06-01-2003 04:01									#31
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Kropotkin - yeah, it was a great line

	06-01-2003 04:06									#32
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Well you know what happens if put thousands of spammers in front of a computerscreen; there's bound to be some substance being written. It's not luck, it's statistics.

	06-01-2003 08:08									#33
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Ahhh, good old trickle-down economics at its "best".

I wonder if Dubya remembers when his daddy called these plans "voodoo economics." I also wonder if Dubya was in a coke-haze at the time.

	06-01-2003 08:14									#34
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quote: Originally posted by Lawrence of Arabia I didn't know that they had hard empirical evidence which refuted the trickle down theory.

1) The Great Depression
2) Reaganomics
3) Currently falling economy since Dubya took office.

	06-01-2003 08:16									#35
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What does #1 have to do with trickle down theory?

	06-01-2003 08:23									#36
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Zkribbler - What I meant by empirical data was data for the Marginal Propensity to Consume (MPC) and the Marginal Propensity to Save (MPS.)

I think that there is a small trickle down effect, but I do not think that it is big enough to warrant a huge tax cut. I did say 'refute' but i did not say that this mean that it was proven.
My mistake.

	06-01-2003 08:28									#37
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Most of this stuff looks pretty modest in context. Less than 1/2 of the first tax cut, after all, which in turn wasn't very big either.

As to the merits of it all, the reason why the cost for the dividend taxation reform will be so small is because companies don't give out dividends due to Uncle Sam taxing dividends at outrageous rates. If taxation is reduced (bringing it more in line with capital gains rates), it should increase dividends, which is a good thing for most non-growth companies and most investors.

In short, I think it makes excellent policy.

	06-01-2003 09:06									#38
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The government shouldn't be giving so large a tax cut, they should be spending more on education and healthcare

	06-01-2003 09:08									#39
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It helps to bouy up the stock price of companies that give dividends but it doesn't directly do anything to help the over all economy. If you want to really improve the economy then you have to put more money in the hands of consumers who will actually spend it. That's why a payroll tax reduction would be much more efficient at boosting consumption.

If a poor or middle class person gets more in his check then he's likely to spend it on things he's been needing but which he's had to delay purchasing. If a wealthy person, who already has most of the things he wants, gets a wind fall they are more likely to save it or slush it into the stock market. Again that's good for stock prices but that doesn't help companies to sell more of their widgets so it doesn't help clear out inventories nor does it make them restart the production line.

I forget the reporter's name but NPR's chief economist did a detailed piece on why a pay roll tax reduction would be far superior to Bush's proposed reductions for millionairs. The economist also has a big spread on its web site explaining why Bush's "Fiscal Fine Tuning" doesn't andd up, is to expensive, and probably won't be needed any way. It's a great read I suggest you look it up at www.economist.com.

	06-01-2003 09:12									#40
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I'd have to agree somewhat with DanS, and there should be 2 parts of a stimulus implemented:

1) Extended Unemployment Benefits
2) Cuts in the dividend tax (though this is a probably)

The cuts to personal income tax, however, should be reinvestigated. One figure said that the average middle class person would only get a $76 break, while the highest class would save $24,000. While that extra personal spending ($76 a person) when added up as a whole will have stimulating effects on the ecnomomy, it doens't do to much for the average person's personal situation. (Though I understand the argument that the increase in aggregate personal spending lifts everyone up as a whole).

The idea of the dividend tax would restructure the way the stock market works, smoothing it out, and encourging companies to actually make a profit, a far cry from the growth stocks of the late 1990s which would expand at any means necessary even if they were losing boatloads of money.

The only problem I have with the dividend tax idea is, (can you help me with this Dan) besides reducing tax penalties on the dividend, what is the incentive for companies to pay out more dividends instead of sitting on the cash (like Microsoft) or reinvesting it in the company?

	06-01-2003 09:14									#41
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quote: Originally posted by Oerdin If a poor or middle class person gets more in his check then he's likely to spend it on things he's been needing but which he's had to delay purchasing. If a wealthy person, who already has most of the things he wants, gets a wind fall they are more likely to save it or slush it into the stock market. Again that's good for stock prices but that doesn't help companies to sell more of their widgets so it doesn't help clear out inventories nor does it make them restart the production line.

Excellent post, a more even distribution of a tax cut would do wonders to even out distribution of wealth problems.

	06-01-2003 09:30									#42
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Dividends are taxed too high, no question about it. But that should not be at the top of the agenda.

First question is whether blunt instrument fiscal policy will get the timing right. I would rather use monetary policy (to the extent it can still be useful at low interest rates) or tax cuts which can be recinded if need be.

If there is a tax cut, far better at this point to raise the earned income tax credit (blunting some of the movement for higher minimum wages) than to cut the higher brackets.

The real gripe I have with this proposal is cutting the tax lives for certain types of assets. The lives that the tax code already assumes for certain types of equipment are shorter than their actual economic lives. This allows companies to write off depreciation sooner than it actually occurs, and amounts of a subsidy for capital investment. Further reducing tax lives will result in overinvestment in these goods. Capital could be better used elsewhere, and employment might increase in these industries, if there wasnt this tax distortion.

	06-01-2003 09:38									#43
	Got spare money?

In the past, the market punished companies giving out dividends. Hopefully, with a reduction in the dividend tax, the market would punish them less or even reward steady dividends.

You are right to bring up Microsoft because that's where all the action is at. $40 Billion in cash and growing at $5 Billion each year. Almost anything we could do to encourage Microsoft to distribute that very inefficiently used cash seems worth it. Uncle Sam would get a large chunk of the distribution, after all...

	06-01-2003 09:45									#44
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Crossposted with AS. I agree with you on the subsidy of capital investment. However, inasmuch as industry has been making generational changes in equipment every couple of years, I do think that tax policy (and accounting principles) should recognize that this is going on. I don't know if that is going on economy-wide, but it seems like it is in some industries.

I guess I'm of two minds about it. It would encourage supply-side growth, which doesn't seem like the right thing to do now.

As for priorities, I think there's no better time than the present for the dividend tax cuts. I doubt there will be a more auspicious time in the future.

	06-01-2003 09:47									#45
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Okay, now that would make logical sense, thanks Dan.

AS,

That's an amazing angle that I don't think anyone else would have thought of. (But you are the professional here. )

One example I can think of is the corporate IT infrastructure, which is at the end of its useful life. (Some have argued that it has actually lived beyond its normal life).

Now in the short term, I can see why this tax change would be a boon to corporate investment, which is comatose at moment. However, you bring up a good point in that I don't want to see a binge that leads to problems on the tail end where we end up in a similar position that we are in today. (Flatline investment in infrastructure).

Man, I just want it all smooth again.

	06-01-2003 09:49									#46
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Dan,

I think the normal life cycle is 3 years, and most equipment is now going on 5+. That's just a guesstimate from things I have read or overheard and my own observation.

I am not sure what the tax code says about lifespan.

	06-01-2003 10:05									#47
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Asset life in the tax code varies with type of asset ... which lets some of the individual industries use some political pull. IIRC, airframes get written off long before their useful life. Oil drilling equipment might be another example, but I would have to look to be sure. Rental real estate is another biggie, as are natural resource depletion allowances (coal, oil, timber).

Tax lives for computer equipment started out the same as office equipment e.g., adding machines. Not an unreasonable place to start. I think the tax life has been knocked down to five years, and may now be headed to three years, which is probably pretty close to economic life.

Ted:
Did I understand that you are AKA Derek? I thought you were gone after the April Fools joke. Good to see you back.

	06-01-2003 10:06									#48
	Help yourself to an AD-FREE life

It's normally pretty generous. But even with lifespan reductions, the depreciation schedules are generous as well, further distorting the value of these investments.

Edit: Another crosspost with AS.

	06-01-2003 11:06									#49
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So what do you folks think about the idea of lowering payroll taxes instead of Dividend taxes?

	06-01-2003 12:08									#50
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I don't think they should focus the tax so much on the rich, they should try to mainly cut taxes for the poor and middle class.

	06-01-2003 12:17									#51
	Lose 30 kilos (of popups)

I agree BD.

Adam Smith,

Yes that's correct. I actually came back about 8 months after the April Fool's joke for a few months. Then I disappeared for about a year beginning Jan 2002, now I'm back.

April Fool's joke was well excecuted and sent me off in a 5-Year-Old crybaby fit.

It's nice to see you.


Oerdin,

I'd like to see them both done.

	06-01-2003 12:24									#52
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As a college student, I'd like to see tax breaks on families putting kids through college. Harumph!

	06-01-2003 12:27									#53
	Avatar Enlargement: We've got the solution

$600billion sounds like alot but realize that it's spread out over 10 years and that $60billion a year has to have an affect on an economy which is nearing $11trillion per year. It's like trying to move the Titanic with just one guy pulling on a rope.

Bush's proposal will put more money into the economy. There is no denying that, but, it's not just about putting more money into the economy it is also about encouraging the money that is there to be used in ways which will more efficiently generate growth.

Will this money be spent, thus maximizing it's effect on the economy by stimulating service providers & manfacturers, or will it be saved, thus have less of an impact upon the economy? All the reports I've ever heard point that the money doesn't trickle down very efficiently and it's better to skip the middle man and put the cash in the hands of people who will actually circulate it.

	06-01-2003 12:30									#54
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Huey Long for prez!

	06-01-2003 12:32									#55
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I'd have to say I agree with you. You made a point earlier that many of the ultra-rich just take the extra cash and wrap it up into things that generate more cash.

I'd also like to speculate and say that some of that money gets tossed into real estate, where it builds up equity or more revenue for the bank (another wealthy entity).

Now the argument can also be made that this wealth in turn allows the banks to be able to loan out more money to corporations which in turn can expand and hire more people. But often times what I've seen is that the banks are just more likely to make bad loans, which at the front of an expansion, lead to more jobs, business growth, etc, but again leads to a wobblier economy that stalls out on the tail end.

I think getting things to the "end user" makes things alot smoother.

	06-01-2003 12:36									#56
	Put an end to popups!

quote: Originally posted by monolith94 Huey Long for prez!

How about his boy, Gerald L.K. Smith ? Dubbed as the best American speaker ever. I saw this guy for the first time and MAN he could whip people up into a frenzy!

"These great phenomenal assemblies, whether they be headed by Dr. Francis E. Townsend, Gerald Smith, or Father Charles E. Coughlin, represent the unmistable edict that is being issued to the corrupt, seething politicians of America that the baby-having, stump-grumping, sod-busting, go-to-meeting, god-fearing American people are about to take over the United States Government of America!"

*crowd goes into a frenzy*

You guys should watch the "grilled millionaire," speech by FDR, pretty interesting parallel to this debate:



http://www.pbs.org/greatspeeches/ti...index.html#1930

	06-01-2003 12:39									#57
	Suffering from ads?

I don't think any further stimulus is needed, and I think short-term cuts are really a waste of money. We should have healthy growth next year without it. The dividend stuff is all long-term tweaking, and is worthwhile.

	06-01-2003 12:47									#58
	Suffering from ads?

"How about his boy, Gerald L.K. Smith ? Dubbed as the best American speaker ever."
You've OBVIOUSLY never heard me speak!

	06-01-2003 12:50									#59
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Dammmmmnnnnnnnnn!!!!

	06-01-2003 12:54									#60
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My problem with Democrats demagoguing this issue is that they are actually playing class warfare politics. They have no interest in what is best for the economy. They simply want to keep taxes on middle to upper income brackets high. They preach envy. They tell you that economics is all about the rich stealing from the poor and that they, the Democrats, will fix that. The Democrats in the US are Marxists.

Adam Smith and others have made some very good points on the flaws of Bush's proposals. He made these points by arguing the economics of the proposals. If only, just once in my lifetime, a Democrat politician would make principled arguments when taxes are involved, I would be amazed.

I think it is right and proper for Republicans to hammer the Democrats for being the socialists they are. They are not interested in a growing economy. They are interested in equality of results. Their methods, if ever allowed free reign, would impoverish the United States.