Tax Guru – Ker$tetter Letter

Helping real people win the tax game.

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Posted by taxguru on August 29, 2002

Stay In The Real World

This time of year, leading up to a big election, always causes a lot of confusion for people who fail to distinguish between the real world of actual tax laws and the fantasy world with scads of changes promised by our rulers and wannabe rulers.

Case in point: there is a lot of discussion about tax breaks for investors, such as making some dividend income tax free and increasing the capital loss deduction from the insanely low maximum of $3,000 per year to a higher amount, such as $20,000. Nobody is even mentioning the possibility of eliminating the ceiling on the deduction in order to make it consistent with the unlimited amount of capital gains that are taxable per year. That would be just too fair for our rulers to ever consider.

While these would all be great improvements in the tax system, it would be completely idiotic to modify your investment strategies based on these promises. There is very little chance of most of these changes making it through the liberal controlled Congress, who will portray them as just more tax breaks for the evil rich. Their Fellow Travelers in the media will echo those lies, as they always do.

Any changes that do survive and become real will most likely be watered down quite a bit. There is also the issue of the effective date of any change. Will it be retroactive to January 1, 2002 or will it only apply to sales after the law is enacted? There is no way to know because our rulers have never been consistent in regard to effective dates.

KMK

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