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That is not what happened with the mortgage industry. They loaned person A $ to buy a home and that money went to person B, who then deposited that money into a bank to pay off the old mortgage. ITS A WASH. It doesnt generate money.
You have to look at the bigger picture. Person X buys a home for $100k, "years ago".
Home has now appreciated to $350k, but that money is illiquid -- that $250k gain is not in circulation.
Person Y comes along and borrows money (from the banks, who get it from the Fed) , and buys that house for $350k, today. This has created a short-term boost to the monetary base, by turning that $250k "illiquid home price gain" into a $250k lump of "liquid cash".
X's new cash gain is what causes the short-term inflationary boost. Y's new obligation is what causes the long-term deflationary drag.
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Even if person B walked away with cash over and above what they owed on their mortgage, they still went out and spent that money or bought something else, thus returning the money back to the banks. We arent discussing government money, we are discussing consumer currency being transferred.
That money doesn't necessarily go "to the banks." It goes into the economy. That is the part which is "generating economic activity". That liquid cash wouldn't have existed , had the house not been sold, and the gains not taken.
The house could not have been sold, had a new buyer not been willing to take on a new 30-year mortgage.
The new 30-year mortgage could not have been issued without the Federal Reserve giving money to the banks to make it happen.
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Lie. The bush tax cuts encouraged economic growht and encouraged people to spend their money which generated more revenues, not less.
No, it didn't.
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Deficits only came because government INCREASED SPENDING
What part of this is so difficult for you liberals?
Oh, the wars, and Medicare Part D definitely increased spending. Bush failed to cut the size of government, but that's not under dispute.
What's under dispute is your claim that economic growth in that time period was caused by the Bush tax cuts. You say it is. I say it is not. I say the growth was caused by the mortgage lending boom.
Last edited by Cletus Awreetus-Awrightus; 11-22-2011 at 06:00 AM..
Receipts as a percentage of GDP, by year, over a longer term:
1993: 17.5
1994: 18.0
1995: 18.4
1996: 18.8
1997: 19.2
1998: 19.9
1999: 19.8
2000: 20.6
2001: 19.5 <- First Bush Tax Cuts (EGTRRA)
2002: 17.6
2003: 16.2 <- Second Bush Tax Cuts (JGTRRA)
2004: 16.1
2005: 17.3
2006: 18.2
2007: 18.5
2008: 17.5
2009: 14.9
Now, you may be in love with receipts making it past 18% of the GDP for couple of years, but that happens to be merely an average over about a half century. What do you think the average has been since 2001?
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Originally Posted by pghquest
Do you understand what a recession is and why unemployment rates under 5% would mean less govenrment [sic] expenses? Sure looks to me like you only want to look at part of the picture and not the complete package. What a surprise!!
pghquest,
Your conclusion displays that you completely misunderstand what EinsteinsGhost's table means. His table is revenue as a percent of GDP. Therefore, your snippy comment about government expenses has nothing to do with anything.
You also need to understand that “percent of GDP†is a fraction and fractions have numerators and denominators, in this case Revenue/GDP.
EinsteinsGhost clearly shows how Revenue as a p% of GDP dropped after the Bush tax-cuts. Expenses are not a factor in this equation and therefore has no bearing on the fraction, which makes you reply an answer to something irrelevant to case in hand.
EinsteinsGhost's overall point is that the Bush tax-cuts lowered revenue in real terms and a p% of GDP. That's incontrovertible.
Go through the data in post http://www.city-data.com/forum/21804039-post159.html and take note of tax rates, revenue and investment. I'll look forward to your conclusion. Go to the BLS website and coincide that data with employement data, you'll see a clear correlation.
Just tell them Clinton lowered capital gains tax from 28 to 20 then they'll like it.
Do you understand what a recession is and why unemployment rates under 5% would mean less govenrment expenses? Sure looks to me like you only want to look at part of the picture and not the complete package. What a surprise!!
Unemployment rate under 5% my foot. I know it is something you're in love with, and an utter non-sense to me, but at least try to understand the numbers that are being posted before you respond to them. Hint: Receipts as a percentage of GDP.
Go through the data in post http://www.city-data.com/forum/21804039-post159.html and take note of tax rates, revenue and investment. I'll look forward to your conclusion. Go to the BLS website and coincide that data with employement data, you'll see a clear correlation.
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Originally Posted by Loveshiscountry
Just tell them Clinton lowered capital gains tax from 28 to 20 then they'll like it.
I looked at that earlier post and your basic assertion is when one looks at a comparison of capital gains in 1981 and 1982 and compare it to later years in the decade, when capital gains rates were lower, capital gains revenue is higher, and thus proves that lowering capital gains rates were responsible for the rise in revenues. Too bad it doesn't.
What you are engaging in is the correlation is causation fallacy. You look at one aspect, note a change in an event and ignore anything else going on at the time and then conclude that the one factor you are measuring was causal to the event.
What else was happening in 1982? Interest rates were 14%, causing equity prices to be low (e.g. lower capital gains taxes.) Then they fell dramatically.
Interest rates:
The Dow Jones industrial Average bottomed at 775 that August. Then, interest rates came down sharply starting a bull market in equities (e.g. higher capital gains revenue.)
This is a chart of the DJIA:
Within two years of that low, the Dow nearly doubled and it had nothing to do with lowering capital gains rates. It was entirely due to ending a recession with high interest rates going into recovery with lower interest rates. That's why government capital gains revenue rose.
Oh, by the way, the same thing happened in the 1990s. We had a stock market boom caused by low interest rates coupled with a growing economy. Higher capital gains government revenue grew because the markets and volume of trades grew. Had Clinton not lowered capital gains rates, the markets would have risen the same but revenues would have been higher because the rates would have been higher.
Your claim was that 100 years of data proves that taxes don't correlate to changes in revenues and investment. Your ability to analyze is atrocious.
Here, from the IMF...
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The growth of the shadow economy can set off a destructive cycle. Transactions in the shadow economy escape taxation, thus keeping tax revenues lower than they otherwise would be. If the tax base or tax compliance is eroded, governments may respond by raising tax rates—encouraging a further flight into the shadow economy that further worsens the budget constraints on the public sector. (On the other hand, at least two-thirds of the income earned in the shadow economy is immediately spent on the official economy, resulting in a considerable positive stimulus effect on the official economy.)
Countries with relatively low tax rates, fewer laws and regulations, and a well-established rule of law tend to have smaller shadow economies.
Macroeconomic and microeconomic modeling studies based on data for several countries suggest that the major driving forces behind the size and growth of the shadow economy are an increasing burden of tax and social security payments, combined with rising restrictions in the official labor market. Wage rates in the official economy also play a role.
a tax on interest (investment) should be no higher than the interest earned..
why would you tax at a high rate of 15%, when the best interest you can get right now is less than 5%
tax at one rate for all incomes..and no higher than 15%..preferably 10%
if the government cant run on 10% of all incomes...then something is wrong with the government
So you are alright with those in the top brackets paying a lower percentage than a middle class worker, because that is exactly what the 15% capital gains creates.
A flat tax would punish those at the bottom severely, there will always be a graded tax structure, no one in their right mind will ever approve a flat tax.
What doers tax and interest rate have to do with anything, you do understand that capital gains is relative to stock, real estate investments, collectables.
a tax on interest (investment) should be no higher than the interest earned..
why would you tax at a high rate of 15%, when the best interest you can get right now is less than 5%
tax at one rate for all incomes..and no higher than 15%..preferably 10%
if the government cant run on 10% of all incomes...then something is wrong with the government
It's now abundantly clear. You have no idea what you are talking about. You really think that tax on interest is a tax on the entire principle?
capitol gains hits almost everyone
No, only those who have sold assets that are subject to the tax. Most of those taxes fall on the upper brackets and particularly the top 1% -- but 50% of the capital gains income of the top 1% is concentrated in the top 0.1%. Poor people and most of the middle-class have near zero capital gains taxes, because they own little or no stock. Stock held in 401K plans are taxed as ordinary income when realized at retirement. Sales of primary residents are exempt.
a tax on interest (investment) should be no higher than the interest earned..
What this says is that it's clear you seem not to know the difference between interest income and capital gains. It also says that you don't know that interest income is taxed at the ordinary income rate and only the interest earned (see below). Capital gains is taxed at a special rate depending upon if it's short or long term.
why would you tax at a high rate of 15%, when the best interest you can get right now is less than 5%Wow, you're clearly ignorant of how this works. I had no idea. With interest income (like bank interest) you only pay taxes on the interest, not the principle. Example: If you have $1,000 in the bank and earn 5% interest, at the end of the year you will have $1,050 in the bank. Your tax is on $50, not $1,050.
On capital gains: They call it a "capital gains tax" because only gains are taxed. In other words, if I buy $10,000 worth of stock and sell it for $15,000, only $5,000 is subject to tax. If this was a long-term capital gain, the tax would be $750.
tax at one rate for all incomes..and no higher than 15%..preferably 10%
Then we won't raise enough money to run the government. Already taxes as a p% of GDP is 15% -- a modern time low, and we are running huge deficits.
if the government cant run on 10% of all incomes...then something is wrong with the government.
According to who, someone who doesn't even know that bank interest isn't capital gains? For many decades, under Democratic and Republican governments, revenue as a p% of GDP is traditionally 18%. Lower it to 10% and we probably can't even have the military we have.
For the middle class investors, capital gains will be lowered to 10%, the rich will have their capital gains raised to 50%. Thoughts?
Have you ever sat for one day in an economics class?
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