The Foolish Naivete of Obama's Tax Plan

[shagdrum]

from here:

1) On people making more than $250,000.

$338 billion - Bush tax cuts expire
$179 billlion - eliminate itemized deduction
$118 billion - capital gains tax hike

Total: $636 billion/10 years

2) Businesses:

$17 billion - Reinstate Superfund taxes
$24 billion - tax carried-interest as income
$5 billion - codify "economic substance doctrine"
$61 billion - repeal LIFO
$210 billion - international enforcement, reform deferral, other tax reform
$4 billion - information reporting for rental payments
$5.3 billion - excise tax on Gulf of Mexico oil and gas
$3.4 billion - repeal expensing of tangible drilling costs
$62 million - repeal deduction for tertiary injectants
$49 million - repeal passive loss exception for working interests in oil and natural gas properties
$13 billion - repeal manufacturing tax deduction for oil and natural gas companies
$1 billion - increase to 7 years geological and geophysical amortization period for independent producers
$882 million - eliminate advanced earned income tax credit

Total: $353 billion/10 years​

And from here:

Most of this is vaporware. This is a triumph of static tax analysis, which assumes that increased taxes have no effect on the amount of money available for taxation. For instance, the hike from 15% to 20% on capital-gains taxes assumes that people will invest and cash out in the same manner they do at 15%. They won’t. The fact of increasing the tax will discourage investors and encourage them to shift money out before the hike. Not only will the extra revenue vanish, but investment levels will drop, leading to job losses and less opportunity for American businesses.

And what “itemized deduction” will get eliminated? All of them? Some of them?

The business tax hikes are even worse. Obama will increase taxes on existing American oil production starting in 2011. Do we have massive amounts of alternative energy capacity ready to replace the energy production and usage that this will discourage? A growing economy has to have a reliable energy supply. Energy producers get hit on several fronts in this plan, and those costs will either result in lower energy production or increased cost to the consumers.

Again, the expected revenues will far exceed the reality, once the depressive economic effects of these taxes kick in. The spending, unfortunately, will be all too real, which will mean huge, ballooning deficits. It’s the inevitable result of Deadbeatonomics.
​

 

[luxuryrules]

Do we have massive amounts of alternative energy capacity ready to replace the energy production and usage that this will discourage? A growing economy has to have a reliable energy supply.

The answer to that rhetorical question is, of course, no. Yet, when we talk about alternative energy and changing our consumption habits, we get told that we don't need to change. And now the very same people are criticizing us for not having alternative energy readily available?

 

[shagdrum]

The answer to that rhetorical question is, of course, no. Yet, when we talk about alternative energy and changing our consumption habits, we get told that we don't need to change. And now the very same people are criticizing us for not having alternative energy readily available?

The difference is, one is market driven and one is forced on a society that hasn't been able to prepare for it by the government. If the market is allowed to bring new alternatives to bear as the real need arised, the transition is smooth. If the transition is forced on a society that doesn't need it, then it causes a lot of pain strife and hardship throughout society.

There is also the little issue of something being forced on society and how it undermines our republican form of government in favor of totalitarianism.

 

[luxuryrules]

The entire point behind the government 'forcing' the market to do something would be so that, when the market conditions hit, the market is already ready for it.

I'm going to snag Cal's example from another thread. If you put a frog in a pot of boiling water, it will jump out. But if you put it in and slowly turn up the heat, the frog will slowly cook. In relation to the current situation, if the market suddenly turns and doesn't have time to react (boiling water) it will cause a panic and ultimately damage itself. But if the market has been slowly acclimated to the conditions, it will be ready to deal with the changes the market will throw at it.

We can hit a brick wall at full speed. Or we can hit the brakes and collide at a much more controlled speed. I know what I'd rather do, do you?

 

[shagdrum]

The entire point behind the government 'forcing' the market to do something would be so that, when the market conditions hit, the market is already ready for it.

I'm going to snag Cal's example from another thread. If you put a frog in a pot of boiling water, it will jump out. But if you put it in and slowly turn up the heat, the frog will slowly cook. In relation to the current situation, if the market suddenly turns and doesn't have time to react (boiling water) it will cause a panic and ultimately damage itself. But if the market has been slowly acclimated to the conditions, it will be ready to deal with the changes the market will throw at it.

We can hit a brick wall at full speed. Or we can hit the brakes and collide at a much more controlled speed. I know what I'd rather do, do you?

That example is inappropriate to this. The market is constantly changing an reactive, unlike the frog which just sits there and does nothing. Any change in availability of oil will not naturally happen immediately. It will happen slowly over time and in that time the market will bring something in to replace it. That is assuming that we in fact will run out of oil.

So, in short, your analysis is based on two false premises;

• the assumption that the markets are static and reactive and will not "slowly acclimate to changing conditions" on their own, and,
• That we will run out of oil and that running out of oil will be sudden and like "hitting a brick wall"

History has disproven both those assumptions countless times.

It is foolish to base policy on assumptions based in speculation, especially if those assumptions have been proven wrong in the past.

Also, there is the fact that the government doesn't have the constitutional authority to do this. It is, in no uncertian terms, a totalitarian act.

 

[luxuryrules]

So, in short, your analysis is based on two false premises;

• the assumption that the markets are static and reactive and will not "slowly acclimate to changing conditions" on their own, and,
• That we will run out of oil and that running out of oil will be sudden and like "hitting a brick wall"

History has disproven both those assumptions countless times.

It is foolish to base policy on assumptions based in speculation, especially if those assumptions have been proven wrong in the past.

You should have taken note of how spooky the market got around $120 a barrel. You are correct that we won't quite hit it suddenly, but rising demand coupled with dwindling supply is a recipe to make the price skyrocket in a short period of time. After the world is out of this recession and resumes its increases in consumption from 2007 or so, that will cause a steady increase in the price of oil, which is acceptable. Now, what happens if, without warning, OPEC cut production or Saudi Arabia announced Ghawar was running dry? The sad fact is that we have way too much exposure to a market that is not stable at all. Investors know to avoid these types of situations, but it is really sad that the American people do not.

Now, here is where we take a twist. You'll notice I said "American people" above and not government. Let me make this clear, because this is an important distinction. I'd rather not see the government intervene in the market at all. In this case, it simply becomes necessary because the American consumer has proven time and time again to be unable to plan for the future. Surely you saw the six month hybrid waiting lists when gas hit four bucks, yes? People spent the last five years buying trucks thinking that fuel was going to be cheap forever, and when it went through the roof, they panicked and all went out to trade down to Priuses (Priusi?). They failed to plan ahead. Do you think we would have had the same type of panic had people made more reasonable and responsible decisions for the last five years about their choice in vehicles?
Not that I think the government should actively go raising the price of fuel to encourage greater efficiency, but working to temporarily keep it low is simply attempting to stall the inevitable.

 

[shagdrum]

You should have taken note of how spooky the market got around $120 a barrel.

Actually, that wasn't due to natural market forces at all. It doesn't logically support your theory unless it is due to natural market forces.

In fact, it was due to an artificially created market bubble that burst and returned prices to a more realistic level; an example of the market adapting and correcting itself.

You are correct that we won't quite hit it suddenly, but rising demand coupled with dwindling supply is a recipe to make the price skyrocket in a short period of time.

Again, that won't happen. When has it happened in history? The example you cite is due to market speculation creating an artificial market that the free market crushed to return prices to normal levels. If anything, it works against your theory by showing that the market is adaptive.

After the world is out of this recession and resumes its increases in consumption from 2007 or so, that will cause a steady increase in the price of oil, which is acceptable.

We don't know that. That is pure speculation on your part. The price increase in 2008 was to to non-market forces working to bottleneck supply and drive up prices artificially. It was not pure supply and demand forces.

Now, what happens if, without warning, OPEC cut production or Saudi Arabia announced Ghawar was running dry? The sad fact is that we have way too much exposure to a market that is not stable at all. Investors know to avoid these types of situations, but it is really sad that the American people do not

.

You are basing your claim that we are to exposed on speculation. If all you have to do is come up with halfway plausable hypotheticals, then no market is "stable".

And, if you want to reduce our dependance of foreign oil, you don't force a change to an unproven and unreliable alternative. We tried that with ethonol and it has proven to be a failure with many unintended consequences. The market would correct for any unintended consequences as they slowly arise and maintain an equalibrium. However, when the government forces a change on society, it throws the market into chaos by forcing it to deal with that change and all those unintended consequences all at once and at a much magnified intensity.

What you do is increase domestic oil supply. That will reduce the effect of OPEC countries on the market and decrease the price of oil due to a shift in supply.

In this case, it simply becomes necessary because the American consumer has proven time and time again to be unable to plan for the future.

The market has never "planned for the future" but has always adapted very well; much better then any government plan has ever done. That is an historical fact.

Just because there isn't a "plan" in place means nothing. There has never been a need for a plan in the market.

You are once again making an assumption that ignores history here.

And you are buying into a false ugency due to fear mongering. It has not become "necessary" for any type of market plan. You have not provided any basis for any necessity other then the fact that there hasn't been a plan before. That reasoning seems somewhat circular, don't you think? Just because we haven't had a plan in the past does not prove that we need a plan now.

There is also the fact that there is no legal or moral justification for the U.S. government to interfer in the free market. You apparently have no problem with totalitarianism.

Surely you saw the six month hybrid waiting lists when gas hit four bucks, yes?

Again, you are citing an anomoly in the market due to non-market forces as proof. The exception does not disprove the rule. And there are plenty of other reasons for the 6 month waiting lists then purely a reaction to high gas prices last summer.

People spent the last five years buying trucks thinking that fuel was going to be cheap forever, and when it went through the roof, they panicked and all went out to trade down to Priuses (Priusi?).

Yes, they panicked due to non-market forces artificially inflating the price very quickly and unnaturally. Prices do not naturally increase that fast. They only ever do that through outside influence.

They failed to plan ahead. Do you think we would have had the same type of panic had people made more reasonable and responsible decisions for the last five years about their choice in vehicles?

Who are you to say they were not being responsible?

What you are is highly arrogant and condesending. You are imposing your personal views based in your own personal situation to the rest of society. You cannot expect farmers to drive hybrids. But that is precisely what you are saying here.

Not that I think the government should actively go raising the price of fuel to encourage greater efficiency, but working to temporarily keep it low is simply attempting to stall the inevitable.

That has been tried in the past; it is called price control. Do you remember those long lines in the 1970's for gas? That is how those came about.

You can only support price controls (or cap and trade, if you wanna call it that) if you are highly ignorant on the negative economic effects that those policies have historically had.

It seems you are trying to do the devils advocate thing again. That is fine to a point, but you are going well beyond that into the ignoring of fact, history and reason to use speculation, assumption and fallacious arguments. That only drags down the debate and forces discussion on the irrelevant and unnecessary. If you are asking question that force someone to further explain and examine their view, then that is doing the devils advocate thing. If you are challenging another view through ingnorance, fallacious arguments and speculation, that goes beyond playing devils advocate in a debate to smug condesension.