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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: CalculatedRisk who wrote (33494)	7/11/2005 11:59:57 PM
From: Jim McMannis	Respond to of 116555

RE:"I keep hearing how the "Clinton Tax Act of '97" is contributing to the housing bubble, I finally decided to debunk this myth. I don't mean to offend anyone, but the Act is not the reason for the housing bubble." First of all, the ability to take big gains tax free is inflationary in itself, for that sector. See Zweig. The ability to move from a high tax state with high housing prices to a low tax state like FL that "had" low prices, TAX FREE (the "will" was always there) is a pretty maor incentive. The ability to flip every two years tax free cause a lot of money movement. Also gives Real Estate an unfair advantage over non tax advantaged investments. Somewhere around 45% of the price of real estate was caused by tax breaks prior to Cinton's 1997 tax break. After the tax break you see what happened. Real Estate prices went that much further aove the rate of increase of GDP. Of course there are other factors. Low rates, weak dollar, weak immigration policies fueling he fire. IMHO...the boom would be stopped dead if Clintons tax break was repealed. People would be much more reluctant to sell and move if they had 15% less profit. If what you say is true the NAR wouldn't say a thing if the cap gain was put back. In fact they would scream bloody murder. I do detect that a lot of people are reluctant to blame Clinton for a tax cut. Especially when they blame Bush for the same.