My Life in Short Pants

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Apr 17

"Double Taxation"

A common refrain that you hear from people arguing against the increase (or mere existence) of a Capital Gains tax is that it constitutes “double taxation” - that money is taxed twice, once as income when it is earned, and again as investment gains after it is invested.

This argument is so absurd that it causes me actual physical pain to hear it.  Money that you earn is taxed at an income tax rate.  If  you choose to invest that money, it’s not taxed when you do so.  There’s no tax for transferring funds to E-Trade, or for buying stocks.

If you make MORE money on top of the money that you invested (the amount that was taxed when you earned it) the EXTRA MONEY that you made gets taxed at 15%.  The original money that you invested isn’t taxed again.  It’s not touched.  Only your EXTRA MONEY gets taxed.

EXTRA MONEY from investments is a lot like income.  It’s money you’re earning with your brilliant investment brain (or your brilliant financial-advisor-selecting brain), as opposed to your brilliant marketing brain or doctor hands or construction arms or dancing feet or whatever it is that you do for a living.

So the next time you hear someone complain about Capital Gains “double taxation” just ask them a simple question - “I’m sorry sir/ma’am, which dollars are being taxed twice, exactly?”

  1. abearfoot said: I’ve always heard of it in reference to dividends. Earnings taxed when made and then taxed again when distributed to shareholders.
  2. fullcredit said: Standing ovation.
  3. sweatshorts posted this