Why Would The IRS Folks Have A Tax That Loses Them Money?

Because it's not about the revenue.

by Richard Rahn
September 1, 2016

Would you be in favor of a tax that loses money for the government, and penalizes entrepreneurship, job creation, and economic growth?

Only muddy-brained or mean-spirited people would favor such a tax — yet many such people are found in the Internal Revenue Service and Congress. The tax that I am referring to is the capital gains tax, and even more specifically, the capital gains tax as it is applied to the sale of commodities.

A capital gains tax liability occurs when you sell an asset for more than you paid for it. The asset could be stocks, bonds, real estate, art, or gold and other commodities.

There are many problems with the capital gains tax, and one of them is that it taxes inflation (which is a change in the price level caused by government monetary authorities) rather than income.

Assume that in 1989 you bought a small Florida orange grove for $120,000, and this year you sold it for $180,000 (after maintaining it and replacing old or damaged trees…