Taxes

Well then you could blame the whole damn thing on stupid environmental policies that keep us dependent on foreign oil -- Drill baby Drill! Originally Posted by pjorourke

While that might help it isn't nearly enough to get the US independent from foreign oil.

Its contributing to the trade deficit, not the Federal deficit. Originally Posted by pjorourke

The Army, Navy and Air Force use 10s of thousands of machines that use gallons per mile. Fortunately, the Navy now uses nuclear power for it's major war ships, or we really would be having a problem.

In education, utility costs to heat and cool classrooms are soaring, as are the costs for running a fleet of school buses. Metropolitan areas are having a hard time providing efficient commercial transportation for the same reason. Cities all across the country are curtailing LE car patrols to save their pennies; hence, less security and higher crime - and its associated costs.

The cost of asphalt (petroleum based) to repair potholes is up, as is the associated fuel costs for operating rollers, dump trucks and other road repair machines. Fuel costs are eating up government budgets from top to bottom. The Federal government is picking up at least part of the tab for all of these services.

Finally, the millions we commuters are spending on fuel is not going into savings or the market to stimulate the growth needed to end most of these budgetary problems.

While that might help it isn't nearly enough to get the US independent from foreign oil. Originally Posted by discreetgent

Throw in all of the nukes that would have been built over the last 30 years and we are there.

Who do you think is financing our deficit? OPEC countries are buying our debt with their excess funds.

We need to be getting out of debt to insure our long term financial independence.

Further damaging the economy with another wave of bad economic policy is not exactly something we can afford right now. Originally Posted by CaptainMidnight

Yeah, because that 15% rate has proven to be such a great economic policy.

When politicians fire bullets at the wealthy, they often hit a lot of people who aren't so well off.

Personally, i can't figure out why we bother to tax rich people at all.

Yeah, because that 15% rate has proven to be such a great economic policy. Originally Posted by Doove

Are you going to somehow try to blame our economic difficulties on the 15% capital gains tax rate?

Are you sure you have any understanding of how capital gains taxation actually works? (In the real world, not in the minds of liberals and static analysts who fail to account for behavioral changes resulting from incentives and disincentives.)

Take a look at this graph. Spot a tendency?

Well then you could blame the whole damn thing on stupid environmental policies that keep us dependent on foreign oil -- Drill baby Drill! Originally Posted by pjorourke

I agree. The Obama administration has still not issued a new permit for deep water drilling in the Gulf, and doesn’t expect to issue a permit before the 3rd quarter this year. Yet, the government loaned PEMEX, Mexico, $1 billion and $2 billion to Brazil in 2009 when U.S. regulations prevented deep water drilling every where except in the Gulf, and now that’s been closed since last April. Mexico and Brazil did not stop. Mexico expects to have four rigs at work in the Gulf in 2012.

In September, 2010, there was another $1 billion in the pipeline from the U.S. to support PEMEX's drilling deep water wells in the Gulf, but I cannot find a status update.

http://online.wsj.com/article/SB1000...120524166.html

http://chiefio.wordpress.com/2010/09...-american-oil/

The Arab oil embargo of about 37 years ago should have been a wakeup call for us, but wasn't.

Every president since Nixon has talked about reducing our dependence on imported oil, but when push comes to shove no one ever really does much of anything.

For some time now, I've thought we need to take action on both the supply and demand sides. Yes, we need to exploit all the domestic supply sources we can. But I don't think it's wise policy just to produce more only to exert downward pressure on energy prices. That's nothing more than kicking the can down the road a bit. We consume far too much to have a shot at producing our way out of the problem.

I get roasted by my conservative and libertarian friends for saying this, but I think we need to phase in a high gasoline tax over a multi-year period in order to dampen demand and sharply reduce imports. I think over time that would at least place some downward pressure on oil prices, even though demand from Asian and other rapidly growing countries may increase. And I'd rather the U.S. Treasury have a little more money, and some of the world's worst actors a little less. But the main thing is that it would reduce our oil import bill, which I think is simply killing us.

Of course, such a tax could place a hardship on the working poor. But you could rebate it in the form of a payroll tax reduction or exemption on the first few thousand dollars of income.

I also think we need credits and incentives, and maybe even something like a mini-Manhattan Project directed at the development of better battery technology. Economically viable batteries are about the only thing standing in the way of the development of practical electric cars that a lot of people would want. Then if we would just get sensible and build the nuclear power plants to supply them, we really could make a meaningful difference.

One of my conservative friends thinks I'm simply nuts. His view is that if these ideas were viable, the market would respond. I am generally simpatico with such arguments, but my response is that since the oil market is just about the most rigged and cartelized market in the world, following the "usual rules" just buys you more trouble in the long run. I'm afraid we'll just repeat the same old cycle over and over again. Oil will get expensive and everybody will start talking about alternatives. Then prices will drop to previous levels and consumers will once again binge on gas-guzzlers.

This isn't going to work too well if we continue to run into supply shocks and price spikes like the one in 2008, when prices shot up to about $147/bbl.

And what do we do if "Peak Oil" theory turns out to be more or less correct?

re: Nuclear energy: agreed PJ, that would have helped a lot. Especially now that there are reactors that are far safer, easier to maintain, cheaper to run then the designs used at 3 Mile Island.

re: CaptainMidnight on taxes: Years ago I read an article that posited that a US tax on gas which kept gas at around $4/gallon would both cut back on consumption and encourage investment in alternative energy technologies. The idea was if gas is selling at $2.50/gallon the tax would be $1.50 if at $3/gallon the tax would be $1. Nothing came of the idea. What was fascinating was that back in summer of 2007 or 2008 (I think) gas hit $4/gallon in much of the country and the consumption of gas shot down quite a bit during the time that the prices were at that level. So it seems like that $4 barrier really was some kind of magic number. Of course the chances that our current Congress will even consider such a tax is worst than a snowball's chance in hell.

Take a look at this graph. Spot a tendency? Originally Posted by CaptainMidnight

Yeah, i note that a couple times when the rate was at 20%, the economy boomed. But where's the part of the chart where the rate was 15%?

Oh, nevermind. I found it. I also found some information for the time period prior to 1952. Interesting.

2008 (I think) gas hit $4/gallon in much of the country and the consumption of gas shot down quite a bit during the time that the prices were at that level. So it seems like that $4 barrier really was some kind of magic number. Of course the chances that our current Congress will even consider such a tax is worst than a snowball's chance in hell. Originally Posted by discreetgent

It's going to get there again, soon, without additional taxes.

Yeah, i note that a couple times when the rate was at 20%, the economy boomed. But where's the part of the chart where the rate was 15%? Originally Posted by Doove

Is there some part of the phrase "eliminate preferential treatment for capital gains" that you failed to understand?

The guy to whose post I responded wasn't talking about a 15% or 20% cap gains tax rate; he apparently advocates raising it now to 35% and eventually to 39.6%. I assume he thinks that would raise a lot of additional revenue. It wouldn't. It would primarily just produce distortions.

The guy to whose post I responded wasn't talking about a 15% or 20% cap gains tax rate; Originally Posted by CaptainMidnight

Actually, when you posted your chart, you were responding to me. And i was talking about a 15% tax rate.

he apparently advocates raising it now to 35% and eventually to 39.6%. I assume he thinks that would raise a lot of additional revenue. It wouldn't. It would primarily just produce distortions.

I'm not sure that's what your chart shows, but whatever.

I'm not sure that's what your chart shows, but whatever. Originally Posted by Doove

Let me try and explain it to you using small words.

The line graph shows the capital gain tax receipts in each year as a percentage of GDP. The bar graph at the bottom is the capital gains tax rate in effect for that year.

The only time the line graph is above the 50 year average is when tax rates are either low, or just before they are sharply raised (i.e., people selling in anticipation of a rise).

The explanation for this is pretty simple. People only pay a capital gains tax when they sell an investment assets. When rates are high, they are less likely to sell because they can't earn as much value after they pay their taxes.

For example, suppose that you have owned an asset that you bought for $500 10 years ago which is now worth $1,000. That asset is appreciating 7.2%, so 10 years from now it will be worth $2,000.

If you sell that asset, you won't have $1,000 to reinvest because you have to pay taxes. If rates are 15%, you'll have about $925 after you pay a $75 tax on the $500 capital gain (i.e., the difference between the $1,000 its worth and the $500 you paid). If you reinvest the $925, you would have to get an 8.0% return to break even -- i.e. so that the new asset would be worth $1,000 in 10 years.

But if tax rates go up to 35%, your tax bill if you sell would increases to $175 and you would now need to earn 9.3% or more to break even. That 1.3% additional return might not seem like much, but it is. Over a 10 year horizon, that is about equal to the difference between an average return and a bad one in most asset classes. If you can only get the same 8.0%, your reinvested asset would only be worth $1,784 - $224 less.

Is it any wonder that capital gain tax receipts fall when tax rates rise?

Let me try and explain it to you using small words.

receipts
percentage
anticipation
explanation
investment
appreciating
reinvest
difference
between
increases
additional
horizon Originally Posted by pjorourke

Too many big words