Taxes...are a drag. That’s pretty much what “tax drag” means. (See: Deadweight Loss.) RuPaul is not involved.
Tax drag is the loss of would’ve-been income because of taxes. Whether that’s income taxes or capital gains taxes, tax drag is real. It's often used to contrast forms of income that aren’t taxed...or forms of income with special tax rules, things like municipal bonds and retirement savings. It can also describe the difference between two securities that are taxed at different rates because they’re in different countries.
Since taxes can eat away at investments, an investment’s tax drag is something for investors to take note of, just like inflation and fund management fees. For instance, in the U.S., there’s a larger tax drag on stocks that are bought and sold within a year than on longer-term holdings. This is to incentivize you to save up, buttercup. The government prefers you invest for the long haul, rather than play the short trade game.
Related or Semi-related Video
Finance: What is Ad Valorem?88 Views
Finance a la shmoop what is an ad valorem tax? want to impress and amaze your friends
with your mastery of Latin yeah we had the same thought you need new friends ad [Girl holding Latin book and shows her friends]
valorem means according to value that is an ad valorem tax is a tax based on the
value of the asset being assessed..well why is that even a point of contention
well you can imagine a tax on gate entry into a public park some people are worth [People cycling in a public park]
a lot like you know if Bill Gates just happens to walk in it's worth a lot and [Bill Gates walking in a park]
some people are not worth much like Vin Diesel's personal hair stylists those
would be not ad valorem taxes they'd just be taxes..sales tax that's ad
valorem like the tax for buying a car in California is say 8% buy a new Prius for
35k and you pay about 3k in taxes buy a Maserati that does 185 and [Maserati car zooms past the road]
coincidentally it costs 185 and you'll pay about 8% on that number or about 15
grand for the pleasure of being the target of every jealous cop in the [Police cars chase Maserati]
district well how about real estate tax ad valorem well it is in most states
where the annual tax is based on the value of the property itself being taxed
estate tax well assuming there is still one in the future
you bet ad valorem it's a sliding scale tax whose amount is derived directly
from the value of however many oil patch acres Gran-mama [Oil machine working]
is leaving to young Jethro.. So there you've just expanded your mastery of
Latin but we're gonna end this video here so we don't go on ad nauseam
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