09/06/2024
Here's what is wrong with 28% capital gains tax.
Let's say you buy a piece of land for $10,000, keep it for 12 years and sell it after it's appreciated 3.5% a year with inflation(change in the value of the currency) over those years only going up 2.75%. More people being created than dying puts upward price pressure on the cost of a limited commodity.
At the end of 12 years, the land would have appreciated to $15,110.00, but because of inflation, it would take $13,847.84 to purchase the same things $10,000 would buy 12 years before.
However, the government doesn't take into account the change in the value of the currency(Inflation) and treats the 5,110 as profit and would tax it at 28% which equals $1,430.80.
$15,110 if there is no real estate commission less $1,430.80 = $13,669.20 and it takes $13, 847.84 to buy what $10,000 would buy 12 years before so you actually LOST $178.64 in purchasing power.
You didn't make the $ 5,110 - $1,430.80 = $3,679.20 the government wants to act like you did.
You lost $178.64 in what the money would buy and 12 years.
Even 20% like it is now would only be:
$5,110 profit x 20% = $1022.
$15,110 - $1022 = $14,088 - $13,847.84 = $240.16 actual profit.
In the 20% case, there was actually a profit in terms of purchasing power of $15,110 - $13,847.84 = $1,262.16.
The government gets $1,022.00 of it and the citizen/investor only gets $240.16.
Government gets 80.97% on the increase in purchasing power and the citizen/investor only gets 19.03%.
To be fair to the citizens the long-term capital gain tax of 20% perhaps should be lowered instead of raised.