posted
From the Presidential thread, we got these quotes:
quote: Originally posted by DarkKnight:
I was stunned when Charlie Gibson asked
quote: GIBSON: And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down.
So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?
Obama gave the standard Democrat response of 'fairness' and more or less the evil rich getting richer and that's not 'fair'. But then I was even more stunned when Gibson followed up with
quote:GIBSON: But history shows that when you drop the capital gains tax, the revenues go up.
quote: Originally posted by Lyrhawn:
I'm stunned by two things there. 1. The fact that Gibson is asking a dishonest question, and 2. That Obama failed to call him on it.
I don't know anything about capital gains taxes. Why is it dishonest? I'd think making it easier to buy and sell without having to stop and calculate how much you lose by not hitting the one year mark would be a good thing. Posts: 2283 | Registered: Dec 2003
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posted
Personally I'm okay with cutting capital gains taxes. I don't like it. Taxing someone twice on their earnings, and for the matter a tax that increasingly afflicts the middle class, is a horrible idea. Democrats aren't going to be able to may hay out of this issue for much longer, with more and more middle class earners putting their money into the stock market for retirement, they'll want their earnings to remain untaxed and this will be less a rich person's tax and more a middle class tax, and a second tax on earnings they've already paid taxes on.
My problem is the way in which the question is phrased. The idea that tax cuts lead to bigger earnings may be right in the long run, but they rarely if ever pay for themselves, because the growth that comes from the cuts takes years to make up for the cuts. I'm not as sure on the specifics of the capital gains cut, but in general tax cuts don't pay for themselves for several reasons. If say you cut a billion dollars in taxes one year, and in a few years you end up taking in 1.1 billion, you still have several years in which you took in less than a billion and end up with a net deficit. They don't pay for themselves over the long run, not unless you tie spending cuts in with tax cuts to eliminate the deficit increase they create.
Posts: 21898 | Registered: Nov 2004
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posted
Ok, I follow the reasoning. And I get that not taking in any money at all will never give the government more money.
But in this situation where folks are just paying less, wouldn't the dip pay for itself eventually as more money is invested in stocks? After it reaches the break-even point, it's going to continue to bring in more money at the lower rate than it would have at the higher rate, right?
Posts: 2283 | Registered: Dec 2003
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posted
It's "dishonest" because it frames the question in a way that a) suggests that annual tax revenue is the best way to measure the results of changes in tax law, which isn't necessarily true; and b) implies that variations in tax revenue in the periods cited were caused by changes to the capital gains tax rate as opposed to merely correlated to it. (In particular, this last effect may greatly overstate the effect of capital gains tax manipulation, which -- even if the Laffer curve is right -- we know has a point at which diminishing returns might be expected. Most of the stats I've seen indicate that capital gains cuts resulted in additional revenue equivalent to around 40% the typical annual variation in revenue in the first year, which is certainly significant -- except for the fact that the following year saw this increase drop to about 5% above the average. In other words, it appears that cutting capital gains taxes in any given year mainly makes people stop gaming the system that year.)
My conclusion is that Gibson really, really wants to flip one of his houses. Posts: 37449 | Registered: May 1999
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posted
That too. I've read a few different opinions that say the growth in capital gains tax revenues had little or nothing to do with the cuts in the past. With something as complex as the economy, looking at capital gains tax cuts and then resulting gains in revenue and assuming that they are related is a case of post hoc ergo propter hoc ("After it therefore because of it"). There are a lot of other factors involved, and many studies I've read say that those factors have been far more important in the growth of revenue than the tax cuts.
Posts: 21898 | Registered: Nov 2004
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posted
So it's a weird rule that's going to inconvenience folks when they invest, but it's better to have it in place than to cut it and lose lots of money. For now, while the economy's shaky.
Though that begs the question, wouldn't it be better (if I remember my economics class and that Keyes guy right) to let the government take the hit on revenue now and let the people have more money?
Posts: 2283 | Registered: Dec 2003
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posted
Well you're going from arguing the merits of the question to arguing the merits of the tax. I think the way Gibson phrased the question was unfair and dishonest. He was trying to play "gotcha" using a questionable argument and half truths. It was the debating version of a push poll.
But much as I don't like the way he phrased the question, I think a serious look at capital gains taxes (and corporate taxes) is perfectly fair. I'm okay with cutting capital gains taxes, we just have to cut down on government bloat to go along with it. Republicans run up big deficits because they make big tax cuts but don't cut spending, and more recently, they drastically increase spending. Democrats on the other hand tell you they are going to spend more and raise taxes to do it, which still pops up the deficit at times (depending on how overboard they go) but at least they're generally up front about it and don't try and convince you with, to use a fun phrase, "voodoo economics."
I say cut the tax and cut spending.
Posts: 21898 | Registered: Nov 2004
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quote: Well you're going from arguing the merits of the question to arguing the merits of the tax.
That's because I don't understand either of em.
So the question was unfair because either the guy was really wrong in a way you can't fix in a couple minutes, or he was looking for a certain answer he assumed Obama wouldn't want to give.
And while I agree with you ont he taxing/spending dynamic, I'm not sure what's in the budget, let alone what to cut. I know how tough it's been for us to try to balance the budget both in Florida and Tally. Everyone agrees that stuff needs to be cut, but no one wants their pet project to be the one. About the only thing we've agreed on is to not give state workers any raises again this year. [/wry]
Posts: 2283 | Registered: Dec 2003
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posted
So, I know nothing about this except that it makes flipping houses less profitable. From that viewpoint, I can see why they would be taxed. Flipping houses is a form of income, so why shouldn't it be taxed? Again, all I actually know on this tax area is my friend who flips houses sometimes holds onto the houses for a while in order to avoid paying the tax (and I am sure it is much more complex then that).
Posts: 2223 | Registered: Mar 2008
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quote:So the question was unfair because either the guy was really wrong in a way you can't fix in a couple minutes, or he was looking for a certain answer he assumed Obama wouldn't want to give.
It's unfair because the he gives Obama a question about capital gains taxes, answers it himself, and then asks Obama why he'd be so crazy as to want lower revenues. It's not an honest question; it uses dubious logic to reach a false conclusion, or at least, a conclusion that is under serious contention amongst economists (I'm not totally sure, this isn't really my area so much but I think the Laffer curve people are in the minority, Tom might know, or fugu). The best answer Obama could have given would have been to not accept the premise of the question to begin with. I don't know what his actual answer was because I didn't watch the debate and DK left it off. But any answer he gives at that point surrenders the question and says that yes, that is in fact the case.
Like my example earlier, a push poll (in case anyone is unfamiliar with the term) is when you more or less suggest an answer to a respondent. Like, if I were to say "Funding for stem cell research is money that could be used to reduce the deficit or reduce taxes for cash strapped Americans in poverty, do you support funding for stem cell research?" That's maybe not the best example but, it's basically poisoning the well.
Getting into the budget is a much trickier issue. Ear marks account, as a total, for a relatively low percentage of the total budget. I think they amount to less than $30 billion dollars out of a $3 trillion budget, which is to say, less than one percent. The biggest chunks of the budget are entitlement programs like Social Security and Medicare, and the military, which clocks in at more than half a trillion dollars.
That's a much bigger discussion that we could get into if you wanted, but it's difficult. Spending is spread over multiple years on a lot of different bills, and it's not as easy as I'd like to find a current synopsis of the budget online (plus those things are written in labyrinthian formats), and spending is often spread out over multiple years, so you can't just look at the Farm Bill and say "$300 billion dollars! Cut it!" because the Farm Bill, like the recent Water Bill or Energy Bill spreads that spending out over multiple years. You have to look at projections of how much something will cost, how much we've spend on a particular program in the past, and it's all pretty hard to do when you don't either have a copy in front of you (and it's the size of the entire Wheel of Time series) or have the CBO working for you.
Posts: 21898 | Registered: Nov 2004
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posted
Lots of economists think there is something like the Laffer curve, though the topology, especially in practice, is subject to a lot of disagreement.
What's subject to near-unanimous agreement, though, is that we're on the side of the Laffer curve where decreases in taxes do not fully replace themselves in revenue, and increases in taxes do not lower tax revenue more than they increase it.
This isn't too surprising, since we have plenty of data about what tax cuts and tax increases do, and they fit that state.
I'd have to look more closely at the data, but I suspect the 'after' period is being tailored to suggest the effect, and the greater-than-full substitution is not supported by the data.
That doesn't mean lowering or eliminating capital gains might not be a good idea, just that lowering it is not going to cause an increase in revenue.
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