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Pastimes : Discussion Thread -- Ignore unavailable to you. Want to Upgrade?

To: c.hinton who wrote (2490)	11/6/2008 1:59:21 PM
From: TimF	Read Replies (1) \| Respond to of 3816

Tax policy alters investment decisions. Of course I'm aware of that. Its one more reason to have low and simple taxes, so that investment decisions are not distorted as much by tax policy. are you not aware that taxes are another means of reducing x x monetary liquidity . Not a very good one. Tax changes get put in place for political reasons, not because of a good assessment of problems with too much or too little liquidity (and even the Fed, who does focus on such issues, makes a lot of mistakes). Also tax increases or cuts take time to get passed, and then take time to come in to effect, and then take more time to have their full impact. By the time the full impact is felt you may need the liquidity impact to go in the other direction. And in this specific case changes in rates wouldn't have effected the housing market much because much of the gain on houses isn't taxed. And to the extent it did have an effect, the effect would at first be to increase the demand for debt financing of houses because the interest is deductible while other interest isn't normally deductible for individuals. Eventually the bubble could have been popped by high taxes but only at the price of pulling down the whole economy. I suppose Bush could have argued for repealing Clinton's capital gains cut for homeowners, or repealing the detectability of mortgage interest, but he would have gotten nowhere except to even lower approval ratings. Such proposals never would have passed. When he did try to reign in the GSE's that didn't pass either.