
Russia Getting Rid of Capital Gains Tax  - cwan
http://news.bbc.co.uk/2/hi/business/10349679.stm
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johnwatson11218
I want to repeat a point that I read in one of Jim Roger's books. He was in
favor of repealing all capital gains taxes simply to allow individuals an
option in the fight against inflation. The example is of a person who has
enough cash for 100 cheeseburgers. They decide to put that money in something
like gold. The government prints lots of money causing inflation and the
nominal value of the gold is now much higher. If the investor sells the gold
he still has enough money to buy 100 cheeseburgers. However the government
will say that he has a net capital gain and must pay tax. Jim Roger's point
was that without capital gains tax people could put their money into any form
that they thought would preserve their wealth better than fiat currency. With
capital gains we all become speculators trying to beat inflation and still
realize a net profit after taxes.

~~~
lowkey
I get the point, and agree with it somewhat. However, this truly seems like a
perfect example of treating the symptom while ignoring the cause.

Since this is all theoretical, wouldn't it make more sense to just stop
governments from stealing the wealth of the people through the hidden
'inflation tax?'

~~~
goodside
Vague complaints about "inflation tax" do not contribute anything constructive
to monetary policy discussions. No one disputes that excessive inflation is a
regressive and unsustainable tax. Currency collapse is almost always caused
by, or at least mediated through, governments using inflation to pay debt (or,
more accurately, to partially default on debt). Preventing this is the primary
reason modern central banking exists. Even those opposed to this solution
still support its goal; the "End the Fed" movement wants less inflation, not
more.

Nobody--whether left, right, liberal, or fascist--thinks inflation is a good
way to finance government. The only disputes are how to prevent it from doing
so, as those in office have constant incentive to favor short-term stimulus
over long-term stability, and how to balance such restraints against other
goals like preventing deflationary shocks and making monetary inflation
reflect growth in the real economy.

Suggesting we stop taxing with inflation instead of minimizing its drawbacks
is no more helpful than saying, "We should start preventing murders instead of
building prisons," or, "Let's reduce the violence in Afghanistan instead of
endangering more of our soldiers."

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RockyMcNuts
If you invest in a kleptocracy, capital gains tax is the least of your
worries.

If you don't kowtow to the right people, murky authorities seize your business
on trumped up tax charges, and anyone who fights dies mysteriously in jail.

[http://dealbook.blogs.nytimes.com/2009/11/18/hermitage-
capit...](http://dealbook.blogs.nytimes.com/2009/11/18/hermitage-capital-
lawyer-dies-in-russian-jail/?scp=1&sq=hermitage&st=cse)

~~~
dennisgorelik
No capital gain taxes is important for internal Russian businesses. It would
boost Russian economy.

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endtime
Not sure this is hacker news, but if it is, could we skip the blogspam and
link straight to the article
(<http://news.bbc.co.uk/2/hi/business/10349679.stm>)? The blog post doesn't
add any value.

~~~
boucher
It does embed that absolutely hilarious Cato Institute video.

~~~
chasingsparks
Center for Freedom and Prosperity is not Cato; it is not a Cato Institute
video.

~~~
boucher
The person speaking in the video identifies himself as an employee of the Cato
Institute, it's not hard to imagine why I made the mistake. Not to mention the
fact that half of the board of directors (and some of the listed experts) of
the Center for Freedom and Prosperity work for or have worked for the Cato
Institute.

In any case, you are correct, the video was created by the Center for Freedom
and Prosperity, and I apologize for the error.

------
rms
It's not enough to get me to do business in a country lacking rule of law.
While I respect the functioning of the Chinese economy, I also wouldn't start
a business there for the same reason. Usually I am comfortable with risk, but
shakedown by government under threat of extreme lack of liberty, torture, or
death is a risk that really messes with my expected value calculations.

~~~
fgf
It's misleading to compare china to russia like this[1], commercial law in
general (IP rights being an exception) is paid more respected in China than in
Russia. As a businessman in the former you don't face the risk of "shakedown
by government under threat of extreme lack of liberty, torture, or death" in
Russia the risk to both your property (apart from IP) and personal safety is
considerably larger (and less predictable).

[1][http://books.google.com/books?id=YlKYLRjcoi0C&pg=PA39...](http://books.google.com/books?id=YlKYLRjcoi0C&pg=PA39&dq=%22Rule+of+law+in+Asia%22&ei=hcIASqy4KKGeygSpzf2vDQ#v=onepage&q=%22Rule%20of%20law%20in%20Asia%22&f=false)

~~~
rms
I'm aware that China is safer to business people than Russia, but I still do
not trust the CCP enough to do business with them. Look at what happened with
Google.

~~~
borism
what happened with Google? They left themselves AFAIK?

~~~
fgf
You're right, "what happened to google" was neither unpredictable nor
unavoidable. The decision to stop cooperating with the CCP was commendable
(and probably good for the shareholders too) but they were not _forced_ out.

------
Ratufa
Since, as the blogger put it, "The former communists running Russia apparently
understand tax policy better than the buffoons in charge of U.S. tax policy.",
he must be in favor of the US having a VAT, like Russia does.

~~~
petercooper
I'm not accusing you of this, but a common misconception I've seen from
Americans is that VAT is "yet another tax." It's (usually) not. In California,
I was paying 8.25% sales tax (and this can go up to 10.75% with some local
sales taxes added) and in the UK I pay 17.5% but there are _no_ sales taxes,
and certainly not any "local" ones I need to be aware of. A can of coke that
costs 60p in London costs 60p in Edinburgh too.

~~~
jerf
Most Americans who are A: informed enough to know about VATs and B: against
their introduction here are concerned that it _would_ be instituted as just
another tax here. Resistance would be lessened if there was a credible promise
to simplify the rest of the tax code (not eliminated, but lessened), but I
don't know who has the moral authority to make such a promise right now,
whereas I have a pretty clear idea who has the legal authority to institute a
VAT. The motivation for it being discussed in the US is not for it to be a
revenue-neutral modification to our tax code.

~~~
yummyfajitas
An additional problem with VAT is that it is mostly transparent to the people
being taxed.

If you raise my taxes with VAT, I'll notice prices of assorted goods going up
slightly, be too lazy to add up the various cost increases. If you raise my
income taxes, I'll immediately notice that I'm $2000 poorer than I was before,
and maybe I'll vote for the other guy.

~~~
jerf
Your argument is what I was thinking of when I said "not eliminated, but
lessened". I'm against it for that reason too, but I am pretty sure many
people are resisting simply because it would be a tax increase.

I also think that the stealth nature of the tax is the actual reason it is
being discussed, but I figured that was getting political, and what I posted
was fairly defensible on (relatively) objective grounds.

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mcritz
Interesting article. I guess the author wants America's economy to be as sound
as Russia's?

~~~
fgf
High taxes does not make an economy sound; a sound economy economy makes high
taxes possible.

------
muhfuhkuh
Spurring investment in a country whose economy subsists almost solely on oil
and coal controlled by former soviet Politburo officials and their hanger-on
thugs, who then "nationalize" and otherwise stifle outside competition. Then
they all hole up in their high-rise Onion domes in Moscow while the rest of
the country fights for the scraps in an all-grey market economy.

Sounds like a sound business plan to me. Where do I sign?

------
lsc
note, cutting capital gains only helps you when you sell (or when you are
getting investment on the promise you will pump up the company and sell.

for those of us who plan on holding, lowering capital gains does not help. i
have to pay income tax on all my income, like any other working schlub.

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chasingsparks
I'm curious, do many people here subscribe to Dan's blog? He was formerly my
boss.

~~~
rortian
No, but I am curious, what is this guy like in person?

~~~
chasingsparks
Equally sarcastic and condescending, but far more nuanced. It's a requirement
of people who work for think tanks or politically motivated organizations --
on both sides of the isle -- to over-simplify. For people who study politics,
economics, or whatever, it's infuriating. At the same time, you almost can't
expect anything else; democracy is a game where you win when you have the most
(marginal) voters. You enlist them easier through anger than rationality;
Rationality requires work on behalf of voters.

~~~
rortian
Haha, thanks for that. I'd like more about the person, but I appreciate the
rational of his ridiculous tv persona.

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xenophanes
Breaking News!! Protests break out by people who sold investments yesterday!!

(Just kidding. The value gain to existing investments from this new law will
only cause a small immediate jump in prices, and the rest will ramp up
gradually over the days before the change goes into effect.)

~~~
stretchwithme
wouldn't it make more sense, assuming they are trying to incentivize
investment, for this change to apply to investments made after the change
takes effect?

~~~
cma
Big assumption. The motivations are probably more akin to the US's 1998
_retroactive_ copyright term-length extension.

