Dow down 500!

Discussion in 'Finance, Investing & Economy' started by Anthony, Feb 27, 2007.

  1. VFish

    VFish Member+

    Jan 7, 2001
    Atlanta, GA
    Club:
    Atlanta
    You know what would be really cool? If we could simply compare changes in capitial gains rates with actual capital gains revenues. RatDog, can you help? In 1987 Reagan raised the rates. In 1997 Clinton cut 'em. So what happened to revenues in each case?
     
  2. Sachin

    Sachin New Member

    Jan 14, 2000
    La Norte
    Club:
    DC United
    And while you're at it ratdog, please modify your tax receipts numbers to account for inflation and population growth.

    Thanks,

    Sachin
     
  3. ratdog

    ratdog Member+

    Mar 22, 2004
    In the doghouse
    Club:
    Chicago Red Stars
    Nat'l Team:
    United States
    I assume you're being facetious, but just in case my Sarcasm-O-Meter is on the fritz...

    Did the US population double every ten years? And did prices double every ten years? Oh, OK. I'm a geek for this kind of thing so I looked it up:

    http://www.census.gov/popest/archives/1990s/popclockest.txt

    Our population did double - from 1915 to 1968. It may double again by 2010. Still, that doesn't come close to explaining tax receipt growth although it is probably a less unsatisfactory explanation than tax cuts.

    Anyway, your questions serve as more reason why just looking at tax receipt figures completely out of any overall economic context is a Bad Idea.

    --------------

    Just to smash the TCWPFT lunacy even further into the dustbin of bad theories...

    According to supply-side theory, cuts in the marginal tax rates on earned and capital income should lead to increased investment (measured by, say, non-residential fixed investment as a % of durable goods spending and residential investment) which then drives overall economic performance (as measured by, say, GDP) and thus presumably tax receipts on more profits and income. so, did Bush's tax cuts provide the benefits that supply-siders say should happen at a higher rate that periods of stable or rising taxes? No.

    Even if you factor in the economic cycles by measuring every economic recovery since 1961 from the trough on out, Bush comes in 2nd to last place. He is second only Reagan's recovery that began in 1982 and that saw massive decreases in investment going out over 20 months! Even Bush's numbers began to stabilize after 15 months although they were still lower than even the trough period after 20 months. Kennedy's recovery (beginning in 1961/1962, before he lowered taxes, btw) was by far the best, kicking everyone else to the curb and his targeted investment tax credit for capital equipment provided much of the kick. Carter (1975/1976) barely edged out GHW Bush/Clinton (1991/1992) while Nixon's recovery (1970/1971) was much shorter than the others but he still managed to get back to where he started in only 10 months. On the balance, it looks like cutting taxes by itself doesn't boost investment or Bush and Reagan would have joined Kennedy in leading the pack rather than getting their asses kicked.

    The results also show up in the GDP comparisons I've mentioned in earlier posts that show Bush had the weakest recovery period of any of the above, weaker even his father's famous "jobless recovery".

    Looking back, there is one factor that DOES correlate very well with the aforementioned recoveries and that is the Federal funds rate.

    In 1959 into 1961, the Fed funds rate is slashed from 4.0% to 1.17% and the economy takes off.

    From 1969 into 1970, the Fed funds rate is again about halved from 9.15% to about 3.71% in early 1971, starting the 1970 recovery.

    The rate plunged again from 12.92% in 1974 to 5.35% in 1977 and we get the recovery of 1976.

    Are you sensing a pattern here?

    In 1981, the rate begins it's long decline from it's all-time high of 19.1% to 8.63% in 1983 before beginning a temporary climb and, you guessed it (hopefully), we got the recovery of 1982.

    In 1989, the rate fell from 9.85% to 2.96 in 1993, touching off (along with the critical mass gained by office and then personal electronics) the incredible 1990s boom starting in 1992.

    Finally, there's Dubya's poor little expansion started by a plunge in the Fed funds rate from 6.54% in 2000 to the lowest rate since WW2 - 0.98% in 2003. And the economy (and tax receipts) just happened to go up. What a co-inky-dink!

    But no, it's not the Fed (along with government spending, once-every-few-generations technological breakthroughs, the usual business cycle and a few other factors) that caused economic growth periods and increasing tax receipts - it's tax cuts! Uh-huh. Suuuure it is. Sorry, TCWPFTers, but you're the economic equivalent of the Flat Earth Society.

    ----------

    Finally, to counter someone's (I think it was danny's) ridiculous assertion that the Fed has not dampened inflation cycles, I offer this:

    http://en.wikipedia.org/wiki/Image:US-Inflation-by-year.png

    Yeah, it's Wikipedia. So sue me.
     
  4. Wingtips1

    Wingtips1 Member+

    May 3, 2004
    02116
    Club:
    Liverpool FC
    ok, i'll cede we had tax revenue growth even when we had tax rates from 40-80. but you must acknowledge that we were the first country to undergo massive economic development, and these changes brought us into a new world. we were able to grow at high rates (just like china currently is) because we were starting from very little.
    also, if you start at 20 units of revenue and get to 22 units, you just increased by ten percent. if you start at 100 units and get to 105, you've only increased by five percent though you've grown your revenues by greater #'s than the first scenario. in which scenario would you rather be?
    also, when looking at job growth, you can't cite #'s without any background. did we add the fewest #'s of jobs to our economy following a recession since whomever the president was people quoted (the name escapes me, sorry) during bush' reign? probably. but one only has to look at the fact that the job losses during our recession were not massive. we recovered to pre-recession levels quicker than at any other time and have not stopped adding jobs since. so bush' #'s look bad at first glance, but taken in proper context, they aren't shown to be as disgraceful as the Democrats would hope.
    the problem with people such as yourself, is that you cannot see we've entered a completely unprecedented time in history. old ideas will not work. a flat or fair tax (or, if we must, lower taxes compared to the high ones you favor) is the way forward to bring about accelerating growth, increased economic possibilities, and fully capturing the most revenue possible.
    until you come up with something other than tired, staid, old ideas, nobody will listen to much of what you have to say.
     
  5. Matt in the Hat

    Matt in the Hat Moderator
    Staff Member

    Sep 21, 2002
    Brooklyn
    Club:
    New York Red Bulls
    Nat'l Team:
    United States
    What is TCWPFT? I tried googling it and the only reference was this thread.
     
  6. ratdog

    ratdog Member+

    Mar 22, 2004
    In the doghouse
    Club:
    Chicago Red Stars
    Nat'l Team:
    United States
    "Tax Cuts Will Pay For Themselves".

    Oh, and on the original topic, the Dow was down 300 today. Not that that means much of anything, mind you, unless you bought or sold today.
     
  7. ratdog

    ratdog Member+

    Mar 22, 2004
    In the doghouse
    Club:
    Chicago Red Stars
    Nat'l Team:
    United States
    Which, when taken in with all the rest of the mountain of evidence that's out there, pretty much eviscerates the TCWPFT argument.

    Oh? I'm sure the British will be interested to hear that.

    A valid argument for the 19th century. For the 20th and 21st centuries, not so much.

    From a long-term economic prospective, you want to be in as stable and sustainable a state as possible. I sure as hell wouldn't want us to regress to the 19th century even if that seems to be the goal of some "libertarians".

    I'm not sure how the employment debate has crept in here, but what the hell...

    Few things about either half of our power structure are as abad as partisans of the other side hope, I'll give you that. But if you want argue that Bush's numbers aren't so poor as his first term (when he came a whisker away from being the first President since the Depression to preside over a net job loss) indicated, then you also have to accept that his job numbers aren't as great as you triumphalists want to make them either, especially since unemployment is still higher now than when he took office despite a lower participation rate than in 2000. On employment like pretty much everything else about his performance, he's at best a big underachiever given the twin stimuli of the lowest rates since WW2 and his massive Keynesian deficit spending. But we digress...

    Ah yes, the much ballyhooed "New Economy" where we can blithely toss almost 300 years of hard-won economic knowledge out the window because the basic laws of economics no longer apply to us. Sorry, wingtips, but that idea died in a fire back in 2000. And the current mortgage mess has been reminded us that the laws of supply and demand still function in market economies. The snake oil of ever more tax cuts or flat tax or anything else that demagogues like Neal Boortz dream up and that dishonest media "pundits" like Larry Kudlow take money to pretend to believe in are just that: bad ideas that are politicially motivated and make mainstream corporate economists who have to be right for a living roll their eyes.
     
  8. saosebastiao

    saosebastiao New Member

    May 22, 2005
    I found the best solution already: Abolish 90% of the federal government.
     
  9. ratdog

    ratdog Member+

    Mar 22, 2004
    In the doghouse
    Club:
    Chicago Red Stars
    Nat'l Team:
    United States
    Glibertarianism: Boldly moving forward into the 6th century.
     
  10. saosebastiao

    saosebastiao New Member

    May 22, 2005
    If you think taxes were low in the 6th century, you obviously need to brush up a little bit.
     
  11. Wingtips1

    Wingtips1 Member+

    May 3, 2004
    02116
    Club:
    Liverpool FC
    it doesn't throw it out the window at all. one can have an increase in revenues at high rates, as the evidence clearly shows. the argument, though, is whether the high rates allowed us to capture the most revenues and growth possible. i'll argue that we could have grown faster and in a much more efficient manner (private sector growth vs gov't growth) had rates been lower. you'll obviously go in the opposite direction. and with todays tax rates, you'll argue that we'd be much better off with higher rates, while i'll advocate for even lower rates. but we'll both come to an agreement that spending has been out of control. (I say we start off with trimming $260 bn out of the $290 bn Farm subsidy bill...)


    how do lower taxes equate to an unstable state? and who said anything about returning to the 19th century?


    employment is directly tied to growth...
    Bush' #'s aren't excellent, this is true. but by no means are they poor. it is the utter disregard of good news by the left, the media, etc that makes me sound triumphant. Yes, I'll agree things could be better, but by no means have we entered a depression as some people would have us think.

    there are still simple economic rules that will apply. but globablization has brought about the need to shift thinking from such heavy handed gov't. the types of impact of globalization can be seen within the US, at the state level. those states with less regulation, less taxes, less gov't interference are WINNING in our country.
    http://www.alec.org/fileadmin/newPDF/ALEC_Competitiveness_Index.pdf
    our capital markets in the US are being PUMMELED due to heavy regulatory costs. companies, instead of going to the NASDAQ or NYSE, are going 144a, which is open only to permissable investors and the average joes are losing out, as well as those who work in the US capital markets.
    the idea of the flat tax has already become policy in some 20 odd countries. IN EVERY SINGLE CASE, IT HAS BEEN NOTHING BUT POSITIVE. it has yet to attempted here in it's true form. it is my belief that moving to such a free flowing system, we'll move forward, not just economically, but governmentally. no longer will politicians be able to play favorites with tax code. no longer will special interests be able to weasel their way around Washington. no longer would we see a need for billions of dollars to be spent in various gov't agencies to oversee the tax receipt system.
    if you were to move to this system, and get rid of the redundancy in gov't (72 programs designed to ensure safe drinking water? isn't 1, maybe two enough? 342 economic development programs? how about 12?), the american public would not feel any loss of gov't service or 'protection' while at the same time enjoying even more economic FREEDOM. I fail to see how this is such a bad thing.
     
  12. VFish

    VFish Member+

    Jan 7, 2001
    Atlanta, GA
    Club:
    Atlanta
    The tax on capital gains directly affects investment decisions, the mobility and flow of risk capital and the ease or difficulty experienced by new ventures in obtaining capital, and thereby the strength and potential for growth in the economy

    When capital gains tax rates were lowered in 1978, 1981, 1997 and 2003 revenue climbed steadily. Conversely, when the tax rate was increased in 1987, revenue began declining despite forecasters predictions it would increase. For instance, capital gains tax revenue in 1985 equaled $36.4 billion after adjusting for inflation, yet $36.2 billion was collected in 1994 under a higher tax rate. In other words, tax revenue in 1994 was slightly less than it was in 1985 even though the economy was larger, the tax rate was higher, and the stock market was stronger in 1994.
     
  13. bostonsoccermdl

    bostonsoccermdl Moderator
    Staff Member

    Apr 3, 2002
    Denver, CO
    You make good points, but I just think a capital gains tax is flat out wrong to begin with.. (Even without getting into the good points you made)

    Why does someone's choice to invest their money (rather than use it in some other fashion) suddenly require them to pay a second tax? It makes no sense.
     
  14. DoctorJones24

    DoctorJones24 Member

    Aug 26, 1999
    OH
    But investing isn't the same as "using" the money in some other fashion. It's about making more money, and those earnings are only possible because of the myriad ways that government spending makes it so. From infrastructure to security to education to diplomacy, the government picks up the tab so that investors can safely put their money to work to make more money. Seems only natural for there to be a fee (capital gains tax) for this government service.
     
  15. Matt in the Hat

    Matt in the Hat Moderator
    Staff Member

    Sep 21, 2002
    Brooklyn
    Club:
    New York Red Bulls
    Nat'l Team:
    United States
    Wouldn't that be what corporate income tax is for?
     
  16. Wingtips1

    Wingtips1 Member+

    May 3, 2004
    02116
    Club:
    Liverpool FC
    there are fees, they are called federal income tax, state income tax, local income tax, property tax, sales tax. i've been paid, been taxed, and by using the money that has already been subjected to multiple taxes in a productive manner, i'm being punished with another tax? that is unjust.

    and we say the gov't is only possible because of the money we make. gov't provides us with a sound rule of law (theoretically) and contract protections.

    and the gov't isn't exactly even handed in their levying of taxes. I can buy a stock, and if I profit/lose, I reflect that in my tax forms. If i buy art, I only get to reflect profits in my taxes when I sell it. same goes for automobiles. both of those are both investments, why cannot I use those losses then to my favor?
     
  17. bojendyk

    bojendyk New Member

    Jan 4, 2002
    South Loop, Chicago
    If you're a business (not sure about individuals), you can deduct the depreciation expenses of your autos and several other assets. Am I reading you right?
     
  18. Sachin

    Sachin New Member

    Jan 14, 2000
    La Norte
    Club:
    DC United
    Your premise is flawed. A car is not an investment.
     
  19. bojendyk

    bojendyk New Member

    Jan 4, 2002
    South Loop, Chicago
    Me or wingtips? I didn't say that it was--only that the depreciation can be deducted.
     
  20. Sachin

    Sachin New Member

    Jan 14, 2000
    La Norte
    Club:
    DC United
    Sorry.. wingtips... You (bojendyk) are correct that a company can depreciate automobiles if they are used in the line of business, for example, tow trucks, or something like that.
     
  21. Wingtips1

    Wingtips1 Member+

    May 3, 2004
    02116
    Club:
    Liverpool FC
    a car is an asset, not an investment. capital gains refers to the gain/loss in value of any asset. so then how can I be taxed on my gain from the sale of a classic automobile, but not able to subtract a loss from selling my 1999 sable? it isn't even handed.
     
  22. saosebastiao

    saosebastiao New Member

    May 22, 2005
    Democrats.
     
  23. VFish

    VFish Member+

    Jan 7, 2001
    Atlanta, GA
    Club:
    Atlanta
    Shirley, you can't be serious.

    Your 1999 Sable has a finite useful life, i.e. it is a depreciating asset. A classic auto is timeless, hence is an appreciating asset. No sane person believes they should be treated equally for tax purposes.
     
  24. ratdog

    ratdog Member+

    Mar 22, 2004
    In the doghouse
    Club:
    Chicago Red Stars
    Nat'l Team:
    United States
    In case anyone is still keeping track:

    [​IMG]
     
  25. VFish

    VFish Member+

    Jan 7, 2001
    Atlanta, GA
    Club:
    Atlanta
    Sigh, yeah we're still keeping track. How are those financials you claimed we missed out on holding up?
     

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