Taxing of Capital Income

Dear Fair Taxers

I read with some interest the discussion on the Tax Policy Center web
page about the taxing of "Capital Income", the link to this being
posted by Mr. Jim Schutt. This is an interesting topic and something
that I think may warrant some discussion here.

By Capital Income, I take it to mean Capital Gains. In real estate,
capital gains are those gains that may or may not be realized after
one holds a property for several years and sells it. The Capital Gain
is the difference between the selling price and the purchase price of
the property. It is also known as appreciation. I suppose in the
world of corporations, this equates to profit, or return on
investment. For the purposes of this discussion, I will limit myself
to the real estate side, because that is what I am most familiar with.

Somewhere during the history of the income tax, our government
representatives decided that capital gains on real estate should be
considered as income and should be taxed accordingly. While I don't
know the exact history of this, it most likely occurred during an
administration where there were huge deficits being run up, and
another source of revenue had to be had to offset the excess spending.

At face value, if one believes that the taxing of income is a
legitimate thing for the Federal Government to do, it appears that
this is a reasonable idea, the taxing of Capital Gains. However, one
must question why there was appreciation on the property in the first
place. It's all a matter of semantics, or what words that one uses.
The words; capital gains, appreciation and inflation are closely
related. Excess government spending causes inflation, so the idea of
taxing inflation is a bit like a penalty for trying to be frugal in
protecting the value of money that you previously earned and for
which tax was paid (tax on top of tax).

It's also a tax on the economy, because these gains are going to be
plowed back into the system in one form or another. Taking the
inflated dollars out of the economy serves no purpose except to
justify the excessive government spending. Now, I admit that I am no
economist. My background is in the field of Architecture, which makes
me somewhat of a pragmatist. As such, none of this income tax
Architecture makes a lick of sense to me.

Forgive me for being so long winded here, but this issue is another
one of my income tax pet peeves, and just another reason why I
support the FairTax.

Best Regards,

Robert Nathan