The problem with Over-taxing Capital Gains

Posted on October 1, 2011. Filed under: Conservative Issues, It's My Money and I want it yesterday!, Liberal Craziness | Tags: , , , , , , |

Full Disclosure: I am not rich, by any means. In fact, I still verify that I have enough money in my checking account each month before I set up my automatic bill pay for my mortgage. I admit, this may mean I have more money than many people. But, I also believe I represent the majority of Americans (who are homeowners).

I’ve been hearing a lot of banter lately on the media (radio and TV) with regard to everyone paying ‘their fair share’. My immediate reaction is, “yeah, richer folks (I mean insanely rich, like 2,000,000 or more in net income) can afford to pay more in taxes.” I further listen to the debates and realize that there’s a very important component missing in information being shared by the media: Taxing Capital Gains Hurts middle America too!

Here’s my logic:

I’m earn an income (less than $100,000 per year in the household). From that gross, I pay a huge portion in taxes to Federal government (they take it from me before I even have a chance to complain) and the State government (same complaint). I then take a small percentage out of each paycheck and place the money in a savings account since I have no health insurance coverage and I believe in personal responsibility first. I also believe people should use local support when needed and not rely upon the Federal government (which should be busy worrying over our country’s safety, borders, etc. instead). I end up saving a small amount of money each month which goes into savings. Over the years, I’ve pooled this savings and used it in a trading (stock) account. Through careful research and education, I’ve been able to do both short term and long term trades which have resulted (mostly) in a very good gain. I’ve had plenty of losses, but the wins have helped me to a good net gain. Until this big craziness over increasing the Capital Gains tax, I’ve been doing reasonably well to stay ahead of an overall net loss (due to taxes). If I consider the tax bracket in which I sit and the gains which I am able to earn in my stock trades, I am not rich – but I am not poverty level. My income is still under $100,000 but life is good.

Here’s where the fun begins. The ‘Class Warfare’ issue brought on by the administration in Washington and the self-deprecation from Warren (the big Berkshire Hathaway) has led the mainstream media (read this as folks like Chris Mathews and Ed Schultz, among others) to vilify anyone who wishes to make any income with “capital gains”. I’m  now in that category and I am NOT rich. As I’ve said to my friends, “Heck, I am just trying to make a living here. What did I do wrong?”

So, let’s say Washington (read that as Obama, Reid, et al.) get their way and the capital gains tax is raised across the board for everyone who earns it (yep, even if you only make a very small portion of your income in capital gains). I’ve suddenly lost the opportunity to have additional profits that are useful once the taxes take away a sizable portion of my gains. Further, the clever irony is that the money I used to invest in these equities is money which I received AFTER taxes were imposed. This means I’ve already paid taxes on the income. Now, I am going to pay much HIGHER taxes on the small gains I am able to make. Why should I even go to the extra trouble to 1) research various investments, 2) plan my investments, and 3) manage my accounts to make a reasonable return when the gains I used to count on to make it all worth while are now taxed to nearly nothing?

I’m fearful that the general population will fall victim to the demagogues who help them “feel good” about “being poor” since the “rich folks” will be punished with higher taxes on their gains. I’m pretty sure most people really have no idea what capital gains are. Therefore, they think, “Why not tax something I don’t have?”

I’m only one person. So, Barney Frank reading this would say, “Why should I care? It’s only one person. I’m concerned about the ‘fair’ [re]distribution of wealth to everyone!” Frankly (no pun intended), I really worked hard for my base income and I work hard for every bit of research in my capital investments. I know it’s my patriotic duty to support the Federal government. This I do. I don’t have to be happy with the way the taxes are spent (come on, why do we give money to any companies at all?). The reasonable amount of taxes (current rate of 15%) I pay on my investment income is really the only reason I can continue doing it – I am still not rich – yet. If my various sources of income keep disappearing in larger tax grabs, I am not sure if I ever will be rich.

At least I am happy to be an American!

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