76-09-A2

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Capital Gains

Transcript It's hard to get a great many people excited about the capital gains tax. Because of that fact, politicians aren't inclined to do anything about it except possibly increase it, which they've just done. A capital gain is what happens when someone sells something of value for more than he paid for it. Government says a profit has been made and such prof it must be taxed. That sounds fair enough, and since such capital transaction most often involve people with enough means to make investments in real estate, stocks, bonds, and so forth, it's easy to see why there isn't widespread concern among the general public. But what about that once in a lifetime windfall? Take the small struggling farmer who finds himself and his farm in the path of progress. His scrubby acres become real estate -- quote/unquote -- and after years of scraping along he sells for a price that puts him on easy street - or did until government claimed its share. Now an argument can be made as to whether there should be such a tax at all. Indeed in many countries far less free than ours there is no such tax. In 1942 the executive committee of the American Federation of Labor (believe it or not) angrily demanded of President Roosevelt that the capital gains tax be cancelled. And they spoke truly when they said, in support of their demand, that such a tax reduced the investment in industry needed to provide workers with jobs. Those really were the good old days. Today, the A.F.L.-C.I.O. is the most powerful force urging a higher capital gains tax. Walter Reuther has left this vale of tears, but it would seem his influence lingers on. I remember a night when George Meany sat in our living room talking of the struggle for power in the newly merged labor organization. He said Reuther openly advocated socialist measures in the executive committee meetings. One of his goals was to reshape one of our two major political parties in the image of the Labor-Socialist party of England. Meany at the time led the opposition to such a course. But, I'm not going to argue whether or not we should have a capital gains tax. I'll save that for another time. Right now we have the tax and I'd like to point out an unfairness in it that literally puts our government in the position of stealing from its own citizens. We have and have had for many years a continuing inflation which reduces the value of our dollar by several cents each year. This is not provided for in government taxing policies. Suppose you are that struggling farmer I mentioned or you invested in some real estate, or stock or whatever -- say ten years ago. You sell and you actually get double what you invested then. The government says half of what you get is profit and it takes upward of a third of that supposed profit. But today's dollar is only worth 40¢ compared to the dollar you invested ten years ago. So, you didn't double your money. You got twice the number of dollars, but you actually lost 20% on the sale -- before the government took its bite. You got back $20.00 for every $1.00 invested, but the $2.00 today is only equal to 80¢ in the money you spent ten years ago. Simple honesty dictates that government should compute capital transactions in constant dollars to see if there actually was a profit and if so how much to tax accordingly. That's called "Indexing" and it's overdue. This is Ronald Reagan. Thanks for listening.		Details Batch Number 76-09-A2 Production Date 01/19/1977 Book/Page RPtV-113 Audio Youtube? No
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