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Date:         Thu, 12 Nov 1992 16:45:28 -0400
From:         The Integral Differential <DEMON@DESIRE.WRIGHT.EDU>
Subject:      Re: buffing out the primer pt.I
Comments: To: POLITICS@OHSTVMA.ACS.OHIO-STATE.EDU

>otherAndy:
>I have split this posting up into three convenient, bite-sized chunks as
>it was getting a wee bit too big...
>
>>       Once again you are not being consistent.  An income tax cut is not the
>>same thing as a capital gains tax cut.  Although both would be beneficial to
>>the economy (in different ways, of course).  Capital gains cuts are good for
>>those with income to invest, businesses (especially small ones), pension
 funds,
>>etc.
>
>A capital gains tax cut favors the wealthy (they will receive the greatest
>direct benefit from it),

        I disagree.  Obviously "the wealthy" are in a position to benefit from
it, as is with an income tax cut.  However, one of the barriers to small
investors getting into the stock market, or taking capital gains instead of
income gains is the capital gains tax rate.
        Many smaller investors would get into the stock market if they felt
their gains were going to be taxed at a lower rate than income (from a CD, for
example).  Otherwise, they'll stay in CDs and money markets.

>the sort of across the board tax cuts that I have
>seen advocated by conservatives (note that there was no specific proposal
>in the materials that you posted) favor the wealthy also in sheer amount of
>benefit.

        Sheer amount, yes.  But once again you can't penalize someone for
already having a million dollars.

>I would also argue that a tax cut that only puts a couple of
>hundred dollars in the hands of the average taxpayer is not going to
>stimulate much consumption-fueled growth.

        It depends.  Remember that that's not just a couple of hundred in their
hands, but a couple of hundred that they no longer have to pay in taxes.  Thus
it is far more likely to be used as discretionary income rather than as more
income (from a raise for example) that must be put aside to offset the higher
taxes.
        In addition, that money can be invested (capital gains tax rate cut
again) or used for mortgages, etc.  Even fifty a month makes a considerable
difference in real estate.

>>       On the other hand, income tax cuts get more disposable income into the
>>hands of the individual, who is a lot more efficient at allocating resources
>>than the government.
>
>The spending patterns of the wealthy are not driving the economy, so for the
>economy's sake they do not need a tax cut.

        Tell that to the boat builders.

>The spending patterns of the middle
>and lower classes *do* drive the economy, it would be profitable to give
>them a tax cut.

        I can't sanction heavily taxing "the rich" simply because they've
already got money.  Why not simply state that no one can earn more than $50k a
year?  Or that no one can have a net worth of more than $1 million.

>>       But as GM is now demonstrating, companies that abuse capital writeoffs
>>and fail to downsize at the start of bad times will eventually either go out
 of
>>business or be forced into rapid downsizing.
>
>Ok, even supposing that the government wouldn't step in to save GM from the
>market (an unlikely proposition), who *really* pays the price for the
>failures and outright abuses of GM's management? The stockholders lose
>some money, but the folks that really get hurt are those who lose their
>jobs, and the communities that GM's former facilities are located in
>which are destroyed by the massive loss of employment.

        Yes, which is another reason for workers to become more involved in the
companies they work for.  Become part owners (stock or employee ownership
programs), negotiate for things that benefit the long-term profits of the
company and not just higher wages, etc.
        For some reason the workers expect the company to always be there to
finance them (wages & benefits) while trying to absolve themselves of any
responsability to seeing that it does survive.
        And people losing their jobs should not be a consideration for whether
a company goes out of business.  How much would it cost to retrain M workers?
compared to running GM at a loss for N years?
        As an example, there is a plant here in the Dayton area that (used to)
make nuclear triggers.  As you can expect, there is no longer a market for
them.  So are they being shut down?  Nope.  The local pork politicians went to
Washington and got a 3 year extension, and are now trying to argue that it will
cost more to shut down than to run for five years.  Duh.  Then you still have
to shut it down!  Shut it down, give the workers retraining help, and move on.
Simply pushingthe inevitable down the road is like deficit spending.  Somewhere
down the road, someone will have to pay more to clean up after us.
        And in the meantime, some very talented people will push paper back and
forth while the local politicians beam about how many jobs they saved.  What no
one ever asks them is what could those talented people be doing otherwise?
        Fusion plants?  Hydrogen cars?  Solar power?
        Much better to give them busy work instead. :\

>When a stockholder loses some money on the market, generally speaking
>his other holdings (house(s) and other property) do not lose value;
>when a major employer closes a plant often times it leads to a
>localized depression causing workers not only to lose their jobs
>but their property as well.

        Correct, but those local employers are the ones paying income tax in
the $200k plus range, and paying high capitcal gains taxes.
        Lowering their taxes gives them more cash for workers, investment, etc.

>>       Part of the reason there are hundreds of tax exceptions and loopholes
>>is because the taxes are currently too high for the market to sustain.
>
>Another part of it is sheer greed and arrogance. When I throw a party I
>can't write it off as a business expense - Malcolm Forbes could and did,
>as do a lot of other wealthy individuals.

        Actually you can if you run any kind of service business.  Call
yourself a travel consultant and take trips as tax write-offs.  There isn't
anything stopping you.
        And people do it because it is allowed.  If they felt their taxes
wern't out of line, they wouldn't be looking for ways around them.

>I guess the greed part is
>obvious; the arrogance part is that this schmuck thought that he was
>doing something useful by wining and dining assorted wealthy schlumps
>on his private yacht.

        Business meetings do serve a useful purpose, as to conferences, etc.
If you want to wipe out all deductions, you have my blessings.  But (again)
this isn't rich vs. poor.  This is government vs. the wage earner.  Calling the
rich a scapegoat and levying hefty taxes sounds nice, but in the end it is the
middle class that has always financed government spending.

>>       Government can be used to temper downturns in business, but you have to
>>realize that that also tends to mean that government tempers upturns.
>
>I think you miss my point, my point is that the "free market" does not
>exist and if we were to somehow create it overnight it would devastate
>our economy, further, that large corporations are receiving benefits
>from government (ie., a form of insurance against market forces among other
>things) that they are not paying for.

        A totally free market would certainly have higher ups and downs.  And I
do get you point.  I just don't agree that the government should be playing
equalizer.  You say that "business" and "rich" get perks, which is bad because
others aren't treated equally, but then suggest that the solution to our
problems is to tax the rich and business more heavily than others, again so
that they are treated unequally.  I don't agree.  Everyone should be treated
the same.

>>>Boy, nobody whines as well (or as effectively) as the wealthy! When
>>>Average Working Joe and Josephine don't get a salary increase for
>>>a few years running and inflation eats at their incomes (buying power)
>>>nobody starts talking about indexing their incomes to inflation for
>>>tax purposes... or for that matter when J&J obtain some piddling
>>>interest income on their bank accounts that doesn't get indexed
>>>either, does it?
>
>>       Joe and Josephine should be negotiating with their employer.
>
>Joe and Josephine have been trying to but Reagan's tacit policy of breaking
>the unions (we don't have to debate this do we?) wherever possible
>has severely diminished the capacity of J&J to do this.

        If you haven't noticed, the unions long ago stopped being vehicles for
workers and became a bureaucracy.
        J&J *could* negotiate with their employer if they hadn't signed away
their rights to a union rep.  So while the union headpins livein mansions and
ride in limos (just like the evil owners) the workers get nothing.
        I negotiate directly with the employer.  If I don't like the working
conditions or wages or benefits there is no one to blame but me.  But then that
may be why some people want unions.  Self-reliance scares them.

>>       Good economic times are usually accompanied by low inflation.
>
>During inflationary times workers wages generally rise (though somewhat
>behind the curve of inflation) in response; at the same time the workers
>who have invested in a home or anything bought on credit generally
>benefit by a net reduction in the original price of their purchase.

        I think the 70s debunked this argument.  Real wages fell.  (They fell
in the 80s also.)  And inflationary "gains" in real estate are destroyed as
soon as the inflation ends.  The general trend is up, but only while high
inflation lasts can short-term gains be realized.  But high inflation destroys
the economy after a year or so.  There simply isn't enough time to get a
product to market before it's value has fallen by the inflation rate.
        In general, though wages will not make real gains until the US
normalizes its markets with the rest of the world.  We've been living off of
WWII for too long.

>In these "good" economic times workers are not getting adjustments
>in their salaries and inflation is low but still there. Even if inflation
>is only a couple of percent a year, if you don't get a raise for several
>years it adds up.

        Well, ask for a raise!  I don't mean to sound unsympathetic, but if you
aren't getting a raise, why are you still working there?  Start looking for
another job.  (But will you give your employer six months notice?)

        It's easy to blame you economic condition on "the economy" or "my boss"
or any number of things.  But only you can make things change.

Brett'