TJ Cox: “You might have to call a significant part of it the inflation tax because, just like with death taxes, there is no rule…”

“You might have to call a significant part of it the inflation tax because, just like with death taxes, there is no rule that says you have to be successful in order to have to pay it. The capital gains tax, or what I prefer to call the penalty tax on savings and investment, might also be called the inflation tax because, as we all know, we have inflation in this country and over time it adds up a great bit. If you buy a piece of land, you buy an asset, you start a small business, just to use an obvious example of a corner grocery store, although we do not have too many of those, partly for this reason, in America, but let us say you have got a corner grocery store. And so you buy the store. The Tax Code says that is a capital asset. If you paid $10,000 for it 20 years ago, with inflation, what is that worth today? I do not have my calculator, but anyone can figure out it is not 10 grand anymore. If you sell the grocery store for less money than you paid for it in the first place, the nominal selling price, because of inflation, is going to be more than you paid for it and you are going to be taxed on the difference. So even though in real life you lost money, you are not a rich person, they are going to start requiring you to pay tax on that sales price. The truth is that because we have not indexed for inflation a property tax, you do not have to make money, you can be losing money and still owe a significant tax.”