Most of the communications published in our Letters to the Editor section on Saturday were about taxes on income and capital. Some referred to my recent column on the subject.
The District Line's in-basket is also heavy with letters about taxes. Many of these letters make points you might want to know about.
Ruth Aull Cerick disagreed with my position and called attention to the existing tax regulation that offers an exemption to "old" people who sell their homes. "The attached instructions," she wrote, "show that an old person would pay capital gains tax only on the amount above $35,000 when selling his residence." What IRS instructions actually say is: "If you sold your home for $35,000 or less on or after your 65th birthday, and used it as your principal residence for at least five of the last eight years, any gain on the sale need not be included in income."
So the benefits of that regulation are limited in scope if the selling price of the home is over $35,000 the benefits is diminished. If the seller has not yet reached his or her 65th birthay, the exemption does not apply at all.
You can make your own judgment about the age at which one becomes "old," but our tax laws refer to a specific qualifying date: the seller's 65th birthday.
So the moral here is: Become 65 as quickly as possible. Meanwhile, stay well. Don't beccome disabled or let it become necessary for you to enter a nursing home before you're 65. And for heaven's sake don't make the mistake of leaving a widow who is not yet 65.
M. Younger chided me for disagreeing with The Washington Post's editorial and added, "Read the editorial and kindly print a retraction." Fortunately, I do not work for a newspaper that demands blind conformity from its employees. This is one of the many reasons I love this newspaper and have invested my life and money in it.
Another reader sent me a clipping of our editorial and implied that if I would read it I might learn something. I had already read the editorial and had learned that it addressed itself almost entirely to the Steiger Amendment. It was not intended to be a general discussion of taxes on income and taxes on capital.
I would like the record to show that I took no stand for or against the Steiger Amendment. In fact, I carefully refrained from mentioning it by name instead. I dealt with the inequities in our present tax laws I mentioned an idea that has been knocking around on Capitol Hill for a long time: relating the tax rate on capital gains to the length of time an asset is held. I referred to the many tax reforms that candidate Carter had promised, and I expressed my disappointment at his lack of leadership in getting those reforms before the Congress.
But I didn't really press that last point. Mr. Carter is not the first candidate to bleed for the taxpayer during a campaign and then fail to do much to help him after the election. He will not be the last Reforms have a way of evaporating, regardless of the issues involved or the political parties that oppose or support them.
At least a dozen readers wrote to express enthusiasm for the simple idea of relating the capital gains tax rate to the length of time an asset is held, but they all disagreed with my suggestion that the minimum rate be applied to property held for 50 years. Many suggested that 25 or 30 years would be more relaistic; only two went as high as 40 years. After thinking about their supportng arguments for a while, I must concede they make power sense than my 50-year suggestion.
Many who wrote made the point that a capital gain is often an illusion George Gerkin of Pittsburg and Frank S. Howell of Takoma Park were especially articulate inciting examples of how we are cheated by taxes based on the diminishing purchase power of the dollar Consider the wife who wars engagement and wedding rings for 40 years. She won't seel them, "but some day somebody will" because the dollar value will keep going up.
But the dollars realized from that sale will not buy comparable rings. The phony profit caused by inflation results resuls, in a hugh tax bite that must be avoid out of the sale price, so there isn't enough left to buy back what was just sold. The same pictures applies to every ever other capital that goes up in you value because of longterm inflation.
Soon Russell B. Long (D-La.) has recognized this point and proposed that the government offer its taxpayers an "inflation adjustment." But you can bet your bottom dollar that nothing will com of anything so sensible.