From: andy@SAIL.Stanford.EDU (Andy Freeman)
Newsgroups: talk.politics.misc,alt.politics.elections,alt.politics.clinton,alt.politics.bush
Subject: Re: why progressive tax rates (was Re: Clinton's Economic plan attacked)
Date: 19 Aug 92 15:55:42 GMT
Organization: Computer Science Department,  Stanford University.

In article <l93187INNjvj@spim.mips.com> mpolen@gelato.mips.com (Michael Polen) writes:
>If the purpose of the investment tax credit is to create jobs, then
>your fixing up the house doesn't sovle any problems for the economy
>at all (maybe your economy, but no one elses).

Home-building and repair isn't a significant part of the economy?
Wowsers!

A huge fraction of the houses built in the US are built by small
builders.  They kick in some money, build a house or two, and sell it.
The better things work out, the sooner they repeat the cycle,
but the "investment" is necessarily short-term, because building
a house doesn't take much time.

Large builders work differently.  They kick in a lot of money and
build a series of houses, selling them as they're completed, but the
investment really isn't cashed in until the last house is sold.  Thus,
their "investment time" is significantly longer than that of an
equivalent set of small-scale builders.

Why do people who want to tax long term investments differently want
to favor large contractors over small ones?  The small builders employ
just as many people/house.  They pay the same wages.  They buy the
same materials.  Why treat them differently?

>My understanding of
>an investment tax credit is that is only applicable to investments
>in a business with long term holding and long term depreciation. 
>Houses should not be included, as they are not a business.

In other words, investment tax credits are for landlords, but people
who own should be hosed.  (Taxes paid by the builder/seller are passed
on.)

>If you are discussing capital gains taxes, the purpose of having
>a minimum holding time was to withhold a tax reward for short term
>speculation -- same reason as for the tax credit.  Your example
>of selling to your sister seems to give the impression that the
>sale is different than if you buy a stock and sell it 1 day later
>because the value went up.  There is no difference, and you have
>not invested *your* money in the creation of jobs.

Not so fast.  I compared TWO investments, one a purchase of 100 Disney
shares by someone who kept it "long enough" and the other a purchase
of 100 Disney shares by me that I sold to my sister.  My purchase of
100 shares created just as many jobs as the other purchase.  (We can
argue about how many jobs were created, but we know that this factor
doesn't distinguish the two investments.)  People who advocate taxing
long term investments differently think that these two investments are
different.  What is that difference?

Note that liquidity is a positive aspect of an investment, so you
can't go with "stocks aren't an investment, so they're not eligible
for any long-term advantage".

-andy
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