From: jfr@RedBrick.COM ()
Subject: Re: VOTE, BABY, VOTE!
Organization: Red Brick Systems, Los Gatos, CA
Distribution: usa
Date: Fri, 6 Nov 1992 09:33:40 GMT

In article <1992Nov06.031958.61102@watson.ibm.com> yozzo@watson.ibm.com (Ralph Yozzo) writes:
>In article <Bx96p8.AKL@dptspd.sat.datapoint.com> dscharfe@dptspd.sat.datapoint.com (David Scharfe) writes:
>>The biggest reason I hate income tax is that when you invest,
>>you are taxed again on your money.  You _already_paid_your_taxes_
>>when you made the money in the first place; I cannot find any
>>reasonable justification for paying twice.  Please enlighten me.

  Okay.  You are all mixed up.  When you earn your money, you are taxed
  on it.  As far as I can tell, you will NEVER EVER EVER again pay tax
  on those same dollars EXCEPT in the case of sales tax assessed on the
  purchase of goods with those dollars.  So the sales tax is indeed a
  secondary tax applied on top of taxes already paid.

  REMEDIAL FINANCE 101:

  If you invest your money in ANYTHING capital-related (stock, real
  property, bonds, savings accounts, R&D, etc), and ultimately take
  your money out with a profit, you only pay tax on the CAPITAL GAIN
  (i.e., the profit made above and beyond the initial investment)
  Hey, folks, that's why they call it the CAPITAL GAINS tax :-)

  You do not, no matter what you think, pay tax again on the money
  you earned.  That's your money to do with what you want (spend it
  and pay sales tax on it, invest or save it, or stick it in a
  mattress).  The money you invest is called your basis.  Anyone
  who has ever bought a home and sold it knows that the basis of
  your house (which is even adjusted up by the money you spend to
  try and sell it and clean it up for sale) is subtracted from the
  amount you sell it for to determine what your taxable profit
  (or rollover) is.  
  
  In fact, if you LOSE your money (your stock goes bust, your house
  burns and is uninsured - turkey :-) not only don't you pay tax
  again, you can even take a deduction for your CAPITAL LOSS.  Of
  course the noble Bush administration managed to mangle the capital
  loss rules last time around so there are stringent limits on what
  one can deduct in a given year and it has to carryover to future
  years, but over time, you can write off the loss against future
  taxes.  

  Now, of course, if you take the loss but something miraculous
  happens (the company finds oil on its property during backruptcy,
  your property all of a sudden becomes in demand and is purchased
  by some large company for its HQ building, etc.) and you have
  already taken a CAPITAL LOSS, you DO have to pay taxes on your
  new profit (which may include the dollars that you originally
  spent).  But then you already got a tax benefit from writing 
  off the loss.  So it all works out in the end.

  Since I am on a roll here, I want to disabuse certain people of
  another notion... That is, that if Clinton raises taxes on people
  making over $200,000 by increasing the marginal tax rate to
  50%, that everyone will want to stop their salaries at $199,999.
  Why does everyone seem to think this?  The key is the word 
  marginal.  Our current tax system has ALWAYS (even, Lord help
  us, when Reagan and Bush messed it up pretty badly) taxed people
  on marginal rates, that is at each higher income and tax percentage
  level, the higher tax percentage is only charged on income above
  the level, not on income below the level.  THERE IS NO PLACE IN
  THE TAX TABLES, READ MY LIPS ***NONE*** :-), WHERE EARNING ONE
  DOLLAR MORE WILL MAKE YOU NET LESS IN MONEY THAN IF YOU GAVE UP
  THE INCREASE.  THIS IS JUST A PURE SIMPLE STUPIDITY THAT IS
  REPEATED BY SO MANY PEOPLE THAT IT BECOMES CULTURE.  One of my
  coworkers actually told me that he believed this because a friend
  of his told him how in 1972 he got a raise and ended up taking
  home less pay than he had before he got the raise.  Well, he might
  have gotten his withholding screwed up slightly (that can happen
  and cause aberrations in his take-home pay during the year), but
  if you figure his taxes due at the end of the year, he MUST (absolutely
  MUST MUST MUST) have had more money left in his pocket (or already
  spent) than if he had not taken the raise.  If the marginal tax rate
  is 50%, then you will retain 50% of every dollar you earn over the
  margin line.  True, this hurts (and if you add a state tax, it hurst
  more, leaving you maybe with 37% or so).  But it certainly doesn't
  ELIMINATE the incentive to make more money.  Reduces the incentive?  
  Yeah, maybe a little bit.  But folks, most people making money in
  the $1,000,000+ range, those extra dollars are not coming from their
  hard, back-breaking labor, now are they.  Those dollars are coming
  almost exclusively from passive investments, stock gains, rental
  property, etc.  All the domain of the rich.  Add to that the fact
  that much of that income gets written off against expenses, the
  marginal rate of 50% doesn't hurt anywhere near as much as everyone
  protests.  Of course, if probably won't raise that much in new
  revenue either (that's right Mr. Bill, the upper income folks may
  be the easiest place the feed on but I don't think they will be
  lucrative enough to solve the problem, unfortunately).  But let's
  not let this issue be used to befuddle us.  Taxing the rich (at
  least under our current system) just pinches them, and makes them
  try to be that much more aggresive about making high returns.
  
  Jon Rosen