Date: Thursday, August 30, 2001
Question: "Budget Surpluses, Deficits, and Markets"
Pronounced declines in many indexes coupled with substantially reduced trading volumes has reduced the amount of gains - both longterm and shorterm - that are subject to taxation. These principally non-wage taxable items have fallen and so have tax receipts. These events would not immediately show up in employment, wage income, and other similar statistics.
Many individuals depend on capital items to sustain or supplement wages. Also, the sale of one capital asset may support the purchase of another - example, sell stock, buy house.
Occasionally, a sharp decline in stock market values does not concurrently halt rising residential prices because contracts are in the pipeline. Additionally, some are motivated to reallocate assets by moving from poorly performing groups into better performing ones.
The bottom line is that sharp declines in capital gains reduces the amount of
"income" subject to taxes. Therefore lower tax receipts and quickly diminish budgetary surplus situations. The market was bigger than the tangible economy.Are you looking for ideas, tactics or strategies for enhancing returns or protecting positions, then click here.