You have capital gains tax on it eventually, much of that capital gains is from inflation. The only way for it not to be a wealth tax is if capital gains is indexed to inflation.
Capital gains tax is just a % of your gains. So assuming the appreciation of your asset is due entirely to inflation, capital gains tax will be strictly less than the depreciation of the same amount of cash.
If it's a wealth tax, it is giving the best deal to the people with the most non-cash assets, i.e. the wealthy.
The asset has a nominal increase in value but not a real increase. After paying the capital gains tax you end up with less than what you had. In real terms your wealth has diminished. I think people are conflating a speculative asset bubble with inflation on the basis that they tend to occur at the same time and for the same reasons - easy monetary policy. But it does not necessarily follow that if you have inflation you also have a speculative asset bubble.
If we are talking about say a house, i think the poorer person who rents (and has rent increase with inflation) would be much more negatively affected over time, notwithstanding the extra capital gains tax the person who owns the house would have to pay upon sale.
I agree that it would increase inequality not decrease it like people would assume a wealth tax (inflation + capital gains tax) would do. The problem I see with the government having their revenue tied to wealth tax becomes incentivized to do things that will make the wealthy wealthier, like maintain a higher rate of inflation.
However, fixed inflation targets (with central bank using interest rates to control) are generally not that beneficial for that purpose, as the inflation is known ahead of time and would be priced in.
Inflating away your debt only works if you can increase the inflation to be more than what the person you borrowed from thought it would be.
Erm... no. That's how people imagine it's supposed to work, but in reality, the wealthy fund their consumption from loans using their wealth as collateral, enjoying the benefit of their wealth while avoiding capital gains taxes. Warren Buffet has famously criticized this, it's not some unheard of thing. There are many, many loopholes and they are very much there on purpose.
Certainly, I'm talking about the middle class that are not afforded such opportunities. The rich can not only often dodge such taxes but can benefit more easily from government largess.
some people are the people in question here. This discussion started as a conversation about a wealth tax and “capital gains” is mentioned. The wealthy largely do not pay a proportionate amount of this tax. Additionally, you will see “massive amounts” of anything in an economy as large as the united states. Capital gains tax is not a very big percentage of US taxes collected, and the taxes that are collected are mostly shouldered by people who are not wealthy. So, in the context of this discussion, I’m not sure what your point is. some people pay capital gains tax. My point wasn’t that no one does.
Capital gains tax is one of the more disgusting taxes. Most capital gains are simply due to the devaluation of the unit of account. The banks and government work hand-in-hand. The more money the banks print (as interest-chargeable loans), the more the government makes you pay in capital gains taxes. A win-win situation for them.
One way the wealthy get around this is by taking on debt against their hard assets - generally real estate.
As the price of their assets go up, they take out larger and larger loans, each time paying off the old loan and pocketing the difference tax free. The money is devalued faster than the interest rate, so even after paying interest, they are left with free money (our money), tax-free.
CPI is a useless metric. It doesn't take into that goods and services are going down in value over time (at around 5% per year), and doesn't include hard assets that retain their value such as housing. It's a trick.
> Also, capital gains are unearned.
On average, capital gains aren't gains at all. They are simply the price of your asset going up, not its value. Housing is a perfect example - it increases in price at the same rate at which the dollar is devalued through supply increase.
