Breaking Kids’ Hearts with Capital Gains Tax
by Andrew Barisser
One could say I’m a dyed-in-the-wool capitalist. When I was 9 years old I bought my first stock from a broker in-person. I paid a whopping $50 fee for the transaction. That’s how expensive stock transactions were in 1996; and it was 20% of my total funds! I developed an instant fascination with money and markets. I loved nothing more than to scan the stock prices in the newspaper each morning. It was a game of numbers that I loved. Nothing thrilled me more than the concept of dividends. It still does.
Around that time I was informed by some older gentlemen, who were advising this impertinent 9 year old on financial matters, that there was such a thing as capital gains tax. They explained that if I made money from my stocks, a fraction of that profit would simply be deducted by the government. I remember being dumbstruck. Deducted? Just gone like that? “Yes” they insisted. As older men of at least 70 years each, they were amused to see this young child grow irate over the injustice of it. I was outraged. “How can they simply take what is mine?” I asked incredulously. They smiled and said “That’s life my boy!” I remember a burning sense of injustice, of theft, and of what should have been mine. That money lay outside the domain of any other party; for the government to interpose itself in my own affairs felt like theft.
Of course the sums of money I invested at that age amounted to $200-$300 dollars. Any capital gains taxes would amount to absolutely trivials sums. Even more imposing were my massive transaction costs: $50 to buy and again to sell. Even at that young age I had a nagging concern at the proportional size of these fees. But I was assured by my grandmother, and indeed by the stock broker himself, that these fees were perfectly ordinary and trivial in the long run. I nursed a disquiet over all aspects of the affair.
In hindsight my reaction was spot on. I echo in a more informed manner today the same inchoate outrage I felt then. Truly I am the same person I was even at that young age. It is startling to consider that, over 19 years, the main contours of my personality would remain so constant.