Tags: Congressional | Tax | Delusions | Investors

Congressional Tax Delusions Costly for Investors

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Monday, 29 Jun 2015 08:03 AM Current | Bio | Archive

What should really count to investors is both their after tax return of principle and after tax return on principle.

Somehow in all the discussion and debate about the economy going on in the Congress, what seems lost is that Congress controls the biggest single cash cost of any individual or business — that is tax.

Congress and its dutiful minions who administer the tax law have created a whole Orwellian language just to describe illusions they hold in creating the taxes paid for by investors.

Take the word income for example. How do you define the word income?

For federal income tax purposes several income levels start with gross income. This is not to be confused with cash received. As even a mediocre tax return preparer can tell you, people must report many items which generate no cash but for tax are considered gross income.

And then items create phantom income. Say someone borrow a lot of money from a bank, spends it properly on making what turns out to be a loser of an investment. And cannot pay back the bank loan.

The bank realizes it will not collect, takes a write off of the bad debt (against its income), and forgives the loan. Congress says that for tax the hapless borrower who lost the money non-the-less has taxable gross income even though in reality there is no income.

It's what is called phantom income. It exists only in the fantasy of Congress and is tax henchman.

When the investors spend money, the Congress doesn't call these taxpayer expenditures.

No, they call them tax expenditures because by allowing a deduction against gross income it reduces the tax that will be collected. In the minds of Congress the investors are spending the government's money. That's where they come up with the idea that tax expenditures need to be offset somehow because the government needs to recoup this cost someplace.

How Congress does this is interesting. One thing they do is come up schemes to create the impression they are generous and giving the taxpayers a liberal break on taxes by allowing an expense to reduce the income that becomes taxable.

But that is just a mirage or apparition. What really happens is that the complex provisions of the tax law are structured so anybody who can afford to take the expense deduction is phased out, and only the people who can't afford to spend the money to generate the deduction in the first place may take it.

The thing of it is, the Congress thinks it is doing every investor a big favor. Not only are the investors being conned, but Congress cons itself.

Income is indefinable. Concepts like depreciation, amortization, substantial economic effect, cascading interest and all the rest are nothing more that theoretical concepts.

Congress operates its tax system under the belief that all the money investors receive by risking their hard earned capital is the government’s money.

But Congress doesn't take figment of the mind revenue for payment. No, it takes only hard cash.

What I can say is that the delusional tax system conjured up by Congressional is very costly for investors.

Congress has a mentality when it comes that is difficult to contemplate unless someone is similarly delusional.

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Kleinfeld
What should really count to investors is both their after tax return of principle and after tax return on principle.
Congressional, Tax, Delusions, Investors
543
2015-03-29
Monday, 29 Jun 2015 08:03 AM
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