[Marxism] A secret of modern accumulation: trends in net capital gains declared by individual income tax payers in the USA

Jurriaan Bendien bendien at tomaatnet.nl
Mon Mar 22 19:02:16 MST 2004

If you're interested in going beyond the conventional narrow GDP focus that
economists so often take in macroeconomic inquiries in the United States,
a useful source is: http://www.irs.gov/taxstats/article/0,,id=115033,00.html
which contains plenty additional information on aggregate income flows,
based on individual tax returns.

Capital gains were taxable in the United States since 1913.  But only
capital gains and losses realized through the actual sale of an asset, not
unrealized "paper" gains and losses in asset value, are recognized for
individual income tax purposes, nor is a taxable capital gain or loss
adjusted for inflation in tax assessment.

Capital losses are deductible in full against capital gains, but if the
investor has no capital gains, the deduction for capital losses were
traditionally limited to three thousand dollars per year. Capital gains held
until death are traditionally not taxed at all (although the asset is
subject to estate duty taxes, and these taxes were recently lowered).

Net capital gains for tax purposes are calculated by the Internal Revenue
Service of the federal government. Included are:

(1) capital gains realised from the actual sale of assets held by
individuals for personal use or for investment
(2) net gains realised from the actual sale of certain business property by
individuals treated as net capital gains
(3) "involuntary conversions" of property by individuals, such as due to
calamity or crime
(4) some capital gains received by individuals from partnerships and S
corporations, some personal royalties etc.
(5) certain capital gain-type dividend receipts by individuals.

The amazing thing is how the value of your property can just grow
without needing to do much to maintain it. All you need to do is be
the owner of it, really.

I have arranged some figures here: first, the grand total net
capital gain (NCG) per fiscal year of all individual income
tax payers in the US (current dollars), the calendar-year
average for the US consumer price index (CPI),
and the total adjusted gross income (AGI) for all US personal income
taxpayers, i.e. the total personal income for tax purposes used by the IRS
for tax assessment.

1980 NCG $32.7 billion CPI 82.4 AGI  $1,613.7 billion
1985 NCG $72.1  billion CPI 107.6 AGI    $2,305.9 billion
1990 NCG $123.8  billion CPI 130.7 AGI  $3,405.4 billion
1995 NCG $180.1 billion CPI 152.4 AGI    $4,189.3 billion
1997 NCG $355 billion CPI 160.5
1998 NCG $ 432 billion CPI 163.0
1999 NCG $552.6 billion CPI 166.6 AGI $5,855.4 billion
2000 NCG $644.3 billion CPI 172.2 AGI $6,365.3 billion
2001 NCG $348.1  billion  CPI 177.1 AGI   $6,170.6 billion

(Latest quarterly 2004 CPI figure available = 186.2)

The IRS doesn't have figures yet for 2003, you'd have to extrapolate them.
Using this table however, you can adjust the dollar figures for inflation,
and you can also calculate net gains as a percentage of total taxable
income. But, regrettably I cannot do this myself, because I have lost my
calculator somewhere and I am feeling woozy in the head. The inflation
adjustment is very important to understand the true proportion of the net
gain per year.

It's clear that legal title to an asset can lead to rapidly appreciating
incomes and valuations. Even so, these figures understate the true
situation since the net capital gains assessed refer only to actual sales
and not gains in potential asset value at current market sale prices.

The popsinger Alice Cooper (author of the song "I want to be elected")
put the salient point quite well: "I've got stuff [i.e. property owned] in
Hawaii, Arizona, California - things that don't go away. Everything I've
bought real-estate-wise has gone up about four times what I paid for it.
I've made more money in real estate than I have in rock 'n' roll."


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