AEIdeas

The public policy blog of the American Enterprise Institute

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Discussion: (18 comments)

  1. SeattleSam

    Not a chance. Tax “breaks” have two aspects that appeal to government that it will never give up. First, they reinforce the idea that what you earn does not really belong to you — just what the government allows you to keep if you do certain things. Secondly, if Congress did away with the “breaks” they would have nothing to sell to those who solicit the “breaks”. It would be like a grocer giving away his inventory and clearing the shelves. That’s why we have high rates and lots of “breaks”. It may be inefficient in the macro-economic sense, but it’s very lucrative if you’re the one selling the “breaks”.

    1. Roger Ramjet

      Excellent!

  2. Tell Bernie Sanders that “BIG OIL” is not even on the list.

  3. David Conklin

    We have two main engines for our consumer based economy: new car sales and new housing. Eliminate or even greatly reduce the mortgage deduction and you could cripple the economy but good.

    Its important to realize that the deductions and breaks that we have are there for a reason.

    It is also important to realize that the gov’t failed to COLLECT and estimated 42 trillion in taxes that are owed. We have “charities” that push a social/political agenda (note the groups that Mitt Romney contributed to); this causes donations made to them to reduce one’s tax burden.

    1. SeattleSam

      I wonder how the Canadian economy has avoided being crippled without a mortgage interest deduction?

      1. David Conklin

        I’ll ask my cousin who lives in Canada.

        From Wiki (http://en.wikipedia.org/wiki/Home_mortgage_interest_deduction): “… homes used in businesses as a landlord who owns a rental residential property can deduct interest as any other reasonable business expense. … An indirect method for making interest on mortgage for personal residence tax deductible in Canada is through an asset swap, whereby the homebuyer sells his existing investments, purchases a house in full or in part by the sale, gets a mortgage on the house, and finally, buys back his investments with the money from the mortgage.” And yet! “The home ownership rate in Canada was about the same as in the United States in 2008[2] despite the difference in tax policy.”

        1. SeattleSam

          It’s not clear to me how diverting resources to real estate from other economic uses (which is what the tax code encourages) results in any net positive economic impact. For instance, over the last hundred years, the real return on residential real estate is much less than the real return on the S&P 500. what that means is that you would have been better off investing in stocks than a home.

          1. David Conklin

            You don’t just buy real estate when you buy a house. You also have to furnish it: fridge, oven, carpets, window “treatments”, etc.. Then there’s the maintenance, because things break.

            >that means is that you would have been better off investing in stocks than a home.

            You don’t live in stocks. Now financially speaking you may be quite correct. But, most people don’t think like that.

  4. SeattleSam

    How are we better of when “things break”? Was this meant to be a parody of the Broken Window Fallacy?

    1. David Conklin

      Let’s say we’re talking about a broken window:
      1) Someone has to do the work to replace the broken window.
      2) Someone had to make the glass for the window.
      3) Someone had to stock the window.

      Then there the “caulk” around the window, etc..

      1. SeattleSam

        Yes, and the resources you used to buy the glass and replace it are now no longer available to be used for something else. In economics you have to account for not only the actual costs, but the opportunity costs as well. By ignoring opportunity costs you could conclude that the more things we break, the better off we are. We are only, say, a few earthquakes and hurricanes away from unbounded prosperity.

        1. David Conklin

          >the resources you used to buy the glass and replace it are now no longer available to be used for something else.

          You are assuming that the “something else” is available and ultimately better than the glass that was replaced.

          Side-note: a supervisor came to our store one day and noted the broken glass door and said that she had just paid for the last one! This time we got plexiglass!

          1. SeattleSam

            Other uses of resources are always available unless you live in a cave. And they would have to be of higher economic value than the glass. Otherwise it would pay you to break the glass on purpose in order to benefit from the differential value. If you’re really convinced that this isn’t true, go around and break all the windows and mirrors in your home and see how much better off you are.

          2. David Conklin

            >And they would have to be of higher economic value than the glass.

            You’ve assumed that.

  5. SeattleSam

    No, it’s not an assumption. Sign up for an Econ 101 course and you’ll discover why.

  6. David Conklin

    >No, it’s not an assumption. Sign up for an Econ 101 course and you’ll discover why.

    Took upper level undergrad level courses in economics, pup.

    BTW, your examples show that you’ve misunderstood the “Broken Window Fallacy.” See here: http://en.wikipedia.org/wiki/Parable_of_the_broken_window

  7. David Conklin

    BTW, SeattleSam

    You might want to learn how to cut-and-paste. That way your quip would follow the one you are responding to.

  8. hold on a minute

    Is this guy David Conklin seriously trying to pass off the broken window fallacy as some kind of economic wisdom?

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