Block · one region of the page, as the scanner read it. It may hold a whole story, part of one, several, or an advertisement; stitching blocks into articles is the next step. Text is supplied OCR.
Page 4 · column 1 of 6 · from the scan, no model involved
By B.R. MCCONNON
Rappahannock News Contributing Writer
In Washington, Congress is currently considering capital gains legislation that has serious implications for Virginia’s taxpayers. The present system for assessing capital gains taxes at the federal level is seriously flawed. But for Virginia’s taxpayers, the nightmare doesn’t just end there.
One of the fundamental problems in the capital gains system is the way it treats gains caused by inflation. As it stands now, the government taxes all gains, even those that simply keep pace with inflation. This can lead to a perverse situation in which an individual may have to pay taxes on an investment that actually lost money.
The Commonwealth of Virginia uses the federal government’s figure for taxable income to assess state taxes. That means that for Virginians, the injustice that begins at the federal level is then magnified at the state level.
For example, suppose someone invests $2,000 in stocks, holds them for five years, then sells them for $2,500. It would appear that the investor has made a $500 profit, which is added to his federal taxable income. Virginia then uses the federal income figure and taxes the gain at a maximum rate of 5.75 percent.
After the state takes $28.75, the federal government exacts $131.95 in capital gains taxes, if the investor is in the 28 percent tax bracket. This practice means that the total amount of taxes paid on the “profit” would equal $160.70. This number may seem high already, but the picture grows even darker when one considers the effects of inflation.
Since the investment was held for five years, inflation has made it appear to have gained more value than it actually has. In fact, if inflation has averaged 4 percent each year, the actual value has only risen
91.6%