Jason

President Obama spoke twice in the last 24 hours about the country's economy, and a jittery Wall Street responded both times with sharp downturns.

http://abcnews.go.com/Politics/Busin...6954907&page=1

yustr

So rich republican gamblers feel threatened...sounds like he's on the right path to me.

Drew1369

Or the market is nervous about tax increases that have been proven to bring in less dollars in the effort of "fairness"

Canaanabolaanan

Hmm, more taxes bring in less dollars, eh? Thus, less taxes bring in more dollars, no? Ergo, no taxes brings in the MOST dollars. Proof enough for me! (facepalm)

OR

It's a bell shaped curve, and your sweeping generalization actually hasn't been proven. But if it has, and I'm just being insanely naive, I'd like to see this "proof."

Drew1369

One should read history before they make comments...

http://www.youtube.com/watch?v=WpSDBu35K-8

sobeit

dows been dipping even without speeches so whats the difference.

Canaanabolaanan

Oh, well if "history has shown it," that's proof enough. You know, because in all cases, correlation = causation. Why have taxes at all?

"History shows, when you drop the capital gains tax, the revenue goes up." So again, let's just eliminate capital gains tax, and watch that revenue sore. I can only imagine all the money you raise with no taxes.

I didn't realize economics was so straight forward that the economists have figured it all out already. Great news, then. Crisis averted!

So then, is there proof? Or just the evidence that you're passing off as proof?

Drew1369

Do you really not understand?

When the tax rate is lower on capital gains, more people invest... more people means more tax revenue...

When the tax rate was raised to 28% during Clinton, tax ravenue fell from the capital gains source because less people invested... cause and effect

Thats how its been in history... but why learn from history right? Lets make sure its all "fair"

Canaanabolaanan

I'm pretty sure I understand. I'm pretty sure you're not understanding. More investing only means more revenue if the revenue exceeds the previous revenue, which it may not. Even with more investing. But let's work it out in some detail. Yes, there are very clear cut cases in history where lowering taxes yielded more revenue for the government. When taxes were about 90% for the upper class, there was little incentive to work, because most of the money you made at that point was taken from you. This has a linear progression all the way down to no taxes. Less taxes, more incentive to work. And this was evidenced clearly in the 70's/80's/Regan-ish whatevers. But eventually, the math doesn't continue to support the “less taxes, more revenue” thought train. When you have no taxes, you make no money. The arithmetic can't be any more plain.

So let's look at an example. Say one makes $100, with taxes set at 30%. Then that's very obviously $30 in tax revenue. If you keep lowering taxes, then production has to increase to maintain the same amount of revenue. Which, production should go up; we all agree. But it is virtually impossible to maintain the revenue at a certain degree. At a 20% tax rate, you have to make $150, a 50% increase to match a 50% drop. So you have to exceed 50% increased production to “increase” revenues. At 15%, you need double, $200 in production. 10% - $300. 5% - $600. 1% - $3,000, a 30 fold increase in production. Just because the taxes, hypothetically, would be reduced to 1% does not mean that society is going to exceed a 30 fold increase in production. And if you'd like to pretend it would, we can go lower. 1/4% = $12,000, a 120 fold increase. At some point, we're clearly in the realm of a virtual impossibility. And this assumes all other economic conditions are equal. And very clearly, they are not. The economy is far too dynamic to just make such sweeping claims, especially without further evidence. Many economists now state that we're in “new waters” because this model and situation have essentially never played out. Thus, examples of history is not proof that your tax reduction will guaranteed yield more revenue. At some point, production will plateau, even if you keep lowering the tax rates.

So you end up with something of a bell curve, or at the very least, a maximum of revenue. And the tax rate that produces that maximum may vary with differing economic conditions and models.

Now, you said that tax increases have been proven to bring in less tax dollars. And I ask you, sir. Please show me the proof. Or at the very least, stay away from sweeping generalizations.

Drew1369

I said that increasing the capital gains tax brings in less revenue... I never said all... my first post may have been confusing... but I did clarify on my second.

Canaanabolaanan

Okay. Pretend I'm a capital gains novice. How is this any different? I'm asking for proof. Do you have any?

yustr

Even more fundamental: capital gain is money made on investments. In order for someone to have money to invest, they have to have extra money (over and above what's needed to live - at whatever level they choose.)

If the CG tax is 15% and you have extra money are you really going to turn down an investment; you get to keep the other 85%? What else are you going to do with your extra money? Is your decision going to change if you (only) get to keep 75%? (I understand that at some point you'll say yes but where is that point?)

Another way to think about it is: its a tax on those benefiting from the giant ponzi scheme that is the stock market.