gains taxes are double taxation. Corporations pay high taxes on their profits. This negatively affects the price of their stock. The little bit that the stock increases in value is taxed again if the investor sells it and reports capital gain.
But not all capital gains are from stocks. If someone invests in gold and sells it at a profit, it’s pure profit. No corporate taxes have been paid.
Or is it pure profit? There is that awful word inflation, but I’ll leave that for my next post.
Thursday, November 17, 2011
Capital Gains Taxes
Is the capital gains tax rate too low? Not if you look at the whole picture. Pretend you risk your money by investing in a new company. With your money, the business manages to make $100 profit (after expenses, employee's wages, etc.).
"Yay!" you think. You didn't lose your investment. You made money instead. But you forgot one important thing – the corporate tax rate. That business has to pay approximately 40% of its earnings in taxes (state and federal) before it can give any money to you.
So this new business that you supported sends $40 to the government. “Oh, well,” you think, “I still get $60.” Not quite. Once the company sends the $60 to you, you have to pay taxes on it again. Granted it’s only 15% since it’s capital gains. But 15% of your $60 is still $9.
You send the $9 to the government. You figure it’s a rough deal, but at least you got to keep $51 of the $100 that the business made with your money. But then your neighbor complains that you didn’t pay enough taxes – he has to pay 35% income tax.
Ugh! Forty-nine percent of your profit went to the government, and someone is complaining. Well, that’s his problem. You have a different problem. You’re staring at that $51 in your hand and wondering if it’s worth investing it again. Investments are a little risky. Maybe you should hide it under your mattress.
Tuesday, August 30, 2011
Socialism and Solidarity
The Democratic Socialists of America state, “Our vision of socialism is a profoundly democratic one, rooted in the belief that individuals can only reach their full potential in a society that embodies the values of liberty, equality, and solidarity. Only through creating material and cultural bonds of solidarity across racial, gender, age, national, and class lines can true equality of opportunity be achieved.” See Section 1 of “Where We Stand.”
Superficially, this vision appears beautiful. I realized, though, that I did not know the definition of solidarity. It sounds good. It is a popular word. It must be right. But what does it mean?
According to Dictionary.com, solidarity is union or fellowship arising from common responsibilities and interests. It is a community of responsibilities, interests, feelings and/or purposes
Is it possible to have perfect solidarity without a shared religion? My sense of responsibility comes from my faith in God. My interests, feelings and purpose in life are inextricably entwined with my religion.
How much unity of belief is necessary to make socialism work? Can we find that kind of unity in a pluralist society?
Saturday, June 11, 2011
Jim Crow and Political Debate
On Sunday, the Democratic National Committee Chairwoman Debbie Wasserman Schultz accused Republicans of wanting “to literally drag us all the way back to Jim Crow laws” by instituting photo ID laws for voting. She later admitted that she should not have used the Jim Crow analogy, but she persisted in her claim that Republicans want to disenfranchise minorities.
Why does this bother me? Because I am a Republican, and I am not a racist. I want minorities to feel comfortable in our party. I want them to know that we also stand for civil rights. The Republican Party has a rich history of fighting for civil rights.
In 1954 the U.S. Supreme Court ruled that school segregation is unconstitutional (Brown v. Board of Education). On September 2, 1957, Governor Orval Faubus (D) deployed the Arkansas National Guard to prevent nine black students from attending Central High School. President Eisenhower (R) sent the 101st Airborne to protect the African-American students.
Eisenhower’s Attorney General, Herbert Brownell, proposed the Civil Rights Act of 1957. Senator Strom Thurmond (D) filibustered it, setting the record for the longest speech by a single congressman (24 hours and 18 minutes). The Southern Democrats insisted on compromises that left the act practically powerless. See "Herbert Brownell, GOP civil rights hero".
Wasserman Schultz said, “Photo I.D. laws, we think, are very similar to a poll tax.” Does she remember what ended the poll taxes? The 24th Amendment, voted for by 91% of Congressional Republicans and only 71% of Democrats ("Black Voting Rights").
Even the Civil Rights Act of 1964 needed the help of Republicans. The Democrats had a large majority in Congress, but only 198 of the 315 Democrats supported the bill. President Lyndon B. Johnson (D) needed 269 votes to pass it. He worked with Republicans to get the act through Congress.
The Voting Rights Act of 1965 used the original wording of Eisenhower’s Civil Rights Act. Eighteen Senators voted against the Voting Rights Act. Seventeen were Democrats ("Black Voting Rights").
I don’t want to get into a fight about which party did more for civil rights. But I also don’t want people to assume I don’t care about the poor, oppressed and minorities because I vote Republican.
Republicans care. They just don’t talk about it enough. How many people know of President George W. Bush’s work to treat and prevent AIDS in Africa? To fight malaria in Africa? To help underdeveloped African countries? He carefully structured his programs to provide accountability and incentives for real improvement ("Bush Has Quietly Tripled Aid to Africa").
Concerning No Child Left Behind (NCLB), Bush said, ‘These reforms express my deep belief in our public schools and their mission to build the mind and character of every child, from every background, in every part of America.” Bush wanted to help minority students through accountability and local control.
Many say Bush failed. Thomas Sowell, an African-American author and senior fellow at the Hoover Institution, disagrees. He pointed out that less than five years after NCLB, young black students had significantly narrowed the gap between themselves and white students. Older minority students did not improve, which affected the overall statistics ("Does the No Child Left Behind Act help black students?")
We could debate Bush’s education policy. We should debate it. Let’s quit accusing each other of not caring about minorities. We all care. We just disagree on methods. I’m looking forward to a healthy discussion about policy and methods in this coming election year. But, please, no name-calling.
Why does this bother me? Because I am a Republican, and I am not a racist. I want minorities to feel comfortable in our party. I want them to know that we also stand for civil rights. The Republican Party has a rich history of fighting for civil rights.
In 1954 the U.S. Supreme Court ruled that school segregation is unconstitutional (Brown v. Board of Education). On September 2, 1957, Governor Orval Faubus (D) deployed the Arkansas National Guard to prevent nine black students from attending Central High School. President Eisenhower (R) sent the 101st Airborne to protect the African-American students.
Eisenhower’s Attorney General, Herbert Brownell, proposed the Civil Rights Act of 1957. Senator Strom Thurmond (D) filibustered it, setting the record for the longest speech by a single congressman (24 hours and 18 minutes). The Southern Democrats insisted on compromises that left the act practically powerless. See "Herbert Brownell, GOP civil rights hero".
Wasserman Schultz said, “Photo I.D. laws, we think, are very similar to a poll tax.” Does she remember what ended the poll taxes? The 24th Amendment, voted for by 91% of Congressional Republicans and only 71% of Democrats ("Black Voting Rights").
Even the Civil Rights Act of 1964 needed the help of Republicans. The Democrats had a large majority in Congress, but only 198 of the 315 Democrats supported the bill. President Lyndon B. Johnson (D) needed 269 votes to pass it. He worked with Republicans to get the act through Congress.
The Voting Rights Act of 1965 used the original wording of Eisenhower’s Civil Rights Act. Eighteen Senators voted against the Voting Rights Act. Seventeen were Democrats ("Black Voting Rights").
I don’t want to get into a fight about which party did more for civil rights. But I also don’t want people to assume I don’t care about the poor, oppressed and minorities because I vote Republican.
Republicans care. They just don’t talk about it enough. How many people know of President George W. Bush’s work to treat and prevent AIDS in Africa? To fight malaria in Africa? To help underdeveloped African countries? He carefully structured his programs to provide accountability and incentives for real improvement ("Bush Has Quietly Tripled Aid to Africa").
Concerning No Child Left Behind (NCLB), Bush said, ‘These reforms express my deep belief in our public schools and their mission to build the mind and character of every child, from every background, in every part of America.” Bush wanted to help minority students through accountability and local control.
Many say Bush failed. Thomas Sowell, an African-American author and senior fellow at the Hoover Institution, disagrees. He pointed out that less than five years after NCLB, young black students had significantly narrowed the gap between themselves and white students. Older minority students did not improve, which affected the overall statistics ("Does the No Child Left Behind Act help black students?")
We could debate Bush’s education policy. We should debate it. Let’s quit accusing each other of not caring about minorities. We all care. We just disagree on methods. I’m looking forward to a healthy discussion about policy and methods in this coming election year. But, please, no name-calling.
Sunday, April 3, 2011
Experience
“Is this a good violin?” a parent asked me.
Gulp. How am I supposed to know?
Granted, I am a violin teacher. I have a degree in music. I graduated summa cum laude. That means I play well. I can analyze harmonies. I can discuss the artistic culture of the late 1800s. But college taught me nothing about the quality of student-level violins.
I have learned much since that first frightening experience. I have learned it in the trenches where most learning happens. But the experience makes me think twice about other people’s lists of impressive credentials.
Assistant Attorney General Kloppenburg graduated with honors from the University of Wisconsin Law School (1988). She has argued cases in circuit courts, the Wisconsin Court of Appeals, and the Wisconsin Supreme Court.
But what have these cases been about? According to Media Trackers, “since 1990 she has only argued seven criminal cases before higher courts.” Media Trackers reviewed the cases Kloppenburg has argued before these courts. The website found that over 75% of the cases involved the DNR or environmental issues.
More importantly, Kloppenburg has never been a judge. Judges must be impartial. Do we have evidence she can do this?
Impartiality is very difficult. I struggle with it. I am sure you can decipher my political leanings from my first two posts on this blog.
When electing someone to a ten-year term on our state’s highest court, I would be much more comfortable with a candidate who has judicial experience and a written record that can be examined.
Gulp. How am I supposed to know?
Granted, I am a violin teacher. I have a degree in music. I graduated summa cum laude. That means I play well. I can analyze harmonies. I can discuss the artistic culture of the late 1800s. But college taught me nothing about the quality of student-level violins.
I have learned much since that first frightening experience. I have learned it in the trenches where most learning happens. But the experience makes me think twice about other people’s lists of impressive credentials.
Assistant Attorney General Kloppenburg graduated with honors from the University of Wisconsin Law School (1988). She has argued cases in circuit courts, the Wisconsin Court of Appeals, and the Wisconsin Supreme Court.
But what have these cases been about? According to Media Trackers, “since 1990 she has only argued seven criminal cases before higher courts.” Media Trackers reviewed the cases Kloppenburg has argued before these courts. The website found that over 75% of the cases involved the DNR or environmental issues.
More importantly, Kloppenburg has never been a judge. Judges must be impartial. Do we have evidence she can do this?
Impartiality is very difficult. I struggle with it. I am sure you can decipher my political leanings from my first two posts on this blog.
When electing someone to a ten-year term on our state’s highest court, I would be much more comfortable with a candidate who has judicial experience and a written record that can be examined.
Saturday, April 2, 2011
Prosser Equals Walker, or Does He?
I have an identical twin. She and I are a lot alike. But sometimes we are opposites. I would not want anyone to say, “Jennifer equals Terry.” Why do we do this to politicians?
Many of Justice Prosser’s views are similar to Governor Walker’s. Prosser served as a Republican in the state legislature for eighteen years. If he had to make policy, he might still vote with the Republicans much of the time. But all of the time?
In an interview with The Associated Press, Prosser responded to a question about the budget repair bill. He said, "I don't necessarily agree with the bill. That's all I'm saying. It doesn't mean anything. My personal opinion doesn't mean anything at all." (See "Prosser Questions Budget Repair.")
Judges do not make policy. They are responsible for impartially applying the law to individual situations.
Has Prosser done this? People cite cases in which they do not like the conclusions Prosser reached. But like is not the question. He might not have liked his own decisions.
Showing partiality to the poor is just as wrong as showing partiality to the rich. Judges must be impartial. Did Prosser succeed in this? Did he properly interpret and apply the law?
Those who claim that Prosser equals Walker are responsible for providing evidence. If you believe Prosser misinterpreted the law, you are welcome to comment on this post and give me specific examples. Please be polite. The purpose of this blog is to promote rational discussion, not inflammatory political rhetoric.
Many of Justice Prosser’s views are similar to Governor Walker’s. Prosser served as a Republican in the state legislature for eighteen years. If he had to make policy, he might still vote with the Republicans much of the time. But all of the time?
In an interview with The Associated Press, Prosser responded to a question about the budget repair bill. He said, "I don't necessarily agree with the bill. That's all I'm saying. It doesn't mean anything. My personal opinion doesn't mean anything at all." (See "Prosser Questions Budget Repair.")
Judges do not make policy. They are responsible for impartially applying the law to individual situations.
Has Prosser done this? People cite cases in which they do not like the conclusions Prosser reached. But like is not the question. He might not have liked his own decisions.
Showing partiality to the poor is just as wrong as showing partiality to the rich. Judges must be impartial. Did Prosser succeed in this? Did he properly interpret and apply the law?
Those who claim that Prosser equals Walker are responsible for providing evidence. If you believe Prosser misinterpreted the law, you are welcome to comment on this post and give me specific examples. Please be polite. The purpose of this blog is to promote rational discussion, not inflammatory political rhetoric.
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