Economy Change the Tax Code: Claim Cash Depreciation

[panamaican]

The point is cash IS a depreciating asset. Perhaps the claims of loss would only be for individuals but I understand how that is Pandora’s box.

No, the point is that the government depreciates business assets to reflect that they're not worth what you paid for them over time. That a business investment is meant to produce value over time and as those assets lose their productive life, their ability to produce value diminishes equally.

A farmer buys a tractor. The tractor exists to produce crops. But as the tractor ages, it's ability to produce crops decrease accordingly. So, we give the famer a tax break since his investment is losing value. However, to prevent people from front loading the investment loss, we spread it out over years. Then to account for the fact that the asset might not lose value as quickly as we presumed, we recapture depreciation if/when they sell the asset for more than the depreciated value. But the depreciation is meant to reflect that the tractor's ability to produce value is declining.

Cash doesn't work like that. First, it's not a business investment. It's personal property. We don't let people depreciate their dining room tables or even their personal vehicles. They can only depreciate their home if they use it for business purposes. Cash, for the most part, falls outside of that. Cash isn't an investment. Cash is like your couch, not your tractor.

 

[panamaican]

I … kind of agree but unlike a stock or other asset, cash never appreciates so you it’s not necessarily the same as unrealized losses or gains. It’s only ever headed in one direction.

That's not true. Cash can definitely appreciate. Take $100k and go to a 3rd world country, can you buy more or fewer basic goods in that country? In many cases, more. It's why people retire to developing nations -- their money goes further, it has appreciated in value simply by changing borders.

 

[Rob Battisti]

That's not true. Cash can definitely appreciate. Take $100k and go to a 3rd world country, can you buy more or fewer basic goods in that country? In many cases, more. It's why people retire to developing nations -- their money goes further, it has appreciated in value simply by changing borders.

It would be relative to the purchasing power in the country itself though.

the government depreciates business assets to reflect that they're not worth what you paid for them over time.

You can claim losses on investments. In this case, you’d be investing in cash which depreciates and you’d be claiming that loss.

 

[panamaican]

It would be relative to the purchasing power in the country itself though.

Your statement was that cash never appreciates and that's not true. Your tractor loses working life no matter what country you put it in. It doesn't gain years of useful life because you're a plowing a field in Bangladesh instead of America.

And depreciation is meant to capture the loss. If cash buys you 5 bananas in the US but you can buy 10 bananas for the same cash in Costa Rica...where is the loss?

You can claim losses on investments. In this case, you’d be investing in cash which depreciates and you’d be claiming that loss.

You're not investing in cash just because you got paid in it, lol. It's not an investment, it's a currency. If you're going to do forex, ok, now you're investing in currency and now you can take your tax losses.

 

[Rob Battisti]

Your statement was that cash never appreciates and that's not true.

Never appreciates in the country of issuance**

You're not investing in cash

That’s just a fancy way of saying “savings”. Your cash is an asset. You are holding on to that asset. That asset depreciates over time. You should be able to claim losses on that depreciated asset.

I don’t know the mechanisms, but it’s not a totally outlandish idea.

 

[panamaican]

Never appreciates in the country of issuance**

That’s just a fancy way of saying “savings”. Your cash is an asset. You are holding on to that asset. That asset depreciates over time. You should be able to claim losses on that depreciated asset.

I don’t know the mechanisms, but it’s not a totally outlandish idea.

We don't grant depreciation for every asset that people have. We grant it for business investments that lose value, not simply for business assets.

I think the problem here is distinguishing between an asset and an investment. You acquire assets to hold. You make investments to generate additional value. Investment losses get deductions. But some investments are in goods where the losses are hard to calculate over time so the government gives you a formula. The tractor is an investment, not just an asset. Real estate can be an asset and an investment (but your personal residence isn't an investment, just an asset). Cash is not an investment, it's just an asset.

You depreciate investments, not assets.

 

[Rob Battisti]

We don't grant depreciation for every asset that people have. We grant it for business investments that lose value, not simply for business assets.

I think the problem here is distinguishing between an asset and an investment. You acquire assets to hold. You make investments to generate additional value. Investment losses get deductions. But some investments are in goods where the losses are hard to calculate over time so the government gives you a formula. The tractor is an investment, not just an asset. Real estate can be an asset and an investment (but your personal residence isn't an investment, just an asset). Cash is not an investment, it's just an asset.

You depreciate investments, not assets.

That’s not correct.

An asset can be an investment an investment can be an asset.

You invest in “asset classes”.

My point is that people who are risk adverse choose to keep their assets in savings and in doing so their asset depreciates. In a way, turning that asset into a liability.

I don’t advocate for people to keep large amount of cash for that reason. What I’m advocating for is the offsetting of the government’s debasement of their money supply and subsequent reduction in value of people’s holdings to become loss write offs.

 

[aitkenmike]

only rich people have savings accounts.

Who has more in their savings accounts? Relatively rich people or relatively poor people? This shouldn't be a difficult question.

 

[Jack V Savage]

Seems like the point is to discourage investment. How do people in the nation benefit from that? We usually want to encourage more investment because it leads to higher living standards.

 

[emefer]

So in this scenario, if I keep all my money in my wallet and then lose my wallet, can I write it off as a loss?

 

[nostradumbass]

Who has more in their savings accounts? Relatively rich people or relatively poor people? This shouldn't be a difficult question.

Poor people already have little to no tax burden, and middle to lower middle class probably have a higher percentage of their wealth in a checking or savings account than rich people. Rich people have a higher percentage of their wealth in several types of investment that can already be written off if it loses value. Why do they get the write off while who try to save sit back and watch their money turn to shit?

 

[panamaican]

That’s not correct.

An asset can be an investment an investment can be an asset.

You invest in “asset classes”.

My point is that people who are risk adverse choose to keep their assets in savings and in doing so their asset depreciates. In a way, turning that asset into a liability.

I don’t advocate for people to keep large amount of cash for that reason. What I’m advocating for is the offsetting of the government’s debasement of their money supply and subsequent reduction in value of people’s holdings to become loss write offs.

I literally typed that assets can be investments but not all assets are investments. Cash is an asset but it is not an investment. People who are risk adverse are not investing in cash. They are holding cash because they don't want to invest in something. It's an asset, not an investment.

And we don't give depreciation for assets, only for investments.

If someone wanted to invest in cash or the money supply, they'd buy treasuries or engage in forex trading. Holding cash is not investing. It's simply holding an asset. And you don't get tax losses for just holding assets.

 

[panamaican]

I get that people don't understand taxes but let's cover some basic things.

Personal losses are not tax deductible. Only business losses.

Assets don't generate depreciation or tax losses. Investment losses generate depreciation or tax losses.

 

[BreatheSherBro]

This would mostly benefit people with large savings accounts. I don't think the government wants people to stockpile cash. Governments want you to either spend or invest.

 

[SammyPops]

Tax code should be simplified. Flat income tax+sales tax+death tax=done.

 

[William Huggins]

That's why I keep my liquidity in Elephant dung my new ultra stable crypto currency.......

 

[BreatheSherBro]

Tax code should be simplified. Flat income tax+sales tax+death tax=done.

Yeah, it really aught to be a one or two pager instead of 74,000.

 

[SammyPops]

Yeah, it really aught to be a one or two pager instead of 74,000.

The mor ecomplex an model, the more people can fuck with it.

 

[Jack V Savage]

The mor ecomplex an model, the more people can fuck with it.

And this is a thread about a way to introduce fairly extreme new complexity, for no benefit that the TS wants to discuss (that is, he refuses to say why we want less investment--could be that he thinks we're in "end times").

 

[SammyPops]

And this is a thread about a way to introduce fairly extreme new complexity, for no benefit that the TS wants to discuss (that is, he refuses to say why we want less investment--could be that he thinks we're in "end times").

End times eh? Firearms adn ammo > dollars!