Lessons In Incompetence

I don't intend to focus too much on the tax problems in the PRC; but since the rulers in Sacramento have dug themselves the biggest financial hole in the country, they are very illustrative for everyone. In fact, they have shown an almost perfect textbook example of how not to set up a state's finances. As these articles by Margaret Talev & Dale Kasler and Daniel Weintraub describe quite well, the PRC's tax revenues have been far too dependent on the fortunes of the wealthy people who haven't yet left the state.

As I have seen on several real life tax returns, this reliance on capital gains taxes has hurt Federal tax revenues as well. People showing huge gains on their 1999 tax returns have had huge losses on their 2000 and 2001 returns.

Of course, it would have been much worse for our rulers if the taxpayers hadn't been nailed by one of the most unfair double standards in the tax code. Capital gains are fully taxable with no maximum; yet capital losses are only deductible at a maximum of $3,000 per year per person or per couple. For some clients, who have carryover losses well over a million dollars from the stock market plunge of 2000 & 2001, I have my doubts whether they will live long enough to actually deduct all of their losses. Any unused losses expire when they do.

It's not likely that Governor Gray-out Doofus will solve the money problem with such brilliant ideas as taxing Internet sales or having volunteer organizations take on the work of the public employees. Of course, he really doesn't care if things are corrected because he has already been reelected to his second and final term in office.

KMK
- posted by Kerry M. Kerstetter, MBA~CPA~ATP~ATA @ 1/05/2003 02:09:00 PM Send this post: