Tax Break Contributed to Bubble
Don’t blame it all on Bush, or on deregulation-crazed Republicans. An article in the NY Times today suggests that the housing bubble, and its subsequent bursting, may have been aided by a Clinton cut on capital gains tax. One real estate broker made $700,000 in three years, “and thanks to a tax break proposed by…
Don’t blame it all on Bush, or on deregulation-crazed Republicans. An article in the NY Times today suggests that the housing bubble, and its subsequent bursting, may have been aided by a Clinton cut on capital gains tax. One real estate broker made $700,000 in three years, “and thanks to a tax break proposed by President Bill Clinton and approved by Congress in 1997, he did not have to pay tax on most of that profit. It was a break that had not been available to generations of Americans before him.” Such situations enticed more and more folks into real estate, making homes “tax-free windfalls” and increasing sales by 17 percent. The tax breaks caused a zeitgeist shift, whereby a home became less an abode than an investment. They admit, though, that a tax break alone is not responsible for the mess. Other reasons include “a relaxation of lending standards, a failure by regulators to intervene, a sharp decline in interest rates and a collective belief that house prices could never fall.” And it turns out the tax cut came from the Clinton administration, but was in the mind of the Dole camp; they rolled out the idea first, making Clinton nervous; he pledged to cut capital gains to catch up.
Tax Break May Have Helped Cause Housing Bubble [NY Times]
Photo by Paul Graham Raven.
Polemicist…you’re smokin some serious weed today. Where’d you get that stuff???
A hipster tax, Ha! That would bring in dozens of dollars to the State treasury.
benson and sam: This news about California is worse than probably any other. When the machinations of the state cease to function, the confidence of the people in the very validity of that state is severely shaken. This is the kind of stuff revolutions are made of. This news will NEVER be heavily publicized until the people find out for themselves they won’t get their welfare check.
I have every confidence in the American people that enough of us will do whatever it takes to maintain safety and stability that total anarchy is impossible. There will always be those ready to keep the peace, although justice might be more swift than we typically have enjoyed if antisocial behavior increases at a rapid pace.
The problem comes with the severe centralization of authority in Washington and dependence of the majority of the population on mostly federal tax revenue collected from the minority.
There is no question the era of massive wealth redistribution is over, and those who are unable or unwilling to work will have to count on the generosity of their neighbors. The people who choose to forgo the luxuries of life to continue to maintain order will have little tolerance for the tax man coming to tell him he must give 1/3 of is earnings to a state that plays no active role in his life.
Expect government revenue to plummet next year with violent protests a very real possibility Depending on the severity, default on our debt could happen. Any congressman that votes to pay interest at the expense of food for the masses will find himself out of a job or worse. Congress has proven time and again they will choose a solution that provides short term benefits (food) over long term planning (an orderly wind-down of the FIRE-economy and usury in general).
As for the elderly – the sad fact is they will be hit first as they have lots of money and cannot defend themselves. I fully expect the excess wealth of the elderly class will be appropriated in order to prevent the scenario I described. Most elderly will probably find themselves in group homes with only basic accommodations. In desperate times, the old are always sacrificed for the young.
sam….every good economist knows that if you want to see something disappear then tax the hell out of it. I’m all for anything that resembles a “hipster tax.”
benson, California is, as usual, leading the new trend. how do you think NYS is going to pay its future obligations? Taxing soda pop and I-pod downloads?
Sam;
The next thing that is really going to shock folks is California. There was a unbelievable news item in yesterday’s WSJ: starting next month, Califonia is going to start paying its suppliers in IOU’s!!! I am amazed that this news has not received more attention.
This is not just a housing crash anymore it is a major meltdown of our financial system. It is one thing when individuals act irresponsibly and overspend and get themselves into bankruptcy but when banks and brokerages and insurance companies do it too, the impact is universal. The article in yesterday Times about bonuses was really shocking. Thirty and forty million dollar bonuses to individuals from companies that were, even last year, not doing all that well. That’s just sick. The next chapter in all this will be municipalities and even states declaring bankruptcy. It’s bad. what will happen when retirees stop getting their city or state pensions? That may result in scenes reminiscent of the Great Depression. 2009 is going to be one hell of a rough year.
Whuh;
I can see that you are really getting into the holiday spirit!! I also see that do not resort to personal attacks in making your case.
As to your latest statement:
Hmmmmm -let me get this straight. You first invoke Reagan (who left office 20 years ago)and Greenspan as principals in this crisis. When I pointed out that there was an interim president who also fully backed and embraced Greenspan, you inform us that these past precidencies are irrelevant – it’s all W’s fault.
Nahh – you don’t have an ax to grind.
couldnt agree with u more williamsburgguy