A breakdown of who is really paying taxes

[OohPooPahDoo]

According to statistics compiled from the Internal Revenue Service (IRS) by the Tax Foundation, those people making above $50,000 had an effective tax rate of 14.1 percent, and carried 93.3 percent of the total tax burden.

In contrast, Americans making less than $50,000 had an effective tax rate of 3.5 percent and their total share of the tax burden was just 6.7 percent.

Americans making more than $250,000 had an effective tax rate of 23.4 percent and their total share of the tax burden was 45.7 percent.

Out of the 143 million tax returns that were filed with the IRS in 2010, 58 million – or 41 percent – of those filers were non-payers.

In other words, only 85 million actually paid taxes.
Americans Making Over $50,000 a Year Paid 93.3 Percent of All Taxes in 2010 | CNSNews.com

This just in - 100% of cigarette taxes are paid by cigarette smokers!

 

[OohPooPahDoo]

This just in - 100% of gasoline taxes are paid by users of gasoline!

 

[OohPooPahDoo]

This just in - 100% of property taxes are paid by property owners!

 

[candycorn]

According to statistics compiled from the Internal Revenue Service (IRS) by the Tax Foundation, those people making above $50,000 had an effective tax rate of 14.1 percent, and carried 93.3 percent of the total tax burden.

In contrast, Americans making less than $50,000 had an effective tax rate of 3.5 percent and their total share of the tax burden was just 6.7 percent.

Americans making more than $250,000 had an effective tax rate of 23.4 percent and their total share of the tax burden was 45.7 percent.

Out of the 143 million tax returns that were filed with the IRS in 2010, 58 million – or 41 percent – of those filers were non-payers.

In other words, only 85 million actually paid taxes.
Americans Making Over $50,000 a Year Paid 93.3 Percent of All Taxes in 2010 | CNSNews.com

This just in - 100% of cigarette taxes are paid by cigarette smokers!

Woah...wait a second.

You mean to tell me that someone other than Mitt Romney has been paying taxes? I heard that only the uber wealthy pay taxes. They must be the only ones who smoke.

 

[JRK]

According to statistics compiled from the Internal Revenue Service (IRS) by the Tax Foundation, those people making above $50,000 had an effective tax rate of 14.1 percent, and carried 93.3 percent of the total tax burden.

In contrast, Americans making less than $50,000 had an effective tax rate of 3.5 percent and their total share of the tax burden was just 6.7 percent.

Americans making more than $250,000 had an effective tax rate of 23.4 percent and their total share of the tax burden was 45.7 percent.

Out of the 143 million tax returns that were filed with the IRS in 2010, 58 million – or 41 percent – of those filers were non-payers.

In other words, only 85 million actually paid taxes.
Americans Making Over $50,000 a Year Paid 93.3 Percent of All Taxes in 2010 | CNSNews.com

The income tax is "all taxes" ? Wow! So I guess I should be getting a refund for the $2,000 I paid in property taxes and the approx $5,000 I've paid in sales taxes, gasoline taxes, and vice taxes this year, right?

Got it!

That is state and local issues for the most part
Maybe the headline is not the best, but if you read into it, it becomes clear that its a federal tax issue
and I would not say just income as the IRS covers all taxes collected at the federal level that requires a form and to have that form submitted

 

[JRK]

According to statistics compiled from the Internal Revenue Service (IRS) by the Tax Foundation, those people making above $50,000 had an effective tax rate of 14.1 percent, and carried 93.3 percent of the total tax burden.

In contrast, Americans making less than $50,000 had an effective tax rate of 3.5 percent and their total share of the tax burden was just 6.7 percent.

Americans making more than $250,000 had an effective tax rate of 23.4 percent and their total share of the tax burden was 45.7 percent.

Out of the 143 million tax returns that were filed with the IRS in 2010, 58 million – or 41 percent – of those filers were non-payers.

In other words, only 85 million actually paid taxes.
Americans Making Over $50,000 a Year Paid 93.3 Percent of All Taxes in 2010 | CNSNews.com

This just in - 100% of cigarette taxes are paid by cigarette smokers!

Woah...wait a second.

You mean to tell me that someone other than Mitt Romney has been paying taxes? I heard that only the uber wealthy pay taxes. They must be the only ones who smoke.

Stop smoking
I at times am left in a place that I lack the words to move a debate forward
BHO has a full on war against the wealthy, the point of the article as i asses it is to show just how childish the class warfare game is

Your talking about adding the tax burden on people who for the most part are paying all of the taxes with a message that makes them out as "evil"

I am all for tax reform. I think every-one should be paying some tax, every-one
I Think a fair tax type system is out best path forward, as i understand it there is a poverty level in that idea that pays none
Having issues with your tax assessed on you home is a County and or Parrish issue

 

[JRK]

Another item here that we can use as a learning tool is just this.
Taxes on smokes, homes, fuel are no different than a corporation paying taxes.

You purchase there product, pay for there service, part of that payment will pay there tax.
BHO wants you to pay more and people who support that would also support the 46 cents you pay on a gallon of fuel going up 5-10%
no difference

 

[clevergirl]

Very deceptive use of language. First off, most married filers file joint returns, yet you use the term "people" to obscure that. Second, and more importantly, you use the term "taxes" instead of "income taxes". Even people making under $50K pay significant taxes. They'd include excise taxes on phone bills, tobacco, alcohol, tires, gasoline, etc..

Yes and if you included those taxes it would be divided evenly amongst the entire population and so be statistically a non starter~

By the way when Obama and the democrats discuss raising taxes they are discussing investment incomes and income taxes- those would not effect the 41% who pay no income taxes thereby increasing the burden on those who already carry the entire load!

 

[JRK]

Very deceptive use of language. First off, most married filers file joint returns, yet you use the term "people" to obscure that. Second, and more importantly, you use the term "taxes" instead of "income taxes". Even people making under $50K pay significant taxes. They'd include excise taxes on phone bills, tobacco, alcohol, tires, gasoline, etc..

Yes and if you included those taxes it would be divided evenly amongst the entire population and so be statistically a non starter~

By the way when Obama and the democrats discuss raising taxes they are discussing investment incomes and income taxes- those would not effect the 41% who pay no income taxes thereby increasing the burden on those who already carry the entire load!

another thing here, that is stupid, but true
You can ride a bus, that eliminates all of those taxes
Phones? well it is a choice
sin tax? same
Home ownership? same

Bottom line is that when you pay 46 cents of tax on a gallon fuel, you really paying 46 cents plus what ever Exxon needs to pay there taxes
Now I have really confused the Libs
When you rent an apartment, part of that rent is going to go to paying taxes

The consumer pays all taxes in some form
Raising corporate tax rates on those evil oil companies will only cause the consumer to bear the burden in some form, so the very thread I started has some "holes" in it

But how will the Liberal agree with me?
To say there sharing more of the burden than the thread states will also be agreeing that Exxon does not need a hike in the rate they pay with there "record" profits

 

[clevergirl]

Very deceptive use of language. First off, most married filers file joint returns, yet you use the term "people" to obscure that. Second, and more importantly, you use the term "taxes" instead of "income taxes". Even people making under $50K pay significant taxes. They'd include excise taxes on phone bills, tobacco, alcohol, tires, gasoline, etc..

Yes and if you included those taxes it would be divided evenly amongst the entire population and so be statistically a non starter~

By the way when Obama and the democrats discuss raising taxes they are discussing investment incomes and income taxes- those would not effect the 41% who pay no income taxes thereby increasing the burden on those who already carry the entire load!

another thing here, that is stupid, but true
You can ride a bus, that eliminates all of those taxes
Phones? well it is a choice
sin tax? same
Home ownership? same

Bottom line is that when you pay 46 cents of tax on a gallon fuel, you really paying 46 cents plus what ever Exxon needs to pay there taxes
Now I have really confused the Libs
When you rent an apartment, part of that rent is going to go to paying taxes

The consumer pays all taxes in some form
Raising corporate tax rates on those evil oil companies will only cause the consumer to bear the burden in some form, so the very thread I started has some "holes" in it

But how will the Liberal agree with me?
To say there sharing more of the burden than the thread states will also be agreeing that Exxon does not need a hike in the rate they pay with there "record" profits

I beg to differ on one point- Not all increased costs are passed on to the consumer- much is passed on to their employees-

1. decreased bonuses
2. higher healthcare coverage
3. fewer perks
4. more micro management (to save waste)
5. shed personnel = heavier workloads for those left
6. hiring freeze

 

[buckeye45_73]

I haven read this thread, but here is an answer. If you want to pay more taxes, just pay more. IF Alec Baldwin thinks the local arts jamboree is worthwhile, dont use the NEA, just dontate YOUR OWN cash, Alec.

 

[OohPooPahDoo]

According to statistics compiled from the Internal Revenue Service (IRS) by the Tax Foundation, those people making above $50,000 had an effective tax rate of 14.1 percent, and carried 93.3 percent of the total tax burden.

In contrast, Americans making less than $50,000 had an effective tax rate of 3.5 percent and their total share of the tax burden was just 6.7 percent.

Americans making more than $250,000 had an effective tax rate of 23.4 percent and their total share of the tax burden was 45.7 percent.

Out of the 143 million tax returns that were filed with the IRS in 2010, 58 million – or 41 percent – of those filers were non-payers.

In other words, only 85 million actually paid taxes.
Americans Making Over $50,000 a Year Paid 93.3 Percent of All Taxes in 2010 | CNSNews.com

This just in - 100% of cigarette taxes are paid by cigarette smokers!

Woah...wait a second.

You mean to tell me that someone other than Mitt Romney has been paying taxes? I heard that only the uber wealthy pay taxes. They must be the only ones who smoke.

The average pack of ciagarettes is taxed at a higher rate than Mitt Romney's income.

 

[OohPooPahDoo]

Maybe the headline is not the best

Its misleading is what it is.

 

[JRK]

Yes and if you included those taxes it would be divided evenly amongst the entire population and so be statistically a non starter~

By the way when Obama and the democrats discuss raising taxes they are discussing investment incomes and income taxes- those would not effect the 41% who pay no income taxes thereby increasing the burden on those who already carry the entire load!

another thing here, that is stupid, but true
You can ride a bus, that eliminates all of those taxes
Phones? well it is a choice
sin tax? same
Home ownership? same

Bottom line is that when you pay 46 cents of tax on a gallon fuel, you really paying 46 cents plus what ever Exxon needs to pay there taxes
Now I have really confused the Libs
When you rent an apartment, part of that rent is going to go to paying taxes

The consumer pays all taxes in some form
Raising corporate tax rates on those evil oil companies will only cause the consumer to bear the burden in some form, so the very thread I started has some "holes" in it

But how will the Liberal agree with me?
To say there sharing more of the burden than the thread states will also be agreeing that Exxon does not need a hike in the rate they pay with there "record" profits

I beg to differ on one point- Not all increased costs are passed on to the consumer- much is passed on to their employees-

1. decreased bonuses
2. higher healthcare coverage
3. fewer perks
4. more micro management (to save waste)
5. shed personnel = heavier workloads for those left
6. hiring freeze

You are 100% correct. As I said there passed on to the consumer, I guess I did not expans as my point as much as I should have
Bottom line is people pay taxes, corporations are a piece of paper

 

[OohPooPahDoo]

Another item here that we can use as a learning tool is just this.
Taxes on smokes, homes, fuel are no different than a corporation paying taxes.

You purchase there product, pay for there service, part of that payment will pay there tax.
BHO wants you to pay more and people who support that would also support the 46 cents you pay on a gallon of fuel going up 5-10%
no difference

Oh of course. If its a tax on stuff poor folks buy - well then they aren't really paying it, is the corporations paying it. But if its a tax on rich folks - well then they're the ones paying it. How convenient for your argument.


BTW, would you prefer our highways crumble to bits instead of paying higher gas taxes - or should we just expect them to be built using money from a magical money tree? The gasoline tax is one the fairest taxes there is. It funds highways and its paid by the folks that use the highways - don't see how you coulld get fairer than that. Would you prefer it come out of income tax revenue and hence have the burden placed disproportionately ont he wealthy? But of course, we know the truth - the right is against ALL taxes.

 

[edthecynic]

another thing here, that is stupid, but true
You can ride a bus, that eliminates all of those taxes
Phones? well it is a choice
sin tax? same
Home ownership? same

Bottom line is that when you pay 46 cents of tax on a gallon fuel, you really paying 46 cents plus what ever Exxon needs to pay there taxes
Now I have really confused the Libs
When you rent an apartment, part of that rent is going to go to paying taxes

The consumer pays all taxes in some form
Raising corporate tax rates on those evil oil companies will only cause the consumer to bear the burden in some form, so the very thread I started has some "holes" in it

But how will the Liberal agree with me?
To say there sharing more of the burden than the thread states will also be agreeing that Exxon does not need a hike in the rate they pay with there "record" profits

I beg to differ on one point- Not all increased costs are passed on to the consumer- much is passed on to their employees-

1. decreased bonuses
2. higher healthcare coverage
3. fewer perks
4. more micro management (to save waste)
5. shed personnel = heavier workloads for those left
6. hiring freeze

You are 100% correct. As I said there passed on to the consumer, I guess I did not expans as my point as much as I should have
Bottom line is people pay taxes, corporations are a piece of paper

"Corporations are people, my friend."
-Mitt Romney

 

[BlindBoo]

Very deceptive use of language. First off, most married filers file joint returns, yet you use the term "people" to obscure that. Second, and more importantly, you use the term "taxes" instead of "income taxes". Even people making under $50K pay significant taxes. They'd include excise taxes on phone bills, tobacco, alcohol, tires, gasoline, etc..

listen retard.. it was clear he was talking about FEDERAL INCOME TAX.. and if you're too damn poor to pay taxes you should not be buying tobacco and alcohol,, why should the taxpayers subsidize you're nasty addictions?

According to statistics compiled from the Internal Revenue Service (IRS) by the Tax Foundation, those people making above $50,000 had an effective tax rate of 14.1 percent, and carried 93.3 percent of the total tax burden.

In contrast, Americans making less than $50,000 had an effective tax rate of 3.5 percent and their total share of the tax burden was just 6.7 percent.

Americans making more than $250,000 had an effective tax rate of 23.4 percent and their total share of the tax burden was 45.7 percent.

Out of the 143 million tax returns that were filed with the IRS in 2010, 58 million – or 41 percent – of those filers were non-payers.

In other words, only 85 million actually paid taxes.
Americans Making Over $50,000 a Year Paid 93.3 Percent of All Taxes in 2010 | CNSNews.com

Again, that is only the taxes on wage earners. Capital gains tycoons can make millions each year and pay nothing on that income. Their cap gains are like an unlimited IRA growing tax free with no early withdrawal penalty. When they do finally cash in their capital assets they get a lower tax rate, but they still are not satisfied. They want their puppets in the GOP to eliminate ALL taxes on cap gains, the greedy fucks!

No one is denying that the common wage earners pay nearly all the taxes, but its not fair that the elitist Capital Gains Tycoons get a free ride.

Do what?
1) its not your money
2) it is not your money
3) it is not your money

Do you libs understand that? do you also understand that taxes are paid on capital gains? do you also understand that most of that wealth has been taxed once?
and before you claim thats not true, I trade stocks with money I earned from my job

Free ride?

Capital gains tax in the United States - Wikipedia, the free encyclopedia

JRK earns the welath by working 10 hours a day
Pays taxes on that wealth
JRK puts part of whats left at risk by buying stocks in an American company that will us that wealth to expand there product, to create wealth and jobs for others
JRK makes gains on that wealth he put at risk (sometimes)
JRK pays taxes on that welath that you my friend at no time lifted one finger to help, and now you call me greedy and you want more

THATS NUTS

Nutz.

Again. Short term capital gains are taxed at the normal income rate. Long term capital gain are taxed at 15% or lower depending on your bracket.

The Gains are not the wealth use for investment. They(the gain or loss) would be the difference between the price you paid for the stock and the price you sold it for. If that number is positive you pay taxes on it. If it's a negative you can take the loss (of wealth) as a deduction from your gross income.

I hope that clears up the whole idea that capital gains tax somehow taxes your wealth twice.

 

[JRK]

I beg to differ on one point- Not all increased costs are passed on to the consumer- much is passed on to their employees-

1. decreased bonuses
2. higher healthcare coverage
3. fewer perks
4. more micro management (to save waste)
5. shed personnel = heavier workloads for those left
6. hiring freeze

You are 100% correct. As I said there passed on to the consumer, I guess I did not expans as my point as much as I should have
Bottom line is people pay taxes, corporations are a piece of paper

"Corporations are people, my friend."
-Mitt Romney

He is right
You harm the corporation, you harm the person
People pay taxes, not corporations
A corporation is a piece of paper, the corporation is made up of people
Obama talks about the paper, when in fact his policies will harm the person

 

[BlindBoo]

From Hans Blix, UN insoector
Jan 27 2003
Update 27 January 2003

Iraq has declared that it only produced VX on a pilot scale, just a few tonnes and that the quality was poor and the product unstable. Consequently, it was said, that the agent was never weaponised. Iraq said that the small quantity of agent remaining after the Gulf War was unilaterally destroyed in the summer of 1991.

UNMOVIC, however, has information that conflicts with this account. There are indications that Iraq had worked on the problem of purity and stabilization and that more had been achieved than has been declared. Indeed, even one of the documents provided by Iraq indicates that the purity of the agent, at least in laboratory production, was higher than declared.
There are also indications that the agent was weaponised. In addition, there are questions to be answered concerning the fate of the VX precursor chemicals, which Iraq states were lost during bombing in the Gulf War or were unilaterally destroyed by Iraq.
I would now like to turn to the so-called “Air Force document” that I have discussed with the Council before. This document was originally found by an UNSCOM inspector in a safe in Iraqi Air Force Headquarters in 1998 and taken from her by Iraqi minders. It gives an account of the expenditure of bombs, including chemical bombs, by Iraq in the Iraq-Iran War. I am encouraged by the fact that Iraq has now provided this document to UNMOVIC.
The document indicates that 13,000 chemical bombs were dropped by the Iraqi Air Force between 1983 and 1988, while Iraq has declared that 19,500 bombs were consumed during this period. Thus, there is a discrepancy of 6,500 bombs. The amount of chemical agent in these bombs would be in the order of about 1,000 tonnes. In the absence of evidence to the contrary, we must assume that these quantities are now unaccounted for. The discovery of a number of 122 mm chemical rocket warheads in a bunker at a storage depot 170 km southwest of Baghdad was much publicized. This was a relatively new bunker and therefore the rockets must have been moved there in the past few years, at a time when Iraq should not have had such munitions. The investigation of these rockets is still proceeding. Iraq states that they were overlooked from 1991 from a batch of some 2,000 that were stored there during the Gulf War. This could be the case. They could also be the tip of a submerged iceberg. The discovery of a few rockets does not resolve but rather points to the issue of several thousands of chemical rockets that are unaccounted for.
The finding of the rockets shows that Iraq needs to make more effort to ensure that its declaration is currently accurate. During my recent discussions in Baghdad, Iraq declared that it would make new efforts in this regard and had set up a committee of investigation. Since then it has reported that it has found a further 4 chemical rockets at a storage depot in Al Taji.
I might further mention that inspectors have found at another site a laboratory quantity of thiodiglycol, a mustard gas precursor.
I have mentioned the issue of anthrax to the Council on previous occasions and I come back to it as it is an important one.
Iraq has declared that it produced about 8,500 litres of this biological warfare agent, which it states it unilaterally destroyed in the summer of 1991. Iraq has provided little evidence for this production and no convincing evidence for its destruction.
There are strong indications that Iraq produced more anthrax than it declared, and that at least some of this was retained after the declared destruction date. It might still exist. Either it should be found and be destroyed under UNMOVIC supervision or else convincing evidence should be produced to show that it was, indeed, destroyed in 1991.

Iraq also declared the recent import of chemicals used in propellants, test instrumentation and, guidance and control systems. These items may well be for proscribed purposes. That is yet to be determined. What is clear is that they were illegally brought into Iraq, that is, Iraq or some company in Iraq, circumvented the restrictions imposed by various resolutions.

No one denies St Ronnie gave his buddy Saddam chemical weapons in the 1980s, but by the time Bush invaded, those that weren't destroyed were so degraded they couldn't kill a flea. And Chem weapons do not produce ConDiLosers Twice's "Mushroom Cloud."

RR has what to do with Saddam becoming a mad-man?
you got proof of the weapons being supplied by RR?
Saddam was to destroy and document/witness
congress told GWB Oct of 02, if he don't use force to enforce the mandate
Blix comes out 12 weeks later and there you have it

Raygun took Iraq off the nations who support terrorist list. Thus allowing Saddam to import duel use technology from the USA and our allies. That's history.

After two devastaing wars it is quite likely that the small % of alleged missing weapons were either lost or destroyed.

(a) AUTHORIZATION- The President is authorized to use the Armed Forces of the United States as he determines to be necessary and appropriate in order to--

(1) defend the national security of the United States against the continuing threat posed by Iraq; and

(2) enforce all relevant United Nations Security Council resolutions regarding Iraq.

Without WMD and the mean to delevery them against the USA Saddam was not a threat. UNSCR 1441 was being enforce and the inspector Hans Blix had the power to reconvine the SC for further action if they were hampered in anyway in their work. They were not. The Bush Administration disregarded it's obligation to that resolution and its word to other member of the SC that it would seek an new UN Resolution before resorting to military force.

The only other reason Congress gave to the president was the power to use the military against any country that was involve with the 9-11 attacks.

 

[clevergirl]

listen retard.. it was clear he was talking about FEDERAL INCOME TAX.. and if you're too damn poor to pay taxes you should not be buying tobacco and alcohol,, why should the taxpayers subsidize you're nasty addictions?

Again, that is only the taxes on wage earners. Capital gains tycoons can make millions each year and pay nothing on that income. Their cap gains are like an unlimited IRA growing tax free with no early withdrawal penalty. When they do finally cash in their capital assets they get a lower tax rate, but they still are not satisfied. They want their puppets in the GOP to eliminate ALL taxes on cap gains, the greedy fucks!

No one is denying that the common wage earners pay nearly all the taxes, but its not fair that the elitist Capital Gains Tycoons get a free ride.

Do what?
1) its not your money
2) it is not your money
3) it is not your money

Do you libs understand that? do you also understand that taxes are paid on capital gains? do you also understand that most of that wealth has been taxed once?
and before you claim thats not true, I trade stocks with money I earned from my job

Free ride?

Capital gains tax in the United States - Wikipedia, the free encyclopedia

JRK earns the welath by working 10 hours a day
Pays taxes on that wealth
JRK puts part of whats left at risk by buying stocks in an American company that will us that wealth to expand there product, to create wealth and jobs for others
JRK makes gains on that wealth he put at risk (sometimes)
JRK pays taxes on that welath that you my friend at no time lifted one finger to help, and now you call me greedy and you want more

THATS NUTS

Nutz.

Again. Short term capital gains are taxed at the normal income rate. Long term capital gain are taxed at 15% or lower depending on your bracket.

The Gains are not the wealth use for investment. They(the gain or loss) would be the difference between the price you paid for the stock and the price you sold it for. If that number is positive you pay taxes on it. If it's a negative you can take the loss (of wealth) as a deduction from your gross income.

I hope that clears up the whole idea that capital gains tax somehow taxes your wealth twice.

Overtaxed Capital Gains

There are three ways to argue that capital gains are double taxed (or simply overtaxed). All three are real and cannot be denied by Democrats.

(1) All taxation of saving is a form of double taxation. This observation is nothing new to economists. For example, in 1848 the British philosopher and economist John Stuart Mill wrote: "Unless . . . savings are exempt from tax, the contributors are taxed twice on what they save, and only once on what they spend." Since then, economists have often said things like "income from saving is taxed twice." This is another way of saying an income tax is biased against saving -- a bias not shared by a consumption tax.

Source: IRS, Statistics of Income division, "The 400 Individual Income Tax Returns Reporting the Highest Adjusted Gross Incomes Each Year, 1992-2006," available at http://www.irs.gov/pub/irs-soi/06intop400.pdf.

(2) Profits giving rise to capital gain on equities have already been subject to corporate tax. There is no good economic justification for the corporate tax. It is unfair and inefficient to tax profits first with the corporate tax and then again with an individual tax either on dividends or capital gains.

Effective Tax Rates on Investment
(Real Rate of Return = 5%; Capital Gains Rate = 15%)

(3) Inflationary gains are not real income and should not be subject to tax. The relative stability of the price level over the past three decades has greatly reduced concerns about the highly detrimental effects of inflation on the operation of the income tax. But even at low levels, inflation overstates returns to capital. One manifestation of this problem is the taxation of inflationary gains as if they represented appreciation in real value.

(1) Tax on capital gain is deferred until gains are realized. Deferral of unrealized gain provides a tax benefit. The size of the benefit grows with the holding period and the rate of return on the asset.

How does the benefit of deferral compare with the extra burden caused by the taxation of inflationary gains? The combination of the two can put the effective tax rate on capital gains either above or below the statutory rate. Which effect is stronger depends on the level of inflation and the length of the deferral period. It is interesting to note that time usually heals the wounds of inflation. Over long holding periods (e.g., 25 years), the detrimental effects of inflation are almost always eliminated by deferral, so the effective rate of tax is below the statutory rate. (See the table above.)

(2) Unrealized gains are untaxed if assets are held until death. Except in the wacky tax year of 2010 (when the estate tax was temporarily repealed), heirs get a tax-free step-up in basis of inherited property. So unrealized gains that have accrued between the time of purchase and the time of death are free of individual tax (although they can be subject to the estate tax). Step-up in basis at death eliminates tax on both real and inflationary gains.

(3) Capital gains are taxed at 15 percent. This rate equals the 15 percent rate on dividends but is far below the top statutory rate of 35 percent. If the Bush tax cuts expire on schedule at the end of 2012, the capital gains rate will return to 20 percent. Also at the end of 2012, dividends will lose their special status and be treated like wages and interest -- subject to a top rate of 39.6 percent. On top of all that, the healthcare reform legislation enacted in March 2010 will impose a new Medicare tax on net investment income beginning in 2013 to the extent income exceeds $200,000 for single individuals or $250,000 for married couples filing jointly.

Table 2.pdf

(3) Inflationary gains are not real income and should not be subject to tax. The relative stability of the price level over the past three decades has greatly reduced concerns about the highly detrimental effects of inflation on the operation of the income tax. But even at low levels, inflation overstates returns to capital. One manifestation of this problem is the taxation of inflationary gains as if they represented appreciation in real value.