Tax Cuts don't pay for themselves?

I'm no economist, but I know enough about the difference between causation and correlation to know that your analysis is far, far, far, far, far too simplistic for anyone to take seriously.

 

well...then why was there the huge expansion in the stock market in the 90's under Clinton? By far the biggest growth ever seen? What was capital gains rate 94-99?

There's so many things that affect these things...the 90s, in my little opinion, were influenced by regulation...people, and funds, were able to dump retirement money into equity. A huge gradual influx of money, buying stocks.

Nothing proven yet, my friend.

 

And yet, that's exactly what I did. Welcome to Denial City, population: you.

Says the guy who quoted from the ASA website. You might as well have linked to the GOP website. It would have been more honest. Anyway, thank you for proving that you did not read the article. Coward.

Again, you dodge the point. At this point, your dishonesty and inability to deal with the substance of my posts have disqualified you from serious consideration. If you want continue repeating yourself to try to maintain your belief, hey, knock yourself out. You're not fooling anyone else, though. Except for your fellow Ferrous Cranuses, maybe.

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For those who are interested, here's more on the current LBO mania from today's WSJ:

"With their lending businesses under pressure, more banks are choosing to return their extra cash to shareholders instead of using it to build their businesses.

In the past week, several major banks and a number of mid-sized institutions have said they plan to ramp up repurchases of their shares. Analysts expect more banks to follow suit.

Fueling the trend, bankers and other experts say, are industry conditions that make lending less lucrative. High interest rates and intense competition are squeezing margins. Meanwhile, more consumers and businesses are having trouble paying off loans, which forces banks to incur costly write-offs. It is a trend that is likely to accelerate this year, experts say.

With profit growth slowing, the reduction of share counts is becoming a more reliable means of delivering returns to shareholders and posting higher earnings per share.

"Your net income the remaining three quarters may be up only slightly, but your EPS looks pretty good," said Gerard Cassidy, an analyst with RBC Capital Markets. "Management has recognized that, with this inverted yield curve and rising credit costs in 2007, it's going to be very tough to [improve earnings] the old-fashioned way."

Companies across industries have poured dramatically more money into buybacks in recent years. Howard Silverblatt, a Standard & Poor's analyst, estimates that companies in the S&P 500 index spent about $110 billion on repurchases in the fourth quarter, basically flat with the third quarter and up about 6% from a year earlier. "Buybacks are immediate gratification," he said.

The financial-services industry hasn't been an exception. In the fiscal year ended in June, financial companies bought back about $44.6 billion of their shares, down slightly from 2005 but up sharply from $25.6 billion in 2004.

Now, even as buyback levels marketwide appear to be leveling off, an increasing number of banks are preparing to pump even more into repurchases.

Washington Mutual Inc., a Seattle-based thrift that has been struggling amid declining mortgage volumes, said last week that it entered an accelerated buyback plan in which it will repurchase $2.7 billion worth of its shares.

National City Corp. said last week that it plans an aggressive repurchase campaign this year, and analysts estimated the company, with a market value of about $23 billion, may spend about $3 billion on buybacks.

Meanwhile, Comerica Inc. is selling its money-management arm and plans to use the proceeds to fuel further buybacks.

Among the other banks that have signaled they may ramp up repurchases of their stocks are KeyCorp, PNC Financial Services Group Inc., Regions Financial Corp., SunTrust Banks Inc. and Valley National Bancorp."

Poor wingtips doesn't understand how the above can affect capital gains tax revenunes.

 

Clinton benefitted from two things:

1) Greenspan's reduction of interest rates from 1989 through 1994

2) The advent of the mass market for personal computers, their software and their peripherals which unleashed an economic boom and subsequent speculative mania.

Clinton himself was strictly mediocre. Luckily for him, he has both Bushses to make him look good by comparison.

 

dot.con anyone?




PBS had a storyby the samename about how the internet economy fueled American economicexpansion in the 1990-z and how the whole thing was a joke on the average person. They eventied it to why Al Gore tried to take credit or pretend that he was significant in the internet's develpment.

 

so you two...

you don't think the change of regulations regarding retirement funds- which allowed funds and individuals to put their retirement money into equity, which was only allowed up to a small percent previously- you don't think that affected stock prices??? and was a major contributor to the 90s stock boom???

you're going to have a really, really difficult time convincing me otherwise...

 

This statement correlates strongly with my statement that wingtips doesn't understand the difference between causation and correlation.

 

The drastic change in the treatment of dividends in 2003 offers a unique opportunity to test the relationship between dividend payments and the dividend tax rate. For decades the dividend payments had been declining, then in 2003, coinciding with the dividend tax cuts, dividend payments surged (and continued to rise in subsequent years). This seems to suggest there is more than cursory correlation at work. John?

 

Of course, that also occurred curiously close to the tech bubble burst that put tremendous market pressure on "growth" companies to start demonstrating fiscal soundness to shareholders by paying dividends, not to mention the plethora of failed dot.com companies that never paid a dividend throughout their existence.

Correlation or causation?

EDIT to ADD: Note that I am not making the argument that tax policy does not impact behavior, individual, corporate or otherwise. Obviously creating 401(k) plans created billions or trillions of dollars in investment accounts, and I myself am a big fan of developing tax policy for the purpose of influencing behavior. What your argument fails to link is an increase in the payment of dividends to anything else we've been talking about -- an increase in tax receipts, a contributing cause to growth, etc. The argument being advanced was the capital gains tax cut "paid for itself." Even if you proved tax policy "caused" the increased payment of dividends (but see above), that does not establish that an increase in tax receipts was caused by the tax cut. Finally, since all links and articles I've seen in this thread are capital gains realted-discussions, I'm wondering whether the dividend tax cut has relevance at all.

 

If that were the case shouldn't dividend payments risen in 2001 and 2002? But they didn't. TBH, I am surprised that someone who is so fond of using tax policy to alter social behavior can't see that large changes in dividend tax rates do alter business investment decisions.

 

First of all I never claimed the dividend cuts increased tax revenues. I said the capital gains cuts paid for themselves (as they historically have). To be honest I have no idea whether the dividend cuts did or didn’t produce a revenue surplus, and I really don’t care. What dividend cuts do is lead to better management investment decisions – marginal investments are evaluated in a harsher light and if they don’t make sense the money is returned to shareholders in the form of higher dividends. That is a good thing for all, even the tax man, as capital gets reallocated in more productive investments.

And if you didn’t think the dividend tax cut had any relevance to the discussion you shouldn’t have used it as the basis of an incredibly condescending and asinine ad hominem attack.

 

Altough it does not directly address the issue of dividend tax revenue, this was included at the tail end of one of my posts:

Then there's the Auerbach-Hassett study:

http://emlab.berkeley.edu/~auerbach/03divtax.pdf



And yeah, basically wingtips is trying to sell us all Amulets of Rhino-Protection on the basis that ever since he bought his amulet there have been absolutely no rhinoceros attacks in the United States despite the well documented presence of rhinos here (in zoos). In fact, wingtips went to the zoo and empirically tested the amulet on a real live rhino. The rhino absolutely failed to even try to leap out of its cage and attack him. And that is impossible to refute!