no third solution

Blogging about liberty, anarchy, economics and politics

Category Archives: Taxation is Theft

A Baseball = Income

August 9th, 2007

…As defined, apparently, by the fucking thieves at the Internal Revenu Service:

Even if he does not sell the ball, [Matt] Murphy [who caught Barry Bonds’ record-breaking 756th homerun ball] would still owe the taxes based on a reasonable estimate of its value, according to John Barrie, a tax lawyer with Bryan Cave LLP in New York. Capital gains taxes also could be levied in the future as the ball gains value, he said.

This would probably be a bad time to mention the various sports memorabilia of meager value, which I possess, lest Barry Sanders make an Odyssean return to the NFL only to shatter even more records. But a baseball is not income, and no reasonable person could ever come to such an asinine conclusion. Only the bastards at the IRS could even make the argument with a straight face. It would almost be funny if it weren’t true.

What will happen? Well, if he’s forced to pay “income tax” on the baseball that he essentially found, he’ll probably be forced to sell the ball – unless he has $150k socked away in the bank, with which he’s willing to part for the keepsake of a stupid horsehide. The choice between { -$150,000 + 1 baseball arguably worth $500,000 } and { $350,000 } is anything but a marginal one, especially if you don’t have $150k in the bank. Now, if they want to call it capital gains, that’s arguably less bad than trying to pretend that a baseball is income. At least he wouldn’t have to cough up any money unless he decided to sell it.

But I’m willing to bet that he doesn’t have the money, and that furthermore, even if he did, he’d rather not piss it away just to keep something he essentially already owns. Instead, some asshat with half a million dollars that has already been taxed will pay him for the ball, and he’ll give his slice to the stationary bandit, and walk off quite a bit wealthier – except for the fact that he’s been forced to sell an heirloom, a one-of-a-kind collectible, simply because he was unlucky enough to come out of the scrum with it in his hand.

If you’re listenting, IRS, that doesn’t get you off the hook. There are plenty of reasonable arguments against taxes on capital gains, too. Like this one.

What Went Wrong circa 1920?

August 2nd, 2007

A thought occurred to me while reading through Bruce Bartlett’s opinion in the WSJ ($$$) today, where he makes a forceful argument that capital gains are not income in-fact. Bartlett cites a number of cases where the capital gains quâ income argument was challenged, including Gray v. Darlington, Lynch v. Turrish, Eisner v. Macomber, and Brewster v. Walsh, where the decision included this morsel: “The sale of capital results only in changing its form, and, like the mere issue of a stock dividend, makes the recipient no richer than before.”

The argument goes basically like this: Since the future income stream from a capital asset, such as a bond, is the very essence of its value, the two cannot effectively be separated. When you purchase a bond, you don’t acquire an income, you acquire an asset. (I’d say it’s an asset simply because you’ve exchanged value to obtain it.) The future income in the form of coupon payments merely represents the conversion of that asset back to cash, like ice melts into water. Of course, modern jurisprudence says otherwise:

Unfortunately, the Supreme Court eventually came around to the IRS view and reversed itself in Merchants Loan and Trust v. Smietanka (1921). Capital gains have been taxed by the federal government ever since.

…Which brings me roundabout to the thought that occurred to me – well, it’s more of a question, really. At least, to me it seems like everything was plugging along rather nicely (the first world war notwithstanding) right on up until about 1920, give or take a few years, when all of a sudden, the shit hit the fan, pretty much across the board: the creation of the Federal Reserve, landmark Anti-trust decisions, the imposition of the income tax, women’s suffrage, prohibition, &c.

What was particular to this era that caused such a shitstorm of policy?

+++

Previous post on John Edwards’ plan to destroy the middle class via capital gains taxation, here.

John Edwards: Destroyer of the Middle Class

July 27th, 2007

Look at this smug sonofabitch, John Edwards. He has all the answers.

First thing first: Is there something about the WSJ’s faux-woodcarving that makes him look even more like a total asshole?

Democratic presidential candidate John Edwards said he would raise the capital gains tax rate to 28% from 15% and boost income taxes on those making more than $200,000 a year in order to finance tax cuts and other benefits for middle- and lower-income families…

Mr. Edwards’ remedies include a series of tax credits and savings incentives to help lower-income families generate wealth, including a dollar-for-dollar government match — up to $500 a year — for families with incomes of as much as $75,000 who use the money for such things as college, a home or retirement.

Let’s set the record straight: If you are spending money, and the government is simply giving you all (up to $500) or part of it back, no wealth has been “generated.” Wealth can only truly be generated by deferred consumption. Best-case scenario: Edwards’ program is simply a wealth transfer., because Government can only give you money that it either A) stole from someone else, thereby impoverishing that person or B) printed out of thin air, thereby impoverishing everyone else, to your benefit. Under no circumstances is this sort of program a wealth creator. Forty-five years of entitlements have done nothing but encourage stagnation and segregation, destroying wealth, opportunity, and communities in the process. There is no reason to believe Edwards’ programs will be any different.

It is also important to remember that there is no such thing as a neutral tax. So as a rule, if taxes are to be levied, they ought to be levied on things that are not desireable. Corporate taxes force companies to outsource. It’s a burden borne overwhelmingly by labor – the same labor that comprises the middle class to which Edwards panders. I’m not sure what world he lives in, but it’s apparently a world where employment, and the appreciation of one’s assets and investments constitutes a crime. Not to mention the oft repeated (and apparently more often ignored) mantra that a capital gains tax is in-fact double taxation. EPS are distributed after Uncle Sam has stuck his hands in the corporate cookie jar. Thus, the money that any individual receives in this form have already been taxed at an often onerous corporate rate.

But, Edwards wants to double the capital gains tax in order to help the middle class? The same middle class that is an enormous holder of securities through various pension funds and 401(k) accounts? The same middle class that would be decimated by a doubling of the tax levied on the sale of real property? If it’s not bad enough that Social Security will not be around for any of us, Edwards wants to proscribe the only methods by which an individual can privately try and secure his future or his legacy! What the fuck is he thinking?

Mr Edwards, this is as anti-middle-class as it gets. Your rhetoric is as fake as your plastic smile, you fucking hate the middle class, and I’m not falling for it.

no third solution

Blogging about liberty, anarchy, economics and politics