My ten-year-old friend Laura made the most remarkable observation by the pool Saturday, and I’m assuming that several of you will be able to solve the mystery. ‘Diet Coke floats,’ she said quietly. ‘Regular Coke sinks.’ Now please: how could that be? But sure enough, there were several cans of Diet Coke bobbing in the ice-water-filled cooler and several cans of Regular Coke sitting on the bottom.
This so defied my sense of physics – could ‘Coke Lite’ really be light? – that I tried pushing down the diets and lifting the regulars to the surface. Guess what? The diets bobbed back up, and the regulars sank. Laura was not gloating, but I would have been had I been the 10-year-old Archimedes.
I immediately got a Bud and a Bud Lite from the refrigerator. Both floated. Barq’s root beer floated. Ice, of course, floated.
I charted a course of further experimentation that would have included going to buy new cans of Coke from an entirely different batch – does all Coke sink, or might the subject six-pack have come from a batch with a little less CO2 in it than usual? And what about changing the water temperature – would the same thing happen in warm water?
But then I decided original research was unnecessary – I have you. I am yet to encounter a question on which some of you have lacked the answer.
So – spill the beans! And would they float?
Dennis King: ‘I don’t quite follow your tax loss arguments in Friday’s column. First off, why compare a $5000 loss to a $10000 loss? Also, doesn’t the loss carry forward to next year, so wouldn’t a higher limit just shorten the time it takes to claim the full loss? Of course if you have REALLY BIG losses you will not live long enough in any case.’
☞ The reason for comparing a $5,000 loss with a $10,000 loss was to point out that small investors – who might have realized losses less than $10,000 – would get less of a benefit from the new higher ceiling. (Their $3,000 deductible ceiling would rise, in this case, by only $2,000, versus $7,000 for the larger investor.) But your larger point is valid: it’s a $3,000 annual limit, with the excess carried forward to future years. So if you had $60,000 in losses (and never again had any net gains to offset them), it would take you 20 years to deduct all your losses from ordinary income, versus just 6 if the ceiling were raised to $10,000.
Steve Stermer: ‘You really had me going there for a moment Friday. Could it be that Andy was going to actually AGREE with a Republican proposal? I had to check my calendar to see if it was April 1. You made such a good case. But then I [read the rest]. Couldn’t your arguments against raising the $3,000 investment loss deduction also be used to argue for reducing this limit to zero? Why not get rid of the favorable long-term capital gains tax rate as well?’
☞ Both the pros and the cons I set forth for raising that $3,000 annual ceiling are, I think, valid. This is not a crazy proposal. I just think the cons outweigh the pros. You look at it and perhaps feel that, no, the best-off are not, relatively speaking, better enough off . . . we need to help them more. Not because you have anything against anybody else (I don’t doubt for a minute you are a man of good will); just because you think the best-off deserve a better break. It is a legitimate difference of opinion.
As for reducing the $3,000 ceiling to zero, or eliminating the favorable capital gains treatment – I guess my short answer would be: It’s a big deal to change the rules of the game -let alone rules that have been in place for decades. Sometimes doing that makes sense. I’m not sure this is one of those cases.
Quote of the Day
We're not trying to outsmart the smart guys. We're trying to sell bonds to the dumb guys.~alleged remark of the head of a Wall Street mortgage-bond group
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