Rants & Essays

Lesson of the Handyman's Special

By George W. Walker III

I had heard the arguments about the capital-gains tax. But why should people like me - or my neighbor the plumber or that nice kid who works as a clerk at the home-improvement center - be in favor of a tax reform that benefits the rich?

Then my wife and I took out a home-equity loan on our family residence and bought an abandoned house in a nice neighborhood. We didn't want to live there; we just saw an opportunity to refurbish the $35,000 "handyman's special" and sell it for a modest profit.

Besides, I was convinced it would be a great lesson for our four children. Even the ten-year-old worked right alongside us: cleaning, scraping wallpaper, sanding, painting.

We hired that neighbor who's a plumber, and a man who had done some electrical work around our own house. We were on a first-name basis with the folks at the lumber store. We were at the home-improvement center two or three times a week, spending money to turn this neglected structure into an inviting home.

We frequented the fabric store (my wife sewed all the curtains) and the building-supply store (vinyl siding). We spent more money at the pizza shop (no time to cook) and at the drugstore (bandages and liniment).

"It will be worth it after the house is sold," I said to my wife, "when we take the kids to the bank and show them the profit we're depositing. 'This,' I will say, 'is what America's economic system is all about. If you're willing to take a risk and work hard, you may reap a financial reward that makes the whole adventure worthwhile!'"

We found a buyer willing to pay $60,000. After expenses we figured to make $6000 on the venture. But a funny thing happened on the way to the bank. I stopped to see our accountant. "Congratulations on your profit," he said. "But remember that the capital-gains tax is the same as your 28-percent personal income tax. And, as a resident of New York, you'll need to add on seven percent in state taxes."

That 35-percent bit left us with a net profit of $3900. Our conservative estimate is that our combined labor totaled 1200 hours. That means after the capital gains tax is paid, we'll have netted $3.25 per hour. We could have earned more standing at a cash register repeated the words "Paper or plastic?"

Will we try a venture like this again? I doubt it. That means we won't be hiring the plumber or the electrician; visiting the fabric or carpet store; making home-equity loan payments to our local bank; writing checks that help pay the salary of that nice young man at the home-improvement center.

Reducing the capital-gains tax would be a "tax break for the rich?" So what? Rich people spend their money. They invest it, risk it, try to get it to work for them so that it will grow. But that's hard to do without hiring people, buying materials and supplies, and spending in a multitude of other ways.

My family is tired and a little discouraged right now. But maybe something good will come out of our experience. Maybe a few people who aren't rich will tell their legislators that we, too, want the capital-gains tax cut.

It's not that we care about the rich. We promise that we'll still envy and resent them. But let the tax cut go through. We could use the jobs - and the prosperity.