Questioning Assumptions: Taxes and Expropriation of Financial Assets

Your analysis is good. But what happens if the assumptions on which you base your analysis change? Carl from Chicago explains how the analyses on which much conventional tax- and retirement-planning advice is based can fall apart if lawmakers change the rules of the game. Carl points out that the rules have been changed before and probably will be again. The conventional advice no longer looks so wise.

3 thoughts on “Questioning Assumptions: Taxes and Expropriation of Financial Assets”

  1. Thanks for the post. I appreciate it since you guys run a very solid site.

    I was attempting to summarize some very complex topics with an overall broad sweep. For most, it is better to save in a 401(k) because the alternative is not to save at all. However, the general assumption that it is always better to defer taxes is one that I am starting to question from time to time.

    On the power side, it saddens me that all of the fiddling done by the developing countries has scared away the big investors. The net result of this is that people in these countries will have poorer services and a poorer quality of life. For phones they were able to use mobile phones to bypass landlines but unfortunately there is no such substitute for power and water (that can be applied on a grand scale).

  2. One of the reasons that Common Law works so well is that it prevents sudden changes in policy and makes long term planning much more accurate.

    The threats to that government poses to long planning go beyond tax policy. Inflation of the currency is even more damaging in my estimation. The more safe and predictable a financial instrument, the more susceptible to inflation it is. People who planned carefully and saved in the post-wwII era saw much of their assets wiped out in the inflation of the 70’s.

    I sometimes wonder if that is why people still gravitate to government programs for security. They may intuitively understand that government itself presents the greatest threat to their financial security and that paradoxically only government can provide security against its own actions.

  3. Perhaps because it is the holidays and family is so close, but your remarks remind me of one of those great pieces of advice about childrearing – that parents can be strict and lenient within fairly broad ranges as long as they are consistent and the parents agree. When children believe they can play one parent off against another or they have a parent who wants to be their friend one day and an authoritarian voice the next, the children are more likely to be more insecure and less productive.

    If the personal problems lead to high-maintenance & manipulative children, the national problems are likely to lead to less productive and less risk-taking businesses – ones more likely to stagnate.

    I suspect a minor reason libertarians want little government to intervene is because the inconsistencies from Congress to Congress and Administration to Administration will have less effect. And as someone nearing retirement the thought that the reason for putting those funds where they were (minimal as they are) may be destroyed by one Congress’s vote on taxation is not particularly pleasing.

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