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Thursday, March 10, 2011

Capital Gains Taxes And Property Rights

If you need to get permission from the State to use something, then you don't fully own it. You need a State permit to drive your care. Therefore, the State owns really owns your car. The State lets you sort of use your car like a partial owner.

Similarly, property taxes mean that you don't really own your home. You're leasing it from the government. You have limited rights to do what you want with your home. You may sell your lease to someone else. Due to property taxes, you don't really fully own your home.

If you need to get permission from the State to sell something, then you don't really own it. Via capital gains taxes, you need to get permission from the State whenever you sell your property.

In effect, the State has a prior lien against all your property. When you sell, you must pay a percentage of the profit to the State.

Inflation exacerbates the problem. Via inflation, you owe capital gains taxes, but that gain was merely compensation for inflation.

Suppose you buy gold for $1000/oz and sell two years later for $2000/oz. You have a capital gain of $1000/oz. With a 28% capital gain taxation rate, the State stole 14% of the value of your investment.

Did the value of an ounce of gold really change? Probably not. What really happened was that the dollar was devalued by 50%. If you believe "gold is money", then this is a definition. Even if you don't use that definition, the gold price should track true inflation.

Capital gains taxes on gold and silver are immoral and Unconstitutional. It's immoral, because you're taxed on a gain that only occurred due to inflation. It's Unconstitutional, because the Constitution says that only gold and silver should be used as money. Unfortunately, a judge would disagree with my conclusions. The moral argument is much more important than the legal argument.

Here's another example. You buy shares of stock in a corporation. There's a 5% dividend, the share price rises 20% but true inflation is 30%. Before taxes, you're already a loser compared to true inflation. You owe tax on the 5% dividend. You owe tax on the 20% gain when you sell.

Your broker will automatically report all transactions to the State. You're forced to pay capital gains taxes and dividend taxes. If you take physical delivery of gold or silver, and sell off-the-books for cash, then you can avoid capital gains taxes.

Via inflation, the State creates nominal capital gains. They aren't real gains. However, you owe tax when you sell. In effect, the State partially steals your property, via inflation and capital gains taxes. Even if your returns underperformed true inflation, you owe capital gains taxes when you sell.


Anonymous said...

A bit incorrect on cars. You don't own it, because you have to maintain registration records, even as a non-operational vehicle. Fail to do that, and your car is gone.

As for driving, (and btw, the state has no right to issue "privileges") the driving permit failure only concerns your ownership of a road, not that of a car itself.

Anonymous said...

The state does a lot of damage via high taxation.

Banks are just the same. They both act as giant sucking machines - sucking in all the money into them.

Then when all the money is sucked up, they gobble up the property and companies.

If it wasn't for high taxes, people would have more money and could spend that money inventing and creating small businesses and making the world a better place.

All taxes do is create non-jobs for clowns. They sit around in offices doing no work. They have high pensions. They take lots of sick leave. If they do overtime they get paid.

If you do overtime in the private sector you won't get paid.

It is all very good talking about the "services" government provides. But what good are services, when the government has done the ultimate wrong to you by taking your home away from you in order to pay a huge 40% inheritance tax bill. Having a roof over your head is the most vital thing.

But in order to give away free things to illegal immigrants and fund their lawyers, the government will take your house away from you.


Anonymous said...

Recently it was reported in the news, that immigrants from the European Union came to England and broke into a family's house. The family had to pay at their own expense to live elsewhere as their house was stolen from them.

Despite breaking and entering being a crime (most houses are locked) the police refused to do anything.

The man went to court to get his house back. But the court threw his case out on a technicality.

The government paid for a lawyer to represent the squatters. They were unemployed and so they qualified for free legal aid.

Essentially my house will be stolen from me by 40% taxes to fund the lawyer to help immigrant squatters criminally steal a house from another family, who in turn are paying taxes.

The winners here are the lawyers and the non-working immigrants from the European Union.

The situation has got totally absurd.

I'm sure if the man tried to throw the squatters out himself, the police will quickly turn up to arrest him.

But the police do nothing to stop squatters stealing the houses of hard working, tax paying UK citizens.

Do something David Cameron you useless man!

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