Inflation as a hidden tax

[Khisanth]

I got to thinking about the tax aspect of selling gold, and how long-term it simply tracks inflation. That's where the phrase "Inflation is a hidden tax" finally made sense to me.

I'm going to be taxed 28% on my gold "profits" when it has simply increased in value (in theory) due to monetary inflation! That's the big SUCK right there.

So, if Gold is going to be the bubble asset in the portfolio, I hope it will rise higher than inflation AND taxes.

[melveyr]

I think lots of people refer to the loss of purchasing power itself as the tax. You are totally right though, inflation does cause capital gains tax to eat away at your returns.

In aggregate, I think the increase in capital gains tax is a good thing though. Taxation is a powerful way to try and break inflation so capital gains tax acts somewhat as an automatic stabilizer.