I always assume you are talking about unicorns.
And I always thought you had trouble understanding English. Glad we cleared that up.
So, municipalities shouldn’t buy anything they can’t pay for in cash?
Why don’t we change the subject of debate from syntax, linguistics, and what the meaning of is is, and perhaps you could illuminate for the rest of us your views of the conditions under which it is bad for municipalities to finance large capital projects?
For example, if a small town wants needs to raise $50 million to build a new school, but state law prevents the town from beginning construction until the town has sufficient resources to pay the full construction cost. I would say that the town should consider a bond issue, thereby financing the construction cost. I think you may disagree with that, but I don’t know what your suggestion is for what the town should do.
Should unicorns fly out of your ass?
At least now you are talking about a subject you are more likely to know something about.
Do you also think those two statements are synonymous?
Heh. Do you always answer a question with a question?
And what was it that I was talking about that time?
You don’t remember?
Seriously, the conditions for taking on debt should not be unfamiliar to people. There is good debt and bad debt. For a town/county/state to issue municipal bonds may or may not be a good thing. They certainly aren’t always good, or always bad.
Here was the original statement I responded to:
So two things wrong there, 1) it is in no way like paying taxes, since you actually make money off the process (ie interest).
- A municipal bond is a town taking on debt. So it follows the same benefits and problems as anyone or anything else taking on debt. A bond issue to finance a much needed bridge may allow the region to prosper and easily pay back the loan. A county that issues bonds to build a shiny new stadium only to have the team leave is shit out of luck. Note that the loan has to be paid back using future tax revenue. If in the future the region can’t afford to pay back the loans, they have to increase taxes. Doing that tends to drive people out, further reducing revenue. Then their credit rating is cut, and they can’t afford to issue new bonds (the interest rate goes up). Result, the municipality goes bankrupt.
I can’t believe I had to write that.
Curious how you would misinterpret it.
Look, this is Great Debates, not the SATs. I’m not interested in rhetorical Battleship, in which contestants randomly fire off questions trying to guess what your views are on this issue.
For those two statements, I could see that one person may think that bonds are dangerous and municipalities should pay for everything with cash. I could see another person may, like you later explained, be warning that debt can sometimes, but not always, be a useful tool. On the Internet, it is sometimes hard to differentiate someone taking an extreme position (the government should never take on debt!) from a nuanced one (the government is making a bad investment with this particular bond) if people don’t put in a little effort to explaining themselves.
I read the statement that you originally quoted as meaning that people who buy bonds are investing in communities, in just the same way as how paying taxes also invests in communities. Obviously buying bonds is different than paying taxes in many, many ways, such as that investors make profits, buying bonds is voluntary, taxes are a terrible place to stash extra money, and so on.
For a guy so caught up in the measuring the precise meaning of two statements, I think you misread RNATB’s statement quite a bit.
And also, back to your statement that if Bricker were paying more in taxes bonds wouldn’t be needed, that’s not really the case either. Many states and localities have sufficient revenue to afford capital projects, but require financing so that the money is available all at the right time. It only takes a year to build a school, but it may not make sense to raise taxes by an amount equivalent to the cost of the school for only that one year. If a county knows that its revenues are such that the school can be built if it is financed over a period of years.
And your example of irresponsible debt notwithstanding, I remind you that the default rate for municipal bonds is approximately 100 times lower than the default rate for corporate bonds. But the concern for public sector financing is touching.
Personally, I find it hard to make observations or compelling arguments if I restrict myself to interrogative prose.
What railing? Where have I railed?
While you do make money off muni bonds, their interest rates are significantly below other investments you can make. You get some of this back from them being tax free, and some is due to their safety. Mrs. Heinz Kerry, being able to afford all sorts of interesting investments and financial advisers, could have made a lot more than she did, so she was giving up money to support the government.
My father refused to invest in anything else. We bemoaned his low return - but his investment wasn’t hurt at all by the recession.
It appears to be **emacknight **that’s getting accused of railing, not you.
Oh.
Sorry. Rail away at the railing, then. My bad.
So, what was the point of the OP?
Well it can be during deflationary periods if you have people hoarding money and not investing it. You create an artificial inflation rate in the form of a wealth tax which creates a hurdle rate for capital to generate in order to maintain its vallue. BUt that doesn’t happen in a modern economy very often.
We are all born naked and society is your partner in all your endeavors and society should get its share.
I’m not sure you can get around the car tax by leasing it.
A million dollars (in hundreds) is about then size of a case of beer. I can fit 80 cases of beer in my walk in closet.
Yeah but guys like Romney make much more than those lottery millionaires.
I’m not sure people WANT to go after Bricker. He’s been taxed already.
Its not immoral, it can be tough to pull off because not all munis are actually 100% tax free, they are frequently subject to AMT and munis are much higher credit risks than treasuries, why would you need to take that kind of risk. Just get the risk free stuff and pay the tax, you will have plenty of money and you will sleep better at night.
Then that is recently (and probably the result of the fire sale on munis that we had during the financial crisis). The objective isn’t to reduce your tax burden, the objective is to maximize your after tax risk adjusted return. For a LOT of people that means buying US treasuries with most of their money.
Really? So if Bill Gates dies with all That Microsoft stock, when was it taxed the first time?
You do realize that the first $5 MILLION dollars of their estate is not subject to the estate tax, right? You knew that, right?
Like I said before I can see it if we are in a deflationary cycle and people are hoarding money but that’s not to raise income or punish wealth, its to encourage people to invest their money so we can get out of a deflationary cycle.
Interesting fact, when Bush cut taxes for the rich, a lot of the rich took their tax savings and bought treasury bonds, effectively lending money to the government instead of paying it as taxes. SO the money ended up in the same place (in some ways) we just pay interest on it now.
Please research this before you answer. I just pulled up my state municipal fund market website and found something like $15M in state and federal tax-free funds available today. Second, the way you get the 100% tax-free funds is…you buy the 100% tax-free funds. Third, many funds are AMT-free; in fact all of mine are such. You ensure this by the simple process of buying funds that are not subject to AMT. Finally, you do know the default rate for municipal bonds is incredibly low, right? Like hundredths of a percent for actual tax-raising authorities?
So I can buy treasuries at 1.8% that aren’t fully tax-free for the AA+ rated US government, or else my tax-free munis from AAA rated states that have never in their entire history defaulted, at 3-5%. Which are 100% tax-free. This is no contest.