Word: frees
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Dates: during 1980-1989
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...proponents' argument is typically neocloassical. By moving towards the free market in housing, supporters of 1-2-3 say all people can gain without anyone losing. Tenants allegedly gain by having the opportunity of home ownership. The city allegedly gains with the increase in tax revenue, as housing units are taxed at market rates. And oh yes, landlords just happen to gain also, to the tune of several million dollars...
True? The answer to that is another question: Do you believe in free-market capitalism? Do you think the best recipe for prosperity is minimum Government interference in the economy? Devotees of the capital-gains break usually claim to be enthusiastic free-marketeers. Let us take them at their word. Does the capital-gains break make sense from a free-market point of view...
...ideal free-market tax system would be no taxes at all. Taxes discourage productive activity: working, saving, investing. Even President Bush, though, seems to recognize that we can't borrow the entire federal budget. So taxes are necessary. In real life, the ideal free-market tax system is one where taxes affect people's economic decisions as little as possible. That is, a tax system that leaves the world looking as much as possible like one with no taxes...
...need any more sermons about the evil effects of high tax rates. But there is a second, equally important feature. Tax rates should be the same on alternative forms of economic activity. If plumbers are taxed more than electricians, there will be fewer plumbers and more electricians than the free market would dictate. If a tax break goes to timber but not to steel, investment flows out of the steel industry and into the timber industry. In either case, the Government is overriding the free market and dictating the shape of the economy just as surely...
There is nothing magical or unique about capital gains. A special break for this particular form of investment profit distorts the free market in two ways. First, it prejudices the economy in favor of certain kinds of investment. Those who say we need to encourage entrepreneurs or long-term investors with this break (which actually would reserve few of its benefits for those charmed circles) are saying the Government can outguess the market about which investments will pay off. If a risky or long-term investment makes more sense than keeping money in a savings account, the market will reward...