I may be disallusioned, but I damn sure know enough about baseline budgeting and economics to be pretty darn confident that I am right. And I know that a cut in the projected budget is not necessarily a cut in spending.
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I may be disallusioned, but I damn sure know enough about baseline budgeting and economics to be pretty darn confident that I am right. And I know that a cut in the projected budget is not necessarily a cut in spending.
I may be disallusioned, but I damn sure know enough about baseline budgeting and economics to be pretty darn confident that I am right. And I know that a cut in the projected budget is not necessarily a cut in spending.
No. It's like this:
Let's say you decide you want a new Harley. You budget $25,000 for it. You've put away say $2,000 already. Then your wife decides she wants a trip to Spain instead and it's going to cost $15,000. So you scrap the Harley and now you have an extra $23,000 to spend and charge it all on the credit card.
Well, sorta, I got lost in your scenario fairly quickly. I ain't the sharpest knife in the drawer, and this stuff rapidly gets complicated. I'm not an accountant or a tax expert, or even an economist, just trying to understand this whole deal. That said, my understanding is that if you are a non-resident alien then you don't pay taxes here on capital gains, you do that in your own country whatever the CG rate is there. That means you had to renounce your US citizenship, which is happening these days, over a thousand a year. I think you gotta be out of the country for at least 3 years though. Anyway, if rich folks are renouncing their US citizneship for tax purposes because the income taxes or CG taxes are too high, that's a negative for the economy and jobs. Cuz those people ain't here spending money and investing as US citizens any more.
If you are an American, you pay our taxes no matter where you live or where you earn your income. Same deal if you are a resident alien living here, you are subject to the same tax rates as the rest of us. Sorry 'bout that. Which is one reason why higher CG and income rates discourage resident aliens from investing and staying here. I do not believe this is trivial either, over the past 30 years or so foreign investors have provided a significant chunk of capital into our economy.
Same deal with American investors, wherever they live. A higher cap gains rate disincentivizes them to put their money to good use on our economy. Maybe they don't invest it overseas, but we lose if that money if it's not invested here. Maybe they put it in tax free investments, or find creative ways to lower their tax burden. Long story short, there's no way a higher CG tax rate can be beneficial to an economy unless you're fighting inflation or the economy is overheating.
The corp tax rate thing kinda muddied the waters a little for me. Don't quite see the link with cap gains, one is for investors and the other is for employees. A lower corp tax rate definitely makes a country more attractive for entrepeneurs to startup a business or expand one ormaybe even relocate one. There's a lotta other factors to that though, but the fact is that many countries and US states are trying to do exactly that, attractmore business and hence more jobs and hence more revenue.
Well, sorta, I got lost in your scenario fairly quickly. I ain't the sharpest knife in the drawer, and this stuff rapidly gets complicated. I'm not an accountant or a tax expert, or even an economist, just trying to understand this whole deal. That said, my understanding is that if you are a non-resident alien then you don't pay taxes here on capital gains, you do that in your own country whatever the CG rate is there. That means you had to renounce your US citizenship, which is happening these days, over a thousand a year. I think you gotta be out of the country for at least 3 years though. Anyway, if rich folks are renouncing their US citizneship for tax purposes because the income taxes or CG taxes are too high, that's a negative for the economy and jobs. Cuz those people ain't here spending money and investing as US citizens any more.
I am sorry, I can't communicate this more clearly. I can't think of another way to communicate it but you are still missing the main point. Where you live no longer matters where you invest. So yes we would lose what they spend which is small in the overall context but would not likely lose what they invest.
If you are an American, you pay our taxes no matter where you live or where you earn your income. Same deal if you are a resident alien living here, you are subject to the same tax rates as the rest of us. Sorry 'bout that. Which is one reason why higher CG and income rates discourage resident aliens from investing and staying here. I do not believe this is trivial either, over the past 30 years or so foreign investors have provided a significant chunk of capital into our economy.
Again where you live and where you invest is no longer correlated. This fact is especially true for the very wealthy. It was true in the 1980's but it is not true any longer. A low coporate income tax will attract foreign investment and a low capital gains tax will do nothing to do so.
Same deal with American investors, wherever they live. A higher cap gains rate disincentivizes them to put their money to good use on our economy. Maybe they don't invest it overseas, but we lose if that money if it's not invested here. Maybe they put it in tax free investments, or find creative ways to lower their tax burden. Long story short, there's no way a higher CG tax rate can be beneficial to an economy unless you're fighting inflation or the economy is overheating.
You can make the case that a higher capital gains tax would cause them to seek less risky investments WW. But remember the case I made was to increase the capital gains rate so that you can reduce the corporate income tax by the same amount. You missing and not accounting for those afffects.
The corp tax rate thing kinda muddied the waters a little for me. Don't quite see the link with cap gains, one is for investors and the other is for employees. A lower corp tax rate definitely makes a country more attractive for entrepeneurs to startup a business or expand one ormaybe even relocate one. There's a lotta other factors to that though, but the fact is that many countries and US states are trying to do exactly that, attractmore business and hence more jobs and hence more revenue.
Replace entrepenuers with investors and you will start to be there once you realize that investors can as likely be from Japan as the US. The lower corporate tax rate will make investing in the US more attractive both for those living in the US and those residing overseas.
I may be disallusioned, but I damn sure know enough about baseline budgeting and economics to be pretty darn confident that I am right. And I know that a cut in the projected budget is not necessarily a cut in spending.
No. It's like this:
Let's say you decide you want a new Harley. You budget $25,000 for it. You've put away say $2,000 already. Then your wife decides she wants a trip to Spain instead and it's going to cost $15,000. So you scrap the Harley and now you have an extra $23,000 to spend and charge it all on the credit card.
I may be disallusioned, but I damn sure know enough about baseline budgeting and economics to be pretty darn confident that I am right. And I know that a cut in the projected budget is not necessarily a cut in spending.
I think your nihilism is getting the best of you. If scoring systems don't matter and all budget projections are worthless, what do you base your opinions on policy on? Entrails of a chicken?
Your attitude may be very emotionally satisfying, but it makes it impossible for anyone to have a discussion with you when you use this kind of argument to shut down all who disagree with you. You come over as something like a conspiracy nutcase, which I believe you are not.
If you really have a background in economics, use it and discuss issues, don't just bail because you don't like the process.
I may be disallusioned, but I damn sure know enough about baseline budgeting and economics to be pretty darn confident that I am right. And I know that a cut in the projected budget is not necessarily a cut in spending.
I think your nihilism is getting the best of you. If scoring systems don't matter and all budget projections are worthless, what do you base your opinions on policy on? Entrails of a chicken?
Your attitude may be very emotionally satisfying, but it makes it impossible for anyone to have a discussion with you when you use this kind of argument to shut down all who disagree with you. You come over as something like a conspiracy nutcase, which I believe you are not.
If you really have a background in economics, use it and discuss issues, don't just bail because you don't like the process.
Scoring is meaningless if they feed the CBO numbers that will produce the desired projections; most especially when subsequent Congresses pay no attention to the scoring and feel no responsibility to respecvt it. When they send a proposed project to the CBO to be scored, they aren't interested in what the actual costs will be. They just want to be able to sell it now as economically sound. They know full well they won't take the heat when those numbers don't hold up when static scoring doesn't hold up on down the road.
In 1965, Medicare was scored to cost $9 billion by 1990. The actual cost in 1990 was $67 billion and last year the costs had swelled to $690 billion. .
In 1967, the House Ways and Means Committee said the entire Medicare program would cost $12 billion in 1990. The actual cost in 1990 was $98 billion. In 1987 Medicaid was scored at less than one billion in 1992. Actual cost $17 billion. Last year around $275 billion.
The list goes on. The 1993 cost of Medicare's home care benefit was projected in 1988 to be $4 billion, but ended up at $10 billion. The State Children's Health Insurance Program (SCHIP), which was created in 1997 and projected to cost $5 billion per year, has had to be supplemented with hundreds of millions of dollars annually by Congress and almost immediately after his first swearing in, Obama signed a $33 billion bill that would add 4 million mostly low income kids to the SCHIP program over the next 4-1/2 years..
I will guess that you cannot name a single large government program in which the costs even remotely resemble the initial CBO scoring.
When you have dual differential equations like I said, there can be huge aberrations over long periods of time because of unforeseen long-term effects. But when you have short-time ago data, it can be used wisely to understand consequences of taxing and spending.
I don't need to listen to this.
There are so many problems when looking at this from any perspective. First off, there is some merit to the idea that raising taxes will hurt more than help, at least in the short term. The problem is that we have gotten ourselves into a severe pickle because we have used tax cuts over the past decade plus as a way to stimulate the economy. Problem is, the tax cuts only helped in short stints, but in the long run, it did nothing. We can't cut taxes any further to stimulate the economy because revenue has hit rock bottom due to the already low tax rates.
So what about spending? Well, we could cut some here and there, but nobody can agree where to cut. In the end, there is not going to be a simple solution, and this storm is going to be with us for some time; we're going to just have to ride it out. My thoughts are that we end the payroll tax cut, and raise the tax rate on anyone making over $100,000 per year. The rate increase does not need to be massive. Secondly, raise the tax rate on capital gains to 20% with the idea of raising it higher once the economy gets rolling again, if necessary. As for cuts, the easiest way to cut spending is to freeze it across the board, other than for SS and Medicare. As for the long term, SS and Medicare spending must be reduced in comparison to what we are expecting to pay out. We can't cut spending on those programs because we have more and more people retiring. What we can do is raise the retirement age gradually for everyone until we hit a point where revenue and payouts are close to being balanced for the long term.
One thing nobody thinks about is that if we do what needs to be done to get spending under control, even if it is done slowly, the economy is going to pick up eventually. There are two factors to look at that have nothing to do with politicians, taxation, or government spending. The baby boomers are all retiring. Even if they haven't retired yet, they are downsizing and not spending as much money anymore. This wouldn't be such a problem but for the fact that their kids have delayed starting their own families. While there are reasons for this, mostly economic, they are starting to hit the age where they have to begin getting married and having kids. My thought is that within the next ten years, we are going to see a boom in child births which will lead to a lot of younger people needing to buy homes and bigger cars. The spending cycle will kick into high gear once again, and then we will see things improve dramatically.
Arguments like this unfortunately miss the big picture. When you argue for increasing government revenue one has to do so under the assumption that the government actually needs more money. That is the assumption that needs to be tackled first if we're ever going to get out of this. Instead of trying to figure out how to get the government more money, we should first be trying to figure out what does government actually need. Once we figure that out we can then devise a tax policy that ensures they get it.
Actually this is pretty much known. Most people look at ~19-20% of GDP as the amount of spending needed. A little less in good times and a little more in a recession. Revenues are currently in the 16-17% of GDP and have to come up for us to get to a balanced budget and maintain the things we currently say we want to have.
Now if we want to go back to an isolationist defense policy or eliminate Medicare or Social Security then we could drop the percentage but with those priorities you are in the 19-20% range.
It all depends on what behavior model you have for investors and their expectations. Right now a lot of commercial real estate deals are trying to close by the end of December under the assumption that capital gains rates will rise in 2013. To the extent that some of this real estate is underutilized now and will be more aggressively utilized by the buyers, the anticipation of future higher capital gains rates may be marginally promoting economic growth. But this is a temporary effect and in general it is hard to see how with very low rates of anticipated inflation and low real interest rates that raising capital gains rates is helpful to the economy.The notion that a higher CG rate can possibly be a positive for economic growth is nonsense.
I'm not sure I understand the reasoning here.Obviously if they are instead investing in non-taxable avenues, that does our economy no good
A good point. Personally I would prefer to lower the corporate income tax rate to the current average rate and eliminate most corporate tax preferences. At first glance this is revenue neutral, but because of the distorting effects on the economy of the many credits and deductions intended to help specific industries and groups, I think efficiency and growth would be improved. Such a rate would settle down to around 16%.A lower corp tax rate would also be more attractive to investors, but why raise one and lower the other? Why not lower BOTH? Or leave the CG rate where it is and lower the corp tax rate?