::  Posts  ::  RSS  ::  ◂◂RSS  ::  Contact

Capital Gains and Inflation

November 22nd, 2013
inflation, money  [html]
Dollars become worth less over time, but we don't adjust capital gains rates to take this into account. If you invested $1,000 fifteen years ago and cashed out yesterday at $1,433 you didn't actually make any money: inflation over this time period was 43%. [1] The IRS doesn't see it this way, however, because they don't adjust for inflation. To them you gained $433 and owe 15% of that as tax. The higher inflation is, the more imaginary gain the IRS sees, which means there's substantial pressure from people who make money from investments to keep inflation low.

This has been recognized as a problem for a while and the obvious fix would be to adjust for inflation. This seems like a reasonable solution, though it does worry me that we'd be giving the government an additional incentive to understate inflation. Capital gains taxes are ~4% of total federal revenue, or about $0.1T/year, so this seems like it might be enough to pressure the BLS.


[1] If you had invested in low-fee index funds you would have done better than this, ending up with $1,927. That's a 2% annual return after inflation.

Comment via: google plus, facebook

Recent posts on blogs I like:

I’m Giving a Talk About Construction Costs Tomorrow

By popular demand, I’m giving the talk I gave 2 weeks ago at NYU, again. The database will be revised slightly to include more examples (like Ukraine, which I added between when I gave the talk and when I blogged about it), and I may switch around a few t…

via Pedestrian Observations December 2, 2019

Your room can be as bright as the outdoors

The effect was huge: I became dramatically more productive between 3:30pm and whenever I turned off the light. I estimate the lamp bought me between half an hour and two hours a day, depending on how overcast it was.

via benkuhn.net November 26, 2019

git-subtrac: all your git submodules in one place

Long ago, I wrote git-subtree to work around some of my annoyances with git submodules. I've learned a lot since then, and the development ecosystem has improved a lot (shell scripts are no longer the best way to manipulate git repos? Whoa!). Thus, I …

via apenwarr November 24, 2019

more     (via openring)

More Posts:


  ::  Posts  ::  RSS  ::  ◂◂RSS  ::  Contact