Gibson's capital-gains tax assertion during debate disputed by economists
SUMMARY: During the April 16 Democratic presidential debate, Charles Gibson asserted of capital-gains tax cuts that "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." In fact, economists dispute Gibson's assertion. Moreover, looking forward, the Joint Committee on Taxation estimated that the 2006 extension of the 2003 cuts on capital-gains taxes would result in decreased revenues over 10 years.
During the April 16 Democratic presidential debate, co-moderator and ABC World News anchor Charles Gibson asserted of capital-gains tax cuts that "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." Gibson later asserted that "history shows that when you drop the capital-gains tax, the revenues go up." In fact, Dean Baker, co-director of the Center for Economic and Policy Research, asserted in an April 17 American Prospect blog post addressing Gibson's statements: "[T]he evidence that a capital gains tax cut raises revenue is rather dubious, since most of the apparent increase is likely due to timing: investors delay selling stock when they know a tax cut is imminent. After the cut takes effect, they then declare their gains and pay taxes at the lower rate." Indeed, a Congressional Budget Office (CBO) Revenue and Tax Policy Brief states that "[r]ising gains receipts in response to a rate cut are most likely to occur in the short run" and that investor responses to capital-gains tax cuts in the short term can "mislead observers."
From the CBO brief:
Because taxes are paid on realized rather than accrued capital gains, taxpayers have a great deal of control over when they pay their capital gains taxes. By choosing to hold on to an asset, a taxpayer defers the tax. The incentive to do that -- even when it might otherwise be financially desirable to sell an asset -- is known as the lock-in effect. As a consequence of that incentive, the level of the tax rate can substantially influence when asset holders realize their gains, as can be seen particularly clearly when tax rates change. ... For instance, the Tax Reform Act of 1986 boosted capital gains tax rates effective at the beginning of 1987. Anticipating that increase, investors realized a huge amount of gains in 1986. Then, in 1987, realizations fell by almost as much, returning to a level comparable to that before the tax increase.
[...]
The sensitivity of realizations to gains tax rates raises the possibility that a cut in the rate could so increase realizations that revenue from capital gains taxes might rise as a consequence. Rising gains receipts in response to a rate cut are most likely to occur in the short run. Postponing or advancing realizations by a year is relatively easy compared with doing so over much longer periods. In addition, a stock of accumulated gains may be realized shortly after the rate is cut, but once that accumulation is "unlocked," the stock of accrued gains is smaller and realizations cannot continue at as fast a rate as they did initially. Thus, even though the responsiveness of realizations to a tax cut may not be enough to produce additional receipts over a long period, it may do so over a few years. The potentially large difference between the long- and short-term sensitivity of realizations to tax rates can mislead observers into assuming a greater permanent responsiveness than actually exists.
Because of the other influences on realizations, the relationship between them and tax rates can be hard to detect and easy to confuse with other phenomena. For example, a number of observers have attributed the rapid rise in realizations in the late 1990s to the 1997 cut in capital gains tax rates. But the 45 percent increase in realizations in 1996--before the cut--exceeded the 40 percent and 25 percent increases in 1997 and 1998 that followed it. Careful studies have failed to agree on how responsive gains realizations are to changes in tax rates, with estimates of that responsiveness varying widely.
In its conclusion, the CBO brief states that "the relationship of realizations and receipts to gains tax rates is neither predictable nor obvious."
Addressing Gibson's question in an April 16 entry on washingtonpost.com's Fact Checker blog, Post staff writer Glenn Kessler cited the CBO brief and wrote: "Charlie Gibson twice challenged Obama on the question of why he might consider raising capital gains taxes when, he claimed, cuts in the tax always results in increases in revenues. Gibson must be unduly worried about his stock portfolio. Gibson is right that a cut in capital gains taxes results in a brief increase in revenue, but that's only because stockholders decide to unload some stocks they have held in the new tax regime; there is less incentive to sell the stock if you know the rate is going to soon drop." In a New Republic blog post about Gibson's question, Jonathan Cohn quoted Brookings Institution economist Jason Furman as follows: "Joint Committee on Taxation and Treasury both score raising capital gains taxes as raising revenues. There is some behavioral response but much of that is timing and doesn't affect the medium-to-long term revenue loss." According to Cohn, Furman stated that "the experience after the 1997 cut and the 2003 cut is not a meaningful way to assess the impact of capital gains tax cuts on revenues because so many things were happening simultaneously."
Further, the Joint Committee on Taxation (JCT) estimated that the 2006 extension of the 2003 cuts on capital-gains taxes would result in decreased revenues of $20 billion over 10 years.
In addition, numerous economists have said that cuts in capital-gains taxes do not pay for themselves, let alone increase revenue. In an article published in the Journal of Public Economics, N. Gregory Mankiw -- former chairman of President Bush's Council of Economic Advisers -- and Matthew Weinzierl asked, "To what extent does a tax cut pay for itself?" Mankiw and Weinzierl concluded, "In almost all cases, tax cuts are partly self-financing. This is especially true for cuts in capital income taxes" [emphasis added]. Discussing those findings in a 2007 blog post, Mankiw noted, "Matthew Weinzierl and I estimated that a broad-based income tax cut (applying to both capital and labor income) would recoup only about a quarter of the lost revenue through supply-side growth effects. For a cut in capital income taxes, the feedback is larger -- about 50 percent -- but still well under 100 percent." A May 17, 2006, Knight Ridder Newspapers article citing Mankiw's study noted that "paybacks of 50 ... percent still mean a net revenue loss for the Treasury." The article also reported, "Treasury Secretary John Snow conceded Tuesday that the much-touted tax cuts for capital gains and dividend income don't drive today's strong economy. Asked by Knight Ridder if the tax reductions paid for themselves, Snow acknowledged that they don't."
From ABC's April 16 Democratic presidential debate:
GIBSON: You have, however, said you would favor an increase in the capital-gains tax. As a matter of fact, you said on CNBC, and I quote, "I certainly would not go above what existed under Bill Clinton, which was 28 percent."
It's now 15 percent. That's almost a doubling if you went to 28 percent. But actually, Bill Clinton in 1997 signed legislation that dropped the capital gains tax to 20 percent.
OBAMA: Right.
GIBSON: And George Bush has taken it down to 15 percent.
OBAMA: Right.
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: Well, Charlie, what I've said is that I would look at raising the capital-gains tax for purposes of fairness. We saw an article today which showed that the top 50 hedge fund managers made $29 billion last year -- $29 billion for 50 individuals. And part of what has happened is that those who are able to work the stock market and amass huge fortunes on capital gains are paying a lower tax rate than their secretaries. That's not fair.
And what I want is not oppressive taxation. I want businesses to thrive, and I want people to be rewarded for their success. But what I also want to make sure is that our tax system is fair and that we are able to finance health care for Americans who currently don't have it and that we're able to invest in our infrastructure and invest in our schools.
And you can't do that for free, and you can't take out a credit card from the Bank of China in the name of our children and our grandchildren and then say that you're cutting taxes, which is essentially what John McCain has been talking about. And that is irresponsible.
You know, I believe in the principle that you pay as you go. And, you know, you don't propose tax cuts unless you are closing other tax breaks for individuals. And you don't increase spending unless you're eliminating some spending or you're finding some new revenue. That's how we got an additional $4 trillion worth of debt under George Bush. That is helping to undermine our economy, and it's going to change when I'm president of the United States.
GIBSON: But history shows that when you drop the capital-gains tax, the revenues go up.
It would seem that Charlie's been listening to Sean Hannity too. I about fell off my chair when Gibson made that statement. Unfortunately, the right wing morons will eat it up, then parrot it as fact, even though it's fallicy.
In essence: "If we take in less, we take in more !" There's a couple of trolls who come to MMFA and tell us that Liberals have no common sense. Jackasses.
RUMPLE:
Since you're into extreme examples, tell us what a tax rate of ZERO will "bring in"? Hmmm?
Oh, that'll bring us at least 100%! That's because if you take zero, you end up with 100!
You liberals.
wow, did you just say that FDR was dumber than George Bush?
You rode the short bus to school didn't you?
Obama is the biggest fool ever to run for the presidency since woodrow wilson or fdr.
How could that be when McCain has turned out to be the biggest fool of this political season?
You cannot look at economic growth and capital gains as a zero sum game. Leftists look at economics as if the pie was already at its fullest so if taxes are lowered here then the income is 'lost' because the pie remains the same. What lowered tax rates do is increase the available money or capital for the economy to use to invest, innovate, upgrade technology and create infrastructure for the economy to grow, ie, increase the size of the pie. Tax revenue goes up because taxes are generated from economic activity, so when the activity of economic exchange increases more sources of revenue are created and more is collected from an enlarging economic pie.
Consider our upcoming rebate as if it were an individual capital gains cut that we will all be receiving this summer. Its stated purpose is to spur economic activity, that's what money in the hands of individuals instead of government can do. It is very similar to what politicians do when they want to give tax credits for say, alternative fuel research. This release of capital for new technology spurs growth of infrasture in that specific area.
This is economics 101 but the libs in government don't like general tax rate cuts because it takes the decision-making power away from them.
I bet if employers were required to pay a productivity indexed living wage, conservatives like yourself sure would start thinking of economic growth as a zero sum game.
Aside from just being a silly slippery slope fallacy, how on earth did you make the connection that decreasing productivity saves costs?
What lowered tax rates do is increase the available money or capital for the economy to use to invest, innovate, upgrade technology and create infrastructure for the economy to grow
Bull. Lower tax rates (for corporations and the rich) increase PROFITS so the rich just get richer and the poor/middle class have to foot the bill. The money isn't re-invested in anything except the bank accounts of CEOs and major stockholders.
You're
proudconservative wrote:
>>This is economics 101 but the libs in government don't like general tax rate cuts because it takes the decision-making power away from them.
You apparently didn't bother to read the details of the MMFA piece. If what you said were true, then the studies and economists would agree with you. They don't. So your scenario is simply incorrect. When you talk about economics 101, you really mean trickle down nonsense, which is not economics, but idealology.
I should also point out that knee-jerk conservatives always claim that cutting taxes increases tax revenue, ignoring the absurdity that such a claim leads to. If cutting taxes increases tax revenue, then we should continue to cut taxes every year--until tax rates are zero, at which point we would have *no* revenue. So obviously, cutting taxes cannot always lead to increased revenue.
Or, looked at another way, if you have a zero percent tax rate, then you receive no tax revenue; if you have a 100 percent tax rate, you also have no revenue because you could not have an economy. An ideal tax rate lies inbetween the two extremes, but where exactly it lies is open to debate, and certainly one cannot say that lower is better, unless you want to make a statement that is mathmatically and logically absurd.
Check this website for a history lesson on tax rates. Be amazed that Eisenhower, a Republican and not a Communist last I checked, presided over a boom economy AND a 91-92% tax rate.
http://www.truthandpolitics.org/top-rates.php
See, taxing the uber rich at an uber rate doesn't depress the economy. Same goes for the 1990s Clinton raised the highest rate to 39.6% and the economy soared despite this "confiscatory" rate, as most Republicans would put it.
Randy
Rrastro wrote:
>>a ragiing cold and hot war in korea help
Then the war in Iraq should have helped the Bush economy. And obviously, there was neither a hot nor a cold war during Clinton's presidency.
at the time of those absurdly high marginal rates, there were also available a whole host of tax shelter arrangements which made the effective tax rate much lower. in fact, when the shelters were available I paid very little in taxes.
that all changed in 1986 under tefra which eliminated the ability to use passive losses, which were paper losses only, mostly relating to amortization and depreciation, to offset earned income. it was only then that the rates came down. it was a real blow to the real estate industry which hosted most of the limited partnerships.
number1dumbman,
Two questions for you?
Do you have a 401K? If you do then technically you are part of the crowd that benefits in the capital and economic growth. Estimates are that about 67% of the working public have some type of retirement accounts, that apart from pensions or Social Security. All of these types of accounts benefit from lowered tax rates for several reasons. Stocks are what make much of pension investments as well as 401k's or similar plans and capital gains rate cuts allow for more movement in stocks. These gains are made when stocks move upward rather than just held onto by indivdiduals which keeps stocks more static. These are the ones taking the risks whereas 401k's are more long term in philosophy. So stock mobility enables long term investors, you and I if we have pensions or 401k's, to keep our money growing and the increased risk takers, who have lowered capital gains rates increase economic activity which is what the government taxes.
Secondly, have you ever had a poor person sign your paycheck? My guess is no. I need to have someone willing to hire me, unless I own my own business, who is wealthier than me. It stands to reason, that I depend upon their resources and risk-taking to become employed.
proudconservative wrote:
>>Secondly, have you ever had a poor person sign your paycheck? My guess is no. I need to have someone willing to hire me, unless I own my own business, who is wealthier than me. It stands to reason, that I depend upon their resources and risk-taking to become employed.
As a matter of fact, I have gotten paychecks from people poorer than myself, when I tutored. It does not stand to reason that you need risk takers to get employed. Many companies need little risk to prosper. For example, the largest employer in many cities is the public school system, which doesn't take risks.
More importantly, it may be true that the rich create most jobs, but it is equally true that you cannot run any company without workers, who tend not to be rich. Or put another way, you cannot run an economy without poor, or poorer people. So the rich are as dependent on the poor as the poor are on the rich, and the economy requires both.
somethingfunnyinhispants,
Tutoring? Is that something that you could actually make a living at? And good liberal that you are, why are you not giving your services to the poor instead of making windfall educational profits at their expense?
Public schools do not take risks because they are public schools without competition for goodness sakes! You're right, no risk in that industry!
You stated: More importantly, it may be true that the rich create most jobs, but it is equally true that you cannot run any company without workers, who tend not to be rich.
You were pretty close on point at that juncture. The great thing about our economy is that those workers have the potential to use their experience to move up the food chain, be able to start their own ventures or choose to do something else altogether. If they desire wealth and have the hudtspa, they can parley that job into something better. But they need an employer with the resources to hire them before they can develop their own to hire somebody else. This ain't rocket science.
But you went on to write: Or put another way, you cannot run an economy without poor, or poorer people. So the rich are as dependent on the poor as the poor are on the rich, and the economy requires both.
Economies run on capital, either generated by a command economic philosophy, ie the government or a free capitalist society. In a command, all eventually become poor except maybe the ruling elite in the politboro, in a free capitalist country, everyone has an opportunity to not be poor, commrade, and to do with their abilities and initiative as they freely choose.
Thus:
PC suggests that those of us who have 401(k)s, and, relatively speaking, mange our portfolios more statically than his idealized risk takers -- who are into stocks for the shorter term capital gains -- benefit from the "mobility" in stocks generated by those shorter term investors. PC seems to suggest these shorter term investors are driven to create this mobility – and, therefore, benefits for all of us -- because they are: (i) in search of capital gains; and (ii) are driven to trade more often because of lower capital gains tax rates.
He doesn't cite any evidence for any of this, and he doesn't suggest how we should adjust for overall market mobility by adjusting for that portion of mobility caused by the trading that goes on in those 401(k) funds themselves, at however a lower velocity.
Not to mention how to adjust for the volatility (notice how PC uses the more positive sounding term "mobility") in down markets. Maybe we should call that "bad mobility," as contrasted with the "good mobility" that somehow magically sends the stock market up.
And let's not dwell too much on the fact the fact that over time, overall stock market volume, which is certainly a measure of mobility, has gone up in any event.
But no matter, let's stipulate for current purposes that PC is right about what he says, at least as far as the basic dynamics are concerned.
Anyway, here is how he sums up the matter:
"These gains are made when stocks move upward rather than just held onto by indivdiduals [sic] [in their 401(k)s] which keeps stocks more static."
But now the question fairly leaps off the page. What happens when the stock market doesn't go "upward"? What happens to all those "benefits" of all that mobility – especially for us 401(k) sticks in the mud?
For example, on January 19, 2001, just before George Bush came into office, the S&P 500 index, an imperfect proxy for the stock market as a whole, but nonetheless a commonly accepted proxy for overall stock activity (and one embedded deeply into the major 401(k) managers' portfolios) stood at 1342.54.
At market close on Friday, April 18, 2008, after a seven year plus orgy of tax cuts sponsored by the Bush Administration, and, of course, a drop in 2003 in the capital gains rate from 20% to 15%, the S&P index stood at 1342.54.
Anyone care to calculate the "benefits" to someone who had his 401(k) invested in an S&P 500 Index fund over that period of time?
Try a 0.484% annual rate.
For those who have trouble remembering how to read the decimal point with percentages, that's a rate of .00484, or a bit under one half of one percent. The financial boys would speak in terms of 48.4 basis points. Why that's strikingly close to what some S&P 500 index fund managers (TIAA for one) will charge you in annual management fees to have your money in their S&P fund in the first place. So Whoosh! There went your yearly appreciation down the hole of management fees.
Yes, you would still have your principal and there would have been modest dividend growth in your holdings. But very modest, especially in an index fund.
And you will have got some tax benefits along the way.
But of course when you take your money out after you retire, you will have the privilege of paying taxes on it at the ordinary income rate. That's right. Despite the fact that you are invested in the stock market, and people like President Bush and PC like to say that so many Americans are invested in the stock market simply because they have 401(k)s, with the snake oil implication that we all somehow directly benefit from lowered capital gains rates, we 401(k) people will not get the benefit of a lowered capital gains rate on any portion of our withdrawals. We gave that up when we accepted the tax deferment benefit.
"But," says PC, "the stock market won't stay down forever. Just wait and you'll see it will go back up again."
You know, he may be right. I mean about the necessity of waiting.
Thus, if we wait around long enough – maybe only until 2009 in this case – we just may have a Democratic president again, and the stock market maybe will go back up, leaving PC and his ilk to spin even newer versions of their whack-a-mole narratives about what happened between 2001 and 2008 to us 401(k) folks.
Their CYDCA (cover your dumb conservative ass) narratives will predictably oscillate between saying that what happened didn't really happen, was somehow abnormal and not to be repeated, or was otherwise our own fault, e.g., the fault of those who stood in the way of cutting capital gains rates to zero. Or at least someone else's fault other than that of the ideological conservatives such as Grover Norquist, PC, and President Bush who, facts be damned, preached the Gospel of cutting capital gains rates as a way to benefit "all of us."
And thank you for not noticing my typo. I meant to say that, as of the Friday April 18, 2008 close, the S&P stood at 1390.33, not the 1342.54 level that it was at on January 19, 2001, and which I erroneously repeated in my initial post.
Use the correct 1390.33 number and the math I provided works out. You know, the miserable 48.4 basis points appreciation over 87 months of investment.
I suppose I can take some consolation in the fact that windbag Proudconservative is apparently so averse to facts – as are most hit-and-run wingnuts, proud or not -- that he didn't even bother to check the math of my analysis in order to try to at least marginally rescue his ridiculous trickle down fantasy about lowered capital gains tax rates benefiting all of us 401(k) folks, and not just the Wall Street sharks and the top 1% of the income distribution.
Billyblog,
There is a lot of objective analysis out there that would say that the stock market in the late 90's was going out of control in relation to where these companies were with their balance sheets and income statements. Plainly stated, the market was way overvalued.
Of course, my view is that an overvalued market would have been unsustainable with Bush in office or Gore in office. The correction was going to happen. The people that didn't benefit from the inflated prices of the late 90's but instead "got in" around 2000 certainly are taking the brunt of the pain. The rest of us that are "dollar cost averaging" for the last twenty years should understand that the euphoria that was the late 90's when the market went up over 20% for 4 consecutive years was bound to be offset by a period of decline. In the long run the return is still decent.
Blaming the cut in rates on what happened to the market seems misplaced to me. The better comparison would be to determine where the markets would be today had the rate cuts not been put into effect vs where they actually are. I don't have the expertise to make that determination, but that would be the relevent comparison, in my view.
billyblob,
Just a few things to consider: S&P 500 values had begun to fall before Bush took office, due in part to the small recession just at the end of Clinton's second term. No biggie though, that seemed to be part of the natural business cycle with added overvaluation of dot.com's. Bush added a small tax rebate in the summer of 2001 that also seemed to mitigate some of the effects of a typical downturn.
Most importantly though, when the terrorist attacked on 9/11, the economy was tanked, especially in the airline industry, a significant part of those '500 companies' and the ripple effect was potentially disasterous. But, the tax rate cuts that followed, benefitted all of us and allowed for a remarkable length of solid economic growth, especially given the destablilizing possiblity from so severe an attack. Those tax cuts need to be made permanent to continue to benefit us and should include the removal of part of the 1993 tax increases that first taxed social security and would help alleviate the pain of having to pay more income tax when IRA's and 401k's are drawn down.
And as far as your CYA statement, consider this: As bad as things may seem now, I will always be grateful for Jimmy Carter's presidency. It set the bar for how bad things could actually get if a president attempts to command so much of the economy through poor tax and fiscal policy. Compare today with interest rates of 20%+, unemployment at 10% and inflation at 8-9%. So lets use the Carter effect for considering tax and fiscal policy, just like Seifeld's George Castanza's did everything opposite his instincts would tell him in order to be successful. Imagine a 'What would Jimmy Do?' campaign (WWJD) where we looked and did 180 degrees the opposite.
Had to throw Jimmy Carter in there, eh? Guess he just isn't your kind of Christian. He actually cares about the people in the entire world. His energy policies if continued would have been helping us get out of dependency on foreign oil.
Small recession at the end of Clinton's prezidency? That was a right wing talking point at the time but the recession didn't begin until BushCo.s took office...It was a result partly of the dot com bust which didn't have much to do with any political move. The tax cuts made the recession much worse unless you think it was a great idea to give all those millionares & billionares more incentive to move their factories overseas. The majority of his tax cut went to the people at the very top...and NO, it didn't stimulate the economy for everyone.
"All of these types of accounts benefit from lowered tax rates for several reasons."
Do tell me, how have my 401k and IRA benefitted? I really want to know because I sure as hell don't see the benefits on my quarterly statements, particularly the ones I've received ever since Bush took office.
Yah gotta fan PC.
You assume That the higher income elitists spend that money on this country's future and we benifit from their spending in this country. Its not working, it hasn't worked. Trickle down redux. Figures show you average family has lost $1200/yr in the last 7 years. Non white families twice that.
When you have sufficient excess income to make captital gains a significant part of your income, 15% tax on that income would seem just great. How is this part of the up right, hard working, bootstrapping, population. What sweat and tears are involved in this windfall, hangnail?
Explain or expand on your last paragraph. Tax rate cuts decreases my power to make decisions. First I wasn't aware of any power that I could freely exercise to make descisions on, what, with regard to,what.
You assume That the higher income elitists spend that money on this country's future and we benifit from their spending in this country
I don't think that's fair, Eweston, not so much an assumption as a spoon-fed pile of BS.An assumption takes a little thinking.As charming as economics lectures from dittobots are, it still makes me laugh to think how many average Americans buy this stuff.
Aside from the obvious short term effects of deferring taxes, they don't seem to catch another aspect of the conservative line, that the "increase in revenue" is almost always stated as relative to the deliberately low forecasts.
The Ultra-wealthy must thank their lucky stars every night for their ignorant fan club.Thanks for the votes, suckers.
Whadya mean, they're the job creators! We shouldn't take anything away from them!
The rich are all that is best in us. That's why they show them to us every night on the TV.
Col., I love that line. May I use it?
There isn't ONE pie. There are TWO pies. One, the big fat one, is on the board-room table. The CEO cuts himself half of the pie. He lets the others fight over the other half,
while he gobbles up his, hunkered down in the corner, snarling and drooling. IF his company actually makes something useful, the workers come in for their piece of the pie. "Where's ours, Boss?" "Oh, its not that one, its this one, here, the flat one with very little "goodie" in it. Well, hee, hee, its more like a Twinkie."
I think when Johnny Mack becomes President he will certainly have a place for Rumple and Proudwhatever in his cabinet. Wouldn't even have to change their underwear.
How will raising taxes fix anything? We have the second-highest corporate tax rate on the planet... will raising that, bring jobs back to America?
People gripe about the "top 1%", but the theshhold to that club is somewhere over $300K. But you'd think they were talking about millionaires when they use terms like "winners of lifes' lottery". Why do we still wallow in class warfare, in 21st century America?
I read with interest today that Spain, a socialist country, which is suffering from a declining economy is reducing taxes to turn things around.
In the U.S. as we are undoubtedly are in or entering a recession, we are hell bent to raise taxes so as to make things worse.
Rumpel wrote:
>>I read with interest today that Spain, a socialist country, which is suffering from a declining economy is reducing taxes to turn things around.
Spain's economy is obviously different from the US, so your argument is absurdly simplistic. What do you mean declining economy, what are the tax rates, who are they going to cut taxes on, etc. Also, just because Spain is going to do something they think will help the economy, doesn't mean it really will help the economy.
Our corporate tax rate is second highest in the oecd, at 39.3% While the trend of countries is to reduce corporate taxes, we have not. you can go here to see tax rates by nation, and the expected benefits of cutting the corporate tax rate. http://www.taxfoundation.org/news/show/1466.html
here are the present rates in spain: Personal Income Tax 25%; top rate of personal income tax 45%, and the standard rate of capital gains tax from 15% (for assets held for more than one year). Corporation tax is levied at a standard rate of 35%, and at 30% on the first €90,151 for companies with a turnover of less than €5m. The standard rate of value-added tax is 16%. A tax reform package is to come into force in January 2007, including a cut in the top rate of income tax, to 43%, a progressive cut in corporation tax to 30% over a period of four years, and an increase in capital gains tax to 18%.Tax on Capital Gains on the Sale of Property in Spain treated as a long term capital gain can be taxed at a flat capital gains tax rate of 15%. New Properties purchase tax: buyers of brand new houses in Spain are liable to paying 7%. this is one year old news.
what they reduce them to was not mentioned in the article.
tax cutting helps economies, so yes it really will help.
Rumpel wrote:
>>tax cutting helps economies, so yes it really will help.
Ah, but no it doesn't. If tax cutting helps economies, then we should cut all taxes. You are simply stating an idealogy. The site you link to is a right-wing site (which doesn't even have the honestly to admit that), so I take their statistics with a grain of salt.
A statistic (singular) is the result of applying a function (statistical algorithm) to a set of data.
whether tax cutting will stimulate the economy has nothing to do with ideology. it will, but if you choose not cut taxes because of some notion of "fairness" that's ideology. libs are more interested in punishing people than helping the economy.
Rumple wrote:
>>gosh, you are dumb. those are not statistics, they are just listing the tax rates.
yes, I see you are substituing name calling for argumentation. See my link below, which exposes your link for the propaganda that it is. And yes, the idea that cutting tax rates will automatically help the economy is propaganda. If what you say were true, then we should have *no* taxes at all!
By the way, your definition of statistics is simply false. You give one definition, and pretend that that is the only way people use the word; they don't. I used the word correctly. Check out dictinoary.com, for example.
"a numerical fact or datum, esp. one computed from a sample."
FMP wrote:
>>The site you link to is a right-wing site (which doesn't even have the honestly to admit that), so I take their statistics with a grain of salt.
Sorry, I was wrong. The site isn't right wing; it is an outright anti-tax propaganda oraganization.
link
Really, how stupid can you get? The Tax Foundations calculates the average taxes the middle class pays by simply dividing the total taxes paid by the tax payers--without taking into account that we have a graduated income tax!
Rumpel wrote:
>>i was referring to corporate tax rates, not individual. are you blind as well as stupid?
Ah, yes, still name calling. (My "how stupid can you get" is in reference to the tax foundation propaganda.) Name calling is not a form of argumentation. Yes, I understand you are referring to corporate tax rates. But if the Tax Foundation is so breathtakinginly dishonest about personal income tax, is there any reason to accept their statsitcs on face value?
You still haven't answered the main problem with your argument. If cutting taxes always helps the economy, as you claim, then there should be *no* taxes at all. You are obviously stating an absurdity.
well zero income taxes would be ideal, as a matter of fact when this nation was founded the only taxes were import duties, and the government made additional money by selling property. there were no income taxes until the civil war.
but undoubtedly we'd need some government programs and services, so it's a question of how to raise the money. but it doesn't have to be with the boot of the government on the neck of the people. this is not stalinist russia.
Rumpel wrote:
>>but undoubtedly we'd need some government programs and services, so it's a question of how to raise the money. but it doesn't have to be with the boot of the government on the neck of the people. this is not stalinist russia.
Okay, since you were picky before, thinking you showed an error in my definition when I did not, let me point out that there was no such thing as "Stalinist Russia." It was the Stalinist Soviet Union. Whatever.
But more to the point, your post simply contains inflamatory rhetoric and makes an absurd comparison. Stalinist Soviet--really? Under Stalin, 20 million people died, most of them in concentration camps. Every aspect of the economy--of life, for that matter--was controled and crushed by one of the worst totalitarian governments in history. You are now suggesting that because the Dems want to set the capitol gains tax at what it was under Clinton (when the economy was very strong), the US will end up killing 20 million people, and likewise end up with complete state control over everything? Again, your comparison is stupid and makes no sense. Such an absolutely dumb comparison shows you have no argument, having to reach for extreme, ludicrous examples because you cannot point out what is really wrong with the Dems proposal.
Ugh! Tax BAD! Bush SMASH TAX!
That is as far as Rumple thinks it through.
the libs in government don't like general tax rate cuts because it takes the decision-making power away from them
Sorry, ProudConservative, but there are members of the GOP that feel the same way. Which is why I vote for neither them, nor the Dems.
Well, one reason, I should say.
It was pathetic to see Stephanopoulos's cronies circle the wagons around him him on his show this morning and Gibson for their performance on the Debate. Was was espceialy galling was George Will trying to defend and expand on the capital gains question. Got new for you Georgie. Your as much as a faux economist as you are a faux scientists, "ther are great doubts about global warming". Noticed that they kept Katarina off today. Just Stephanopoulos's old cronies who would defend the indefensible. Gutless as always.
According to the referenced economists - Gibson's asertion is not disputed - revenues do increase. Though debate as to the reason why presented here soulds like a bunch of leftists trying to poo poo the truth- the revenues DO INCREASE.
This is not misinformation but Media Matters trying to plug the torpedo sized hole Gibson blew in BO's sinking ship.
A few quotes from the article above. Reading comprehension, please:
In its conclusion, the CBO brief states that "the relationship of realizations and receipts to gains tax rates is neither predictable nor obvious."
A May 17, 2006, Knight Ridder Newspapers article citing Mankiw's study noted that "paybacks of 50 ... percent still mean a net revenue loss for the Treasury." The article also reported, "Treasury Secretary John Snow conceded Tuesday that the much-touted tax cuts for capital gains and dividend income don't drive today's strong economy. Asked by Knight Ridder if the tax reductions paid for themselves, Snow acknowledged that they don't."
Go back in time to January 2003, before the Cap Gains tax cut was enacted. Table 3-5 on page 60 in CBO’s Budget and Economic Outlook published in 2003 estimated that capital-gains tax liabilities would be $60 billion in 2004 and $65 billion in 2005, for a two-year total of $125 billion. http://www.cbo.gov/ftpdocs/40xx/doc4032/EntireReport_WithErrata.pdf
Move forward a year, to January 2004, after the capital-gains tax cut had been enacted. Table 4-4 on page 82 in CBO’s Budget and Economic Outlook of that year shows that the estimates for capital-gains tax liabilities had been lowered to $46 billion in 2004 and $52 billion in 2005, for a two-year total of $98 billion. Compare the original $125 billion total to the new $98 billion total, and we can infer that CBO was forecasting that the tax cut would cost the government $27 billion in revenues. http://www.cbo.gov/ftpdocs/49xx/doc4985/01-26-BudgetOutlook-EntireReport.pdf
Take a look at Table 4-4 on page 92 of the Budget and Economic Outlook released in January 2006. You’ll see that actual receipts from capital-gains taxes were $71 billion in 2004, and $80 billion in 2005, for a two-year total of $151 billion. Subtract the originally estimated two-year liability of $125 billion from the actual liability of $151 billion, and you get a $26 billion upside surprise for the government. Instead of costing the government $27 billion in revenues, the tax cuts actually earned the government $26 billion extra.
http://www.cbo.gov/ftpdocs/70xx/doc7027/01-26-BudgetOutlook.pdf
Dems_soul wrote:
>>Subtract the originally estimated two-year liability of $125 billion from the actual liability of $151 billion, and you get a $26 billion upside surprise for the government. Instead of costing the government $27 billion in revenues, the tax cuts actually earned the government $26 billion extra.
I don't think so. You are simply playing games with raw data. (Does the phrase "cherry picking" mean anything to you?) As has been pointed out before, the gains are the results of artificially low predictions. The CBO disputes your assertion. Is the CBO a leftist organization?
demsupacertaincreekwithoutapaddle,
I hope you don't mind me horning in on your fun with baggypants himself, but I just couldn't help it.
First off, the CBO is about projections of the effects of changes in the law. You have correctly compared the results with the projections, shame shame on you sol! Here from their own website:
"How accurate are CBO's budget projections?
By statute, CBO's baseline projections must estimate the future paths of federal spending and revenues under current law and policies. The baseline is therefore not intended to be a prediction of future budgetary outcomes; instead, it is meant to serve as a neutral benchmark that lawmakers can use to measure the effects of proposed changes to spending and taxes. So for that reason and others, actual budgetary outcomes are almost certain to differ from CBO's baseline projections. For a related discussion, see Chapter 1 of CBO's Budget and Economic Outlook; see also The Uncertainty of Budget Projections: A Discussion of Data and Methods for supplemental information. "
Actually, the CBO tends to overestimate deficits and underestimate revenues historically. But its function is to aid the congress in looking at implications for laws regarding the cost of programming, tax law, etc. Its focus is not on looking at an enlarging pie of economic growth, but rather static economic presumptions. That is how the phrase, "who will pay for the tax cuts?' carries weight because the assumption is that the pie never grows with more individuals participating in the economy because of tax cuts.
Point is, if we're in a recession... wouldn't raising taxes just make it worse?