Top Republican Tax Writer Chooses A Bigger Deficit Over Tax Increases For The Rich

[Mr. Big Dog 10,747]

this one does however....

Indeed. It also shows that capital gains revenues did not pick-up following the 1997 rate cut but rather stayed on the very trajectory they were already on. Further, it shows that the peak revenue in 2007 (following the additional rate cut in 2003) stayed below the previous peak of 2000. The chart you posted here would lead to the conclusion that further cuts in the captial gains tax rate would further diminish revenues. What it perhaps shows is that the equilibrium is somewhere between 20% and 28%?

[Obama 2012 1,714]

And you might want to check what happened during those up and down points? Off the top of my head Clinton tripled stock market prices in his time in office. So obviously 1995 to 2000 you are having massive amounts of cap gains (because gains happen when stock markets are booming).

2000 was the dot com bubble.

And I'd just have to take a wild guess here but from 2007 to 2009 you will probably see an incredible crash if the chart was extended....There is more of a correlation between stock market going up and cap gains receipts up than stock market going up because of a tax decrease. Don't you think?

#1 read my second post in response to big dog here on the market vs. cap gains taxes. link

#2 I'm simply responding to your misplaced chart that has nothing to do with what we are talking about.

[Obama 2012 1,714]

Indeed. It also shows that capital gains revenues did not pick-up following the 1997 rate cut but rather stayed on the very trajectory they were already on. Further, it shows that the peak revenue in 2007 (following the additional rate cut in 2003) stayed below the previous peak of 2000. The chart you posted here would lead to the conclusion that further cuts in the captial gains tax rate would further diminish revenues. What it perhaps shows is that the equilibrium is somewhere between 20% and 28%?

Not at all. Read my post in response earlier.

The fact of the matter is, we cannot answer whether or not the 1996 decrease helped the market or not. The only thing we can assert for fact is that it did not hurt it. We cannot conclusively state for or against the idea that if it had stayed at 28% that it would or would not have dropped off.

We can state for fact though, that when the market started recovering after the .com burst and the cap gains was lowered, that the market grew as well. That is conclusive. However there again, we cannot conclude a full trend on this, because after 2007 when the derivatives market caused the housing market to burst, the rest of the market went with it. We had 3 1/2 - 4 good market years in increased receipts trying to catch up until that burst.

[웃 910]

#1 read my second post in response to big dog here on the market vs. cap gains taxes. link

#2 I'm simply responding to your misplaced chart that has nothing to do with what we are talking about.

#3 fill in 2007 to 2009 to see if that 2003 tax cut on your chart was meaningless in terms of tax collected.

because:

2003: Dow low is 7400

2007: Dow high is 14200

= during that period the stock index nearly doubled = more cap gains tax revenue (would have been less if you believe that stock prices had nothing to do with a slight cap gains rate reduction)

Edited June 28, 2011 by Lord Infamous

[Mr. Big Dog 10,747]

Not at all. Read my post in response earlier.

The fact of the matter is, we cannot answer whether or not the 1996 decrease helped the market or not. The only thing we can assert for fact is that it did not hurt it. We cannot conclusively state for or against the idea that if it had stayed at 28% that it would or would not have dropped off.

We can state for fact though, that when the market started recovering after the .com burst and the cap gains was lowered, that the market grew as well. That is conclusive. However there again, we cannot conclude a full trend on this, because after 2007 when the derivatives market caused the housing market to burst, the rest of the market went with it. We had 3 1/2 - 4 good market years in increased receipts trying to catch up until that burst.

Paul, I know you'd like to have it both ways. But you can't sit there and say that we don't know whether revenues would have continued on their trajectory absent the 1997 cap gains tax cut and then turn around and say that the market recovery and revenue recovery are due to the 2003 cap gains tax cut. How do you know that the market wouldn't have picked up absent of that cap gains tax rate cut? You don't. Hence, there's nothing conclusive about the causality you want to claim here. If there was such causality, then how did the economy and the cap gains tax revenue increase absent of any tax rate cut up until 1997?

And I notice that you're avoiding the uncomfortable issue of the overall lower cap gains tax revenues in 2007 (@15%) vs. 2000 (@20%). That could not happen if your theory was right.

[Obama 2012 1,714]

#3 fill in 2007 to 2009 to see if that 2003 tax cut on your chart was meaningless in terms of tax collected.

because:

2003: Dow low is 7400

2007: Dow high is 14200

= during that period the stock index nearly doubled = more cap gains tax revenue (would have been less if you believe that stock prices had nothing to do with a slight cap gains rate reduction)

monies collected meaningless due to a drop in the market?

Trust me, monies collected by the government are never meaningless.

I get what you are trying to say, but there again the lower tax rate was incentive for people who normally wouldn't invest to invest their money as well. The "rich" can invest each and every year as long as they get a return that's positive for them. They'll pay a higher tax rate. Granted some may be reluctant to take their money out and invest it elsewhere, but the majority of the "wealthy" will invest if they know they can always have a positive return. Tax rates are irrelevant to that. The stock market is like Vegas only on a much larger scale. When you have big money to risk, you're going to stay somewhere where the minimum table bid is $5,000. If you're traveler, you're going to stay somewhere that has nickel slots. It's really that simple at the end of the day a lot of times.

However the nickel slots might end up failing if you're taxing 1 penny on every nickel won vs. 1/4 of a penny. That's a lot of money to the poor gambler. However $1250 tax to the rich guy who just increased his earnings by $3750 after taxes is nothing.

Unless you believe in a tierred tax rate (which I don't) then it's hard to accept any type of capital gains tax increase, because of the effects it might have on investors who are of simple means or those who are just trying to have a little something extra when they retire. The last thing they need is governmetn interfering and taxing them on one more dollar that it doesn't deserve.

[Obama 2012 1,714]

Paul, I know you'd like to have it both ways. But you can't sit there and say that we don't know whether revenues would have continued on their trajectory absent the 1997 cap gains tax cut and then turn around and say that the market recovery and revenue recovery are due to the 2003 cap gains tax cut. How do you know that the market wouldn't have picked up absent of that cap gains tax rate cut? You don't. Hence, there's nothing conclusive about the causality you want to claim here. If there was such causality, then how did the economy and the cap gains tax revenue increase absent of any tax rate cut up until 1997?

And I notice that you're avoiding the uncomfortable issue of the overall lower cap gains tax revenues in 2007 (@15%) vs. 2000 (@20%). That could not happen if your theory was right.

I'm not avoiding anything. The rate was lowered and the market kept going up, until 2000. I said, we don't know if they would have kept going up at 28%. 20% sounded good when it was at 28% before.

You can reasonably say that the market went up after the lowering to 15% however. A lower tax rate does spark more turning over of investments and keeps the money flowing. Don't think there's not a reaction to lower taxes? Look at states who have "tax free weekends" in the fall and how busy stores are on those days.

Taxes make the economy go 'round. Be it positive or negative effects.

Tell me how many people would rush out to go shopping on "extra tax weekend..."

[웃 910]

monies collected meaningless due to a drop in the market?

Trust me, monies collected by the government are never meaningless.

I get what you are trying to say, but there again the lower tax rate was incentive for people who normally wouldn't invest to invest their money as well. The "rich" can invest each and every year as long as they get a return that's positive for them. They'll pay a higher tax rate. Granted some may be reluctant to take their money out and invest it elsewhere, but the majority of the "wealthy" will invest if they know they can always have a positive return. Tax rates are irrelevant to that. The stock market is like Vegas only on a much larger scale. When you have big money to risk, you're going to stay somewhere where the minimum table bid is $5,000. If you're traveler, you're going to stay somewhere that has nickel slots. It's really that simple at the end of the day a lot of times.

However the nickel slots might end up failing if you're taxing 1 penny on every nickel won vs. 1/4 of a penny. That's a lot of money to the poor gambler. However $1250 tax to the rich guy who just increased his earnings by $3750 after taxes is nothing.

Unless you believe in a tierred tax rate (which I don't) then it's hard to accept any type of capital gains tax increase, because of the effects it might have on investors who are of simple means or those who are just trying to have a little something extra when they retire. The last thing they need is governmetn interfering and taxing them on one more dollar that it doesn't deserve.

I do think that cap gains should be eliminated for sure on less than $50,000....BS that I guy like me struggles to make a few grand in the market and then has to pay $600 or so around tax time (just an example on a few grand gain)...

[slim 1,530]

All this capital gains taxation talk has me wondering - how much do folks on welfare and/or those below the median income level pay each year in capital gains taxes?

It seems to me the Republican Tax Writer is spot-on to not tax one group more while there's still an entire group paying zero. If the deficit is getting bigger, perhaps alternative methods of debt reduction should be looked at.

I work with a person who makes the same as me (around 50K) and he has, I think, 5 kids. I made the mistake of having this conversation with him before I knew how many kids he had. I voiced my opinion about people having kids they can't afford; and he told me of his situation and that I was wrong because "children are a blessing". My response was that I don't want to have to pay for his blessing.

We don't talk very much any more.

They don't take to kindly to my arguments of "Well, my condo is a blessing. My smack habit is a blessing. My wife's fake tits are a blessing.... and you should be paying for all that. Don't you think?

I don't understand why we have such double standards in this country for things like that. People are free to have all the kids they want and the rest of us have to pay for it yet I want a new sports car and nobody is paying for mine. That's messed up.

Okay, then why are you arguing about it? Leave it alone as an item of non-interest to you. You may have missed it but it wasn't me that brought Denmark into the debate. All I'm saying is that tax rates - either here or there - do not exist in a vacuum.

I don't care who brought it up. Whenever we get on an issue here the first thing that pops up is, "Well, this is how it's handled in XXXXXX." Last time I checked, we didn't compare ourselves to the rest of the world because we can't. That's like comparing apples to oranges. We're not even fruit. We're the farmer!

I can sit here and talk about lower taxes in the US all I want when, in turn, basic necessities cost an arm and a leg where that doesn't need to be the case.

Since when is health insurance a "basic necessity?" See, that's what we've got all twisted up here in the US. We talk "basic necessities" as things like insurance, gas, food for our extra kids, a cell phone, etc.

Basic necessities are very simple. A place to stay and some food to eat. Our "basic necessities" are "basically too much" and instead of formatting our lives to live in a way that we can afford we've morphed our entire existance into always seeking more, regardless of who foots the bill.

I know that as a true American, you cannot fathom that many things we produce in the least efficient and least desirable way could be had at the same or better overall quality at a faction of the cost. Your inability to see and realize that doesn't take away from that reality, however.

I work in manufacturing. I see it on a daily basis. I acknowledge we could reduce the cost of everything we make. But, how can we? If we did, the government would go broke!

[Mr. Big Dog 10,747]

You can reasonably say that the market went up after the lowering to 15% however.

Yes you can. You just can't demonstrate that the latter caused the former. That's all I'm saying.

[Mr. Big Dog 10,747]

Since when is health insurance a "basic necessity?"

Oh, I don't know. It happened sometime between man leaving the caves and now. Closer to now, I think.

[Mr. Big Dog 10,747]

Unless you believe in a tierred tax rate (which I don't) then it's hard to accept any type of capital gains tax increase, because of the effects it might have on investors who are of simple means or those who are just trying to have a little something extra when they retire.

Of course, the retirement nest eggs of the average American is built in IRAs and 401Ks. Capital gains tax rates mean nothing to retirees drawing from such accounts because what you draw is taxed at your prevailing income tax rate rather than the potentially more favorable capital gains tax rate. But don't tell anyone.

Edited June 28, 2011 by Mr. Big Dog

[mawilson 2,133]

True, but the Danes at the equivalent income level of $50K US do not pay 45% in income taxes either.

Yes, they do. 45% is the *minimum* level.

Only income below DKK 42,900 (USD 7,600) is tax exempt - except from the gross tax which is 8 percent.

The income tax is broken down like this:

Social contribution (Gross tax) - 8%

Over DKK 42,900 (USD 7,600):

• Municipal tax: 23-28%
  
• Health tax (Region tax): 8%
  
• Base state tax: 3.76%
  

Over DKK 389,900 (USD 69,000):

• Top state tax: 15%
  

So someone who makes USD 50,000 pays

8% gross tax on USD 7,600 = USD 608

23-28% municipal on USD 42,400 = USD 9,752-11,872

8% health tax on USD 42,400 = USD 3,392

3.76% base state tax on USD 42,400 = USD 1,594

Total taxes: $15,346-17,466 (effective tax rate: 30.6-34.9%)

[Obama 2012 1,714]

Of course, the retirement nest eggs of the average American is built in IRAs and 401Ks. Capital gains tax rates mean nothing to retirees drawing from such accounts because what you draw is taxed at your prevailing income tax rate rather than the potentially more favorable capital gains tax rate. But don't tell anyone.

Well that depends though on whether or not the capital gains tax has an effect on the market.

Let's say that the reason why the stock market started growing again was because of the lowering of the capital gains tax. Then those retirees would be dependent on those who invest more and move their money around.

If we raise the tax and the market were to decline, then in essence, we'd be harming the poor once again.

[Mr. Big Dog 10,747]

Yes, they do. 45% is the *minimum* level.

Each and every Dane pays at least 45%? Link? Source?

It's not what I gathered here: http://www.skm.dk/foreign/english/taxindenmark2008/section2howisincometaxed/