NetNews Usenet Archive 1992 #27/NN_1992_27.iso/spool/talk/politics/misc/60393

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From: [e-mail] (Stupendous Man)
Newsgroups: talk.politics.misc,sci.econ,alt.activism,misc.headlines
Subject: Taxes and stocks (mostly)
Message-ID: <[e-mail]>
Date: 16 Nov 92 17:51:04 GMT
References: <[e-mail]> <[e-mail]> <[e-mail]> <[e-mail]>
Followup-To: sci.econ,misc.invest,misc.taxes
Organization: Demonic Possesions, Inc.
Lines: 116

In article <[e-mail]>, [e-mail] (Ted Frank) writes:
> (Stupendous Man) writes:
>>>>     GDP growth rate, 1982-1990: 3.5%  Up 102% from 1980--equivalent to an
>>>>economy the size of Germany was created.  Even after infation, GDP was up by
> an
>>>>astounding 31% from 1982-1990.
>>>
>>> The first number, of course, is meaningless.  As for the second, it's
>>> a tribute to three trillion dollars of Keynesian deficit spending, no?
>>
>>       Why is it meaningless?
>
> Because it doesn't account for inflation, and therefore it's not a "real"
> number.

    No, that is the *real* growth rate.

> Unless you're being a polemicist, rather than someone interested
> in an accurate portrayal of the economy, there's no reason to present
> numbers not adjusted for inflation, and this type of intentional error
> puts everything else you say in question.

    Unless otherwise stated, you can assume that any numbers I give without
attribution are inflatin adjusted (most of the time, I won't claim to be
perfect :).

>>>>     Captial gains receipts increased every year until the tax was increased
>>>>(1986) again proving the merit of tax cuts.
>>>
>>> Brett, this canard of yours was refuted last time you brought it forward.
>>> Receipts went down in 1986 because they were abnormally high in 1985.  They
>>
>>       Why would they be "abnormally high" in 1985?
>
> Because of people selling off their stocks in December 1985 (or whenever
> the tax took effect) for the tax break.

    Fence sitters and cyclicals due to peak in the first half of the year
would probably sell in December, but there is not incentive for others to sell
& buyback, incurring the commissions and possible adverse price change.
    Holding costs you nothing.  When, and if, you sell, it's at the higher
rate, but that's just another incentive to hold on for a little more gain to
offset the taxes.

>>They've continued to
>>decline after the supposed "spike" that was "caused" by the capital gainst tax
>>hike.
>
> Repost the numbers again, Bret.  That's not true when one accounts for
> the stock market movement.

    I'd like to get the 1990 numbers first, which were out in July.  Anyone
have them?  (Capital gain tax revenues, that is.)
    And the rise of revenues in the 70s (during a relatively flat market)
proves a lot.

>>> were abnormally high in 1985 because investors are intelligent enough to
>>> sell and then rebuy so that their capital gains are taxed at 1985 rates and
>>> not 1986 rates.
>>
>>       I demonstrated why holding was wiser than selling and buying (incurring
>>two commissions along the way.
>>       I can repost it, if necessary.
>
> And I refuted it.  I can re-explain that, if you'd like.

    Go ahead.  I doubt whether you'll convince many people that incurring
two commisssions is better than holding in the face of an *eventual* increased
tax bite.  And then, only if gains are larger than losses for that year.

> Someone holding onto stocks with significant capital gains on the eve of
> the tax change takes a huge hit that they don't have to if they sell and
> rebuy the stocks.  Yes, this transaction incurs two commissions.  And for
> *some* people, it's more profitable to take the hit.  But are you really
> arguing that there wasn't a single American out there whose tax advantages
> didn't outweigh the sum total of the commissions?  There

    No, just that their numbers are within the noise ratio.  They would not
significantly increase the totals in the face of the usual year-end sell-offs.
We could always take an un-scientific poll in misc.invest and ask how many
people sold off to avoid the higher taxes.

> were billions of dollars of capital that were sold off and sometimes, but
> not necessarily, rebought, for the sole purpose of avoiding the tax hit.
> Which increases revenue dramatically in 1985 and drops it dramatically
> in 1986.

    If people were going to get out of the market in the near term, that
would certainly push them off the fence.  But most investors don't play the
market, they play the individual stocks.

> Ask any tax lawyer who was around in 1985, Brett.

    That's a bit like asking a broker whether I should trade now or wait.
When does he want to get paid?  Tax lawyers will always trumpet tax code
changes to drum up business.
    And if you have to ask a tax lawyer whether you should sell, you're
probably not informed enough to merit being in the market, unless you also
defer to a broker about trades.
    And my opinion on that is that if the broker was a genious, he wouldn't
have to trade other people's stocks to make a living.

> Or draw up the scenarios
> yourself.  For a certain capital gain greater than some N, it was more
> profitable to sell off in 1985 and pay taxes that year.  And there's
> lots of money in that when you consider the large number of long-term
> investors out there.

    I still have stock from that period.  Unsold.  No taxes paid.  No
commissions paid.  How have I been hurt?

Brett
===============================================================================
80s: 18 million new jobs, deficits down (%GNP), tax rates down, tax revenues up
GNP up, inflation down, unemployment down, interest rates down, cold war won
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