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Debunking Bush Tax Cut Myths

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A school of political and economic argument goes something like this: every economic ill can be cured by tax cuts. It’s clearly rubbish when stated that way, yet the same logic is given far too much credence every time it is overused.

A very good piece by William Gale at the Washington Post, “Five myths about the Bush tax cuts,” (hat tip reader Francois T) shreds the idea that the rescinding or reining in the Bush tax cuts (scheduled to lapse this year) would be a bad idea.

Oddly, Gale pulls his punches by dignifying the canard that the Bush tax reductions were for everyone. Per the second paragraph:

The cuts lowered tax rates across the board on income, dividends and capital gains; eventually eliminated the estate tax; further lowered burdens on married couples, parents and the working poor; and increased tax credits for education and retirement savings.

This is technically correct but misleading. John Quiggin and others have pointed out that the benefits of income tax cuts over the last 30 years have accrued disproportionately to the top 10%. The Bush tax cuts were so egregiously skewed towards the well off that Warren Buffett objected to them, with Buffett noting that as a result, his secretary paid a higher percentage of her income in taxes than he did. Similarly, 100 uber rich individuals, including Steven C. Rockefeller and other members of the Rockefeller family, Metropolitan Museum board chairwoman Agnes Gund, and George Soros, signed a letter opposing a proposed 2001 estate tax repeal.

Do read Gale piece in its entirety, since it shreds many of the claims made as to why the Bush tax cuts were beneficial to the economy, and most of these arguments are trotted out to promote tax cuts, particularly for high earners. For instance, one widely touted myth is that higher taxes on top earners will hurt small businesses:

One of the most common objections to letting the cuts expire for those in the highest tax brackets is that it would hurt small businesses…

This claim is misleading. If, as proposed, the Bush tax cuts are allowed to expire for the highest earners, the vast majority of small businesses will be unaffected. Less than 2 percent of tax returns reporting small-business income are filed by taxpayers in the top two income brackets — individuals earning more than about $170,000 a year and families earning more than about $210,000 a year.

And just as most small businesses aren’t owned by people in the top income brackets, most people in the top income brackets don’t rely mainly on small-business income: According to the Tax Policy Center, such proceeds make up a majority of income for about 40 percent of households in the top income bracket and a third of households in the second-highest bracket. If the objective is to help small businesses, continuing the Bush tax cuts on high-income taxpayers isn’t the way to go — it would miss more than 98 percent of small-business owners and would primarily help people who don’t make most of their money off those businesses.

You’ll find the article here.

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33 comments

  1. Deus-DJ

    Isn’t it sad that even at this time and date we are still trying to debunk tax cut myths? I think it speaks to a larger statement from the rich and powerful that they don’t care about our arguments or our reasons. They will continue to make these false statements and fool a great many people(as they did with Gale to a small extent) to believe them. It’s time we fought power with power. How we do that for those of us interested in social justice takes some creativity. We must remember, however, that continued attempts to use reason as Yves has above will always, ultimately, be doomed to failure.

    1. Deus-DJ

      Let me point out that that the role Yves takes is very important. It is up to those of reading her blog to take action, as she wishes we do.

      1. steveo

        Hear Hear, you speak words of wisdom. Those that educate and encourage and those that take action often need to be different people.

  2. Vergu

    Tax receipts get obliterated. Pass more cuts for the lower brackets and keep the Bush cuts. I thought all those MMT posts means you believed Yves!

  3. Kakko Warui

    The original “Bush Tax Cuts” were for everybody.

    We’re playing a word game here by saying,

    “Repeal Bush tax cuts for the ultra-rich”
    without saying
    “Keep Bush tax cuts for everybody else”

    It would be nice for conservatives to admit that the rich don’t need the tax cuts as equally as it would be nice for liberals to admit that the tax cuts for everybody else are a welcome sight.

    Some of that money gained in tax hikes may cost jobs and raise unemployment. I learned that from playing SimCity.

  4. michel

    Of course tax cuts are not the answer to everything.

    The important substantial question is how large you want the state to be as a proportion of GDP. And what you want it to do.

    This tells you what proportion of GDP you want to raise in taxes, and, as one keeps arguing, it makes a difference what the government spends it on. If they are just going to spend it on civil servants sitting around doing nothing or making more work for everyone, better cut. If they are going to spend it on pointless foreign wars, better cut.

    In short, higher taxes and higher government spending are not the answer to every economic problem.

    Taxation rate is not the key variable. The key variable is what government does.

    1. Deus-DJ

      No, it should not at all be a question of what % of GDP you want the state to be. If that’s something one personally would like to know and understand from a historical perspective, then that’s good and fine. Looking at it as a pass/fail measure is completely arbitrary and thus completely stupid. What the state does with it is one of the most important questions, but not entirely necessary due to why taxes exist to begin with.
      Taxes exist in society to attain more equity(otherwise there is no role whatsoever for taxes…government could simply print money(subject to constraints of course) and achieve whatever services it wants). How a government goes about using that money may or may not be of huge concern. If the government wisely allocates the money(ie invests it in infrastructure for instance) along with creating a program(s) for the elderly and/or the poor, is by far the most effective means of achieving that equity(as far as taxes are concerned anyhow). However, even that isn’t entirely relevant to why taxation occurs. Even if the money is wasted down what we may consider rat-holes(not including foreign wars) the money is still somehow being allocated from a richer class(given a progressive tax of some sort) to the poorer class, whether it be direct or indirect.

      The point is, when you have tax cuts you are merely giving that money back to a class that already has the vast majority of the country’s wealth(given our tax structure and the essence of the Bush Tax cuts) and thus achieving absolutely nothing. To suggest that the rich would invest that money and thus eventually help the lower class is simply ridiculous; why not simply give them the money via a service of some sort? Thus, the idea of tax cuts is simply a vehicle for the controlling classes to maintain their status in society, with the convenient excuses of free markets/economic growth being offered to and used by them.

      Hope you’re not choking your cat as you read this, michel.

      1. readerOfTeaLeaves

        I admit to scratching my head a bit about one of your points:

        Taxes exist in society to attain more equity(otherwise there is no role whatsoever for taxes…government could simply print money(subject to constraints of course) and achieve whatever services it wants). How a government goes about using that money may or may not be of huge concern.

        IMVHO, taxes exist so that large projects are possible: dams, interstate highway systems, expensive wars, food safety testing, tracking data (i.e., Census Bureau), tracking weather by using expensive satellites, yadda, yadda…

        If in the process of doing all those things, a society becomes more economically equitable (and stable), so be it. Some of those things: dams, roads, weather, data I happen to believe are often a heck of a bargain. I don’t care to live in a nation where commerce is impeded because you can’t ship goods from Point A to Point B. But taxes built all those ‘services’ and the impetus had nothing to do with equalizing income.

        But I concur that under our current situation, the following is a problem:

        The point is, when you have tax cuts you are merely giving that money back to a class that already has the vast majority of the country’s wealth(given our tax structure and the essence of the Bush Tax cuts) and thus achieving absolutely nothing.

        I would quible, however, that this is ‘merely’ giving. It is an abdication of leadership, it is craven caving to influential interests, and it is economic muddleheadedness.

        I would also argue that it does not ‘achieve nothing’.
        It achieves a great deal, and most of what it achieves is further social disintengration, greater distrust and cynicism, increased alienation from institutions like the Fed, the Congress, and other agencies of federal government. This is not ‘nothing’; it is grim.

        1. Deus-DJ

          Taxes aren’t necessary in a fiat monetary system(except perhaps to give the currency intrinsic value, in that it’s value is inherent in it’s need to be able to pay back the taxes). In other words, the government can choose simply not to tax at all and simply print money, with constraints of course. Rather than worrying about that money being paid back, we simply accept a nominal decrease of purchasing power and depreciation of the currency(though it must be very important to note that if such a system were to ever take place that the lower classes nominal income also increases..I think).
          The point though is that taxes are inherently equitable(if progressive, that is) merely through their imposition. Unless wasted in a war(ie money given to private corporations much like it has been done with Blackwater and others) or simply given back to the bourgeoisie, that money MUST NECESSARILY benefit the lower classes to some extent.

          The rest of your comments are true but unnecessary, given that I came to that same conclusion. I would argue, however, that your attacks miss the point. It is pointless to go after the politicians…the only way to achieve the more just society you and I crave is through the lower classes themselves demanding it. Absent such class warfare you should never expect the higher classes to simply cave in to the few demands here or there to voluntarily stop advocating for themselves.

  5. Jackrabbit

    Given what we’ve seen from the Obama administration so far, I fully expect Obama/Geithner to give in on this issue almost entirely – probably in exchange for some other legislation as cover.

    While he COULD take his case to the American people, he won’t. (Maybe he’ll let the Repubs write the legislation?) He’ll tell us how he has to be practical and how his hand is forced or how he was able to reach a “bi-partisan consensus.” (Wow, that bi=partisan thing of his really paid off, huh!)

    What will he buy with these pieces of silver? immigration reform? more stimulus? climate legislation? I’m thinking cap and trade because it helps his Wall Street friends. It’ll be painted as good for the environment (though many environmentalists are opposed to this approach) AND job-creating (on Wall Street).

  6. TheRadicalModerate

    “Less than 2 percent of tax returns reporting small-business income are filed by taxpayers in the top two income brackets — individuals earning more than about $170,000 a year and families earning more than about $210,000 a year.”

    There’s just an eensy tiny problem with this statement: it’s measuring the number of tax returns, not the ratio of business income to adjusted gross income. Which is of course a ridiculous metric, since a huge number of low-income filers report Schedule C income, which deals both with self-employment income in addition to sole proprietorships.

    Which brings us to the second point made:

    “According to the Tax Policy Center, such proceeds make up a majority of income for about 40 percent of households in the top income bracket and a third of households in the second-highest bracket.”

    This prompted me to hit the IRS database and actually compute these ratios for myself. (I used 2008, which is the latest year that has stats published. The Excel link is http://www.irs.gov/pub/irs-soi/08in14ar.xls) When I included gains and losses from Schedule C (Business and self-employment income), Schedule E (S-corporations, rents, and royalties), and Schedule F (Farm) income, as well as Schedule E gains and losses for business and capital equipment sales, as a ratio to aggregate adjusted gross income, I got the following numbers:

    AGI % of AGI as business income
    $1 under $5,000 -12%
    $5,000 under $10,000 4%
    $10,000 under $15,000 9%
    $15,000 under $20,000 3%
    $20,000 under $25,000 2%
    $25,000 under $30,000 1%
    $30,000 under $40,000 1%
    $40,000 under $50,000 1%
    $50,000 under $75,000 1%
    $75,000 under $100,000 1%
    $100,000 under $200,000 4%
    $200,000 under $500,000 13%
    $500,000 under $1,000,00 24%
    $1,000,000 under $1,500,000 29%
    $1,500,000 under $2,000,000 32%
    $2,000,000 under $5,000,000 35%
    $5,000,000 under $10,000,000 39%
    $10,000,000 or more 48%

    Let’s just take a moment to look at that last number: For filers with over a 10 million bucks, **half** of their income came from private business activities. You want to tax these folks’ dividends as ordinary income? Go for it. But if you goose up their ordinary income rates by 3.5% and their capital gains rates by 13%, I think you’re going to see a pretty big impact on how much they’re willing to spend.

    In a crowded field this year, I’d like to nominate that Wapo piece for the annual “Liar Liar Pants on Fire” award.

  7. V Ray

    I Think the “tax cut” crowd should read Stockman’s column today. He was a director of the Office of Management and Budget under President Ronald Reagan.

    http://www.nytimes.com/2010/08/01/opinion/01stockman.html?src=me&ref=homepage

    While I think the Reagan Tax cuts re-formed the tax code and were mid-wife to the technology and deregulation boom that was on the horizon, the Bush tax cuts of 2003 were well … bush league, and created a cancer we will have to live with for a long time.

  8. Donald Last

    his article is packed with sophistry. Item one: the tax cuts caused revenue loss which raised debt levels which pushed up interest rates. Well, that’s a funny way of looking at it. What was so sancrosanct about the tax rates existing before Bush cut them. Were they handed down by God. Was some perfect, optimum tax schedule abused?
    No, it was not the tax cuts that raised debt, it was the fact that state spending went on rising. And I defy anybody to figure the amount a theoretical loss of revenue pushed up rates. That exercise is impossible. It is worse than rubbish.

    Item two: letting the tax cuts expire would provide revenue that would help meet the cost of rising entitlements. I don’t have the exact figures to hand but I don’t believe it. I suspect it would be trivial. The tax revenue raised on the most wealthy is almost certainly small compared with the taxes raised on the mass of middle class households that pays the vast bulk of state spending and entitlements. That’s the way it goes and always has done. The mass of voters have to pay for the benefits they vote for. There is no golden casket marked RICH.

    Tthe wealthy are very adept at lightening their tax burden. They can pay for the best tax lawyers. Move offshore. It’s a losing game even if it makes those who advocate expiry feel warm inside.

    The basic issue has always been this: Is the citizenry in general willing to pay the taxes to meet the cost of the state benefits they believe they are entitled to? The answer is they are not. Trying to pull the wool over people’s eyes by intimating that if only the wealthy can be taxed enough all would be well is sanctimonious hypocrisy. It is made worse by the fact that the exercise is done by intelligent people who should know better.
    The major reason for the huge rise in debt since the 1990′s was because people in America and Europe were both trying to square this circle which is central to Western economies. Governments were not prepared to raise taxes for the stuff they promised – nor their own expensive habits – and citizens were certainly not prepared to pay the taxes. Let’s not waste time chasing futile canard about taxing the wealthy.

    1. Yves Smith Post author

      Looks like more than a wee bit of the pot calling the kettle black on the sophistry front.

      You seem to forget that the US economy was in pretty good shape, and fiscal deficits a non-issue at the end of the Clinton era. The explosion of household debt to GDP dates almost exactly to the Bush era tax cuts, which from a macro perspective results from the fact that big fiscal deficits (which the tax cuts generated) when you already have low private sector savings and an existing (albeit not large as of then) trade deficit is gonna generate huge capital imports, ie a big increase in debt to GDP. And worse, this was HOUSEHOLD debt, the LEAST productive kind from a macro perspective.

      So there is empirical evidence that the structure of income taxes was not bad prior to the tax cuts (“optimal” is a straw man, can you tell me what optimal is?), and the cuts produced big time economic distortions.

      And you don’t rebut the argument re entitlements at all, all you offer is personal prejudice.

      Citizens are overwhelmingly in favor of keeping Social Security and Medicare, poll data shows this consistently. They want cuts in defense and other spending to preserve them. Pretty modest fixes (one of the easiest would be ending the cap on payroll taxes) would solve this exaggerated “problem”(we’ve had multiple posts, with data, on this topic on NC).

    2. V Ray

      Well, Donald. You got it! That is what Stockman is saying – that instead of paying for things, America borrowed.

      Now, one can debate WHO should pay and how much, but there is no doubt that we pay one way or the other.

      What is obvious is that no one wants to pay, and in the immortal words of Oliver, everyone wants “more”!

    3. Deus-DJ

      Mr. Last,

      So let us understand what you are saying here.
      1. The rich can avoid taxes.
      2. Taxing the rich at higher rates(ie pre bush) wouldn’t solve anything.

      So what you are essentially saying is this:
      3. Let’s not tax the rich at rates higher than they are now. Furthermore, let’s cut entitlements to balance our budget…and for those of you reading this, I don’t want you to remember that 58% of real gdp growth has gone to the top 1%. Just forget about that.

      The last point I have is that nobody believes that all would be well if we could tax the rich a little more. In fact, those on this blog that advocate such a position don’t say that from a balanced budget perspective, but from an equity perspective.
      So the question is, why do you even bother posting at all? The only rubbish I see are the comments you posted. Indeed, one can imply your motivations from the comments you made, and that is this: I don’t want higher taxes on the rich, and I will make excuses and false outrage to support that position.

  9. Richfam

    http://money.cnn.com/2008/10/24/magazines/fortune/tully_henrys.fortune/index.htm

    I’m not saying you should feel bad for these people (I admit I might fall into this group) but the point is most poeple like this did not have it given to them. Anyway, the marginal tax dollar hits them (me) the hardest in our tax system. If you’re in the investor class of truely rich not only is your tax burden lower on a percentage basis (that overused Buffet story) but you really dont care because you don’t actually spend that marginal dollar. Most of the these people spend all their money and save enough for retirement but are not busting out with million(s) in the bank. So the bull about taxes and stimulus spending just holds no water for me – all the dollars get spent by this group.

    Plus since many government programs are means tested the benefits from taxes are thin for this group. Most people in this group will not benefit from the health care bill, and fear that they will be means tested out of social security somewhere down the line. So there’s a sense that saving for retirement will be the only source of income in retirement. But its hard to save for retirement when taxes take so much, the 401k maximum is so low, and there’s no pension coming from another source.

    Like I said, I know nobody will feel sorry for this group and most people on this blog will tell me to got to h*ll….but the full force of government and taxes falls here on a marginal basis.

    Now go ahead and call me a straw man, world’s smallest violin, evil, right wing, rich (I wish), out of touch, whatever….

    1. Jackrabbit

      Richfam: take up the issue with the Donald Last, the commenter before you, who says:

      The wealthy are very adept at lightening their tax burden. They can pay for the best tax lawyers. Move offshore. It’s a losing game even if it makes those who advocate expiry feel warm inside.

      Those below you have more pain than you do. It’s unlikely they can/will pay more taxes. If YOU pay more, its because those who are wealthier pay less than what is “fair”.

      1. Richfam

        I hear you loud and clear on both points, I understand people with much less have it hard but I feel like the patsy in that taxing in the name of equality comes down hardest on me on a marginal basis and I’m not rich enough to not care about the money. Also not enough to pay someone to find ways to dodge taxes. So why should I support higher taxes when I know I’m the sucker. It’s like the old poker thing, if you don’t know who the sucker is, you’re the sucker… Same with health care, its more of a very very expensive insurance policy for me against my world falling apart while everyone else seems to benefit. I’m no crying poverty at all I know I’m blessed and I know our capitalist system needs to find ways to help those less lucky.

        1. Jackrabbit

          I agree. Those who are well-off but not rich get screwed. Whether taxes rise or stay the same, we should have a fairer, more progressive, system where the wealthy don’t pay less (on a percentage basis).

          I understand that the knee-jerk reaction is NO MORE TAXES. But given the state that we’re in (as described by Stockman’s Op-Ed) one has to believe that taxes are likely to rise (eventually) so people in your situation should be arguing for fairer taxes also.

        2. JTFaraday

          ” Same with health care, its more of a very very expensive insurance policy for me against my world falling apart while everyone else seems to benefit.”

          But who is “everyone else”? Those in the stingy medicaid expansion?

          This bill is about to hand people making squat, and working without benefits, a federal mandate to purchase the same insurance plan they couldn’t afford before to protect assets they still don’t have.

          That’s “a very expensive insurance policy against their world falling apart,” in exchange for guaranteed poverty. I’d take bet, wouldn’t you?

          “But its hard to save for retirement when taxes take so much, the 401k maximum is so low, and there’s no pension coming from another source.”

          Try no savings, EVER. The median income is about $40k.

          As it is, the upper middle class is the only popular constitutency of either criminal cabal in Washington.

          They even have their own Tea Party rabble, out takin’ the heat, while the culturally “liberal” neoliberal pundit class transforms it into grist for the never ending culture war.

          I wouldn’t be so worried about it, if I were you.

  10. Adam

    You have to take Warren Buffett with a grain of salt since life insurance and annuities are major beneficiaries of higher taxes (both tax sheltered methods of saving and passing wealth to heirs).

  11. Huggy

    Lets see some courage. Put down all the possibilities and state your projected outcome.
    My belief is that it won’t matter one way or the other.
    The math don’t work. Too much Government debt. Government is trying to beat a dead horse.

  12. Bernard

    the poor simply don’t have more money to spend and spend more of their total income on taxes than those with more money.

    so no matter how you want to say it. the rich can and should pay more taxes if they are “members” of that society. the rich won’t do this and have figured a way to avoid paying taxes. Not like the rich got rich/made their money in a vacuum. those self same consumers made the rich wealthy with the help of the society/roads,infrastructure and societal components.

    that is one thing that never seems to get spoken here. the rich somehow get rich in some sort of “way” that never includes the society that allowed them to get rich. not much of a cost for their “wealth accumulation activities” nor any connection to the people who “helped” them get rich.

    that is so amazing to see never ever alluded to. all i hear is “oh the poor rich, the slights and indignities of being rich”. don’t the “poor” understand how tough it is being rich.

    up until the Reagan era of buying Congress/Government through “deregulation and business knows better,” there was a compact between society that worked somewhat.

    since the rich are the main beneficiaries of a functional society, as in what we used to have here in America, paying for the “riches” they extracted from Americans seems like a “fair trade.”

    the illusions that Americans had of being able to one of the “Rich” that Reagan so successfully scammed Americans on( and the Republican Party, in particular), was the vehicle that allowed the Free Lunch that we are now paying for in the guise of the scam we now have.

    maybe if enough Americans are “awakened” to the harsh reality of the scam that the REpublicans sold and Americans bought into, then some corrections might occur. but right now the PR campaign is not going to allow reality to return.

    we can see how tax cuts on the Rich haven’t worked for anyone but the Rich. that’s why they won’t allow people like Elizabeth Warren to be anything but a symbol. The Rich have America by the monetary balls and aren’t going to give up until they get ALL they want.

    that most White Americans still believe in such BS is a testimony to the effectiveness of the PR campaign. i believe Goebbels would be saying “i told you!!!,” of how well the how PR scam has proceeded.

    the looting of the American system is exactly what the Rich want. the poor are to be exploited, as is the case in every country they go to. F the poor, God made lots of them, especially the Mexicans. lol.

    talk about Ayn Randian economics.

    1. Jackrabbit

      A few months ago I saw an article online that described American citizens as suffering from a sort of Stockholm syndrome: on the whole, identifying with their “captors”. MSM teaches us to adore and fear those who are wealthier, and to practically worship the very richest.

      If our current crisis results in any good, it will be to free us from this mindset which promotes a mercenary and insular culture. As long as the culture of “me” prevails, our course as a society will be toward disaster.

  13. brian

    what needs to happen is any revenue gains from the expirations need to be expressly directed to deficit reduction
    better yet put the funds into the social security trust fund account which was raided to pay for the cuts and redeem/surrender the ious/treasuries put into the fund

  14. angry anon

    Yves,

    I really don’t think you and the econ elite just don’t get it.

    Let me relate a very real scenario that happened in a 100,000 population city in 2003.

    In 2003 “Middleton USA” was a small but up and comming area. In the years prior the retail sector was dominated by mom-pop hardware, clothes and durable retailers. The city did not have a Starbucks, Borders, and only had one tired old Kmart that was still in the location it started in the 1970s.

    Just a static steady town you know? Anyway the local military base was set for expansion and many people knew that more money was comming to Middleton. But why cant we get a Starbucks or even a Home Depot?

    WELL – both Home Depot and Lowes would like to move BUT there is no retail space for them to lease… no retail space because there is no commercial real estate developer building a big box… no developer becasue there are no investors to gamble on a Commercial Retail investment.

    In 2003 the tax cuts were in full swing and one local Middleton developer said “hey let’s get some investors”. So he went to the Doctor’s Lawyers and Engineers that all made about $250,000 a year and were seeing about 25k net additional after tax cuts days. The developer gets about 30 or so high income earners to all stake about 100k and assume a loan… AND VOILA you have capital formation

    2 big boxes (Home Depot and Lowes) are built creating in round figures 500 ADDITIONAL new jobs in the home inprovement space alone. (not to mention the other dev projects that went down about this time THREE Starbucks now!!!).

    fast forward to Summer 2010 mil base expanding again develper goes out to his doctors and they say – “health care reform is scaring us no thanks” he goes to the lawyers and engineers “they say nah don’t know if my tax bill is going up because the tax cuts ending”.

    NET NET NO new construction no new retail no new economic activity NO new jobs BECAUSE of regulation and taxes.

    I know the knee jerk reaction will be – eh it’s only one area this can’t be happening everywhere… my experience tells me differently… You increase taxes ESPECIALLY on high wage earners YOU WILL chokeoff new capital formation… I’m seeing it now. And there are A LOT of businessmen seeing the same thing.

    So please keep quoting about “myths” people who do invest and make commerce and industry happen in reality see what happened in the 1980s and the 2000s… AND WE ARE SEEING IT ENDING… AND see the economy is slowing – gee could it be related? nah some researcher says the Bush tax cuts helping was a myth. Yeah and HD and Lowes moving in were a myth too.

    1. Yves Smith Post author

      Sorry, you have it dead wrong.

      I’m not a member of the “economics elite,” I’m not even an economist.

      And I do have quite a lot of experience on the buy side and sell side on small deals. And I’ve also had developers and real estate syndicators as clients.

      Guess what? Your little tale does not pass the smell test.

      I don’t know if you are the developer in question, or a friend of the developer, but no small investor in his right mind lends to a developer. If he can’t borrow from a bank, your alarm bells should go off, big time.

      The dollar sizes also don’t add up. If the deal was papered up properly, the cost of the lawyering (both the developer and the doctors etc. having their attorneys have a look at it) would be disproportionate relative to the scale of the investment. I’d bet a more than a few corners were cut.

      Moreoever, you tout the jobs created and say nothing about investment returns, and say none of the previous investors are coming back. None tells me there were problems. Anyone who has ever done small deals will tell you what that means. The returns were no good, or there was some other reason the investors are unhappy (late or incomplete financial reports, say?). People will ALWAYS find money to invest again with someone who made them money. The line about taxes are a polite way to blow him off.

      Now with the economy being so uncertain, I could see a lower acceptance rate. A lot of people are afraid of a market decline this fall, and the outlook for retail sales isn’t so hot, two reasons to be nervous about a deal that depends on retail demand. But no repeat investors says something more serious is afoot.

      Don’t play with me, and don’t bullshit readers.

      As for local economy benefits, you can’t say the Home Depot was a plus until you net out how many local businesses it killed. Most big box retailers are net job destroyers, not creators.

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