Those that invest money into equities, bonds, mutual funds, and other investments, recognize that when they make that investment, that they are susceptible to having the profit, so of, subject to taxation, be it local, State, or Federal. On the other hand, there are governmental entities that issue tax-exempt bonds, mutual funds, and other investments, in which as the name so amply describes, those that invest in these assets, aren’t subject to any tax whatsoever, per the specific exemption status of that investment. The ostensible reason why these tax-exempt investments are available to the general public, are in theory, because the return so promised to those that invest in such, is lower than the equivalent taxable choices for them, and of which the borrowing cost of the issuance of those bonds to those government authorities, are appreciably less, thereof. While that certainly makes sense, that’s only one part of the story, for the other part is that those with enough assets and capital, are thereby permitted to make additional passive income, with the foreknowledge that they will not be taxed, whatsoever, which seems on the surface, to be unfair to all those others that are subject to taxation, and thereby permits those with capital, to make additional money without restraint, on end.
Of course, the argument made is that tax-exempt securities almost always make less money than alternative choices; but then again, the risk of those securities are often considerably less than other investments, of which, there are plenty of those with a lot of capital that aren’t looking for risk, whatsoever, but rather desire to have that sure and steady return, which bonds, for instance, are very good at providing for them. So too, most people with a considerable amount of money, aren’t fools, so that if they felt collectively that tax-exempt investments, were overall, a poor choice to make, then they wouldn’t do it, and because they actually do make that investment and continue to do so, then clearly being tax-exempt has its advantages for them, and that is why they make those particular investment choices.
America has a progressive tax system, of which, the purpose of such progression in tax rates is to capture a higher percentage of the income of those of whom make more in income. So then, when that particular class of people that has plenty of wealth, are permitted to make investments in which they won’t have to pay nary a dime to the tax man, then this seems like a deal which on the surface is unfair to the general public and probably then shouldn’t be permitted. After all, part of being wealthy is not just desiring to hold on to that wealth, but to augment such, and when therefore there is an avenue that will do both, with little risk, and no taxation attached to it, at all, then for a certainty, there are going to be wealthy people that are going to gravitate to it, and therefore the shortfall in taxation receipts, so of, will have to be made up by somebody else, somewhere else.