Look, I don't have time to give an economics lesson. I think you just want to argue. On the off chance that you care, I'll go into this one more time, then I'm moving on.
My goodness, when were the basics of supply and demand economics repealed?
I think you may be confusing "supply-side economics" with "supply-and-demand". These are two entirely separate principles. But even if you are not confusing them the rest of your statement is summarily false. It is a drastic oversimplification of supply-and-demand to consider the effect wholly linear and symmetrical. It is NOT. No economist with any credibility will claim, as you have, that it is.
And, you can't make the leap from cost/sales of commodities to the cost/sales of a manufactured good - particularly not a high-end luxury item. If you don't understand why not, I can recommend some books to read.
The axiom that you refer to as applied to competitive pricing is a microeconomic concern only. It affects whether I buy boat A or boat B - because I want to feel like I got the best value for the money I spent, but it does not affect the sales purchase until a certain threshold is met. That threshold does not move linearly or symmetrically with pricing, and this is the basis for the observed phenomenon that, for example, a 1% increase in cost does not result in a 1% drop in consumption.
Granted, also part of the effect is that, for example, a 10% increase, may result in a 15% drop in consumption. The idea is that, though the affect is not predictable because of the nonlinear and asymmetrical relation, it is widely accepted to be tolerant of small changes, particularly when those changes are not generally associated by the purchaser with the cost of the item.
A classic example of this is well-known in the telco industry. (The analogy has limited application here, but I thought it might be something you could relate to.) The company gives you a price for the service they will provide. After the assorted taxes and fees, you are lucky if your actual price is only twice the quoted price. And, these taxes and fees climb up over time. This increase in cost only has a deleterious effect on consumption when it reaches a certain threshold. That is, at some point, consumers start to decide that the cost is not worth the service. However, telcos know this threshold to be almost 15% per year in some markets. Ever wonder why telcos don't use their massive lobbying power to reduce fees and taxes? Because they benefit (to a large degree) by the application of those moneys, and they know that it doesn't hurt their sales in a linear way. (They do resist some fees, so there are counter-examples here, but the basic trend applies.)
The loss of this deduction, would have an analogous effect. It does not effect the purchase price, so will not, to any measurable degree, decrease sales. The only thing it MIGHT do is decrease the length of time any boat owner will hold onto the boat. And, such a decrease creates an increase in the sales and availability of used boats. People who buy used boats, also put money into fixing up and modifying those boats (I would venture to say more so than new boat owners).
Also, the previous owner now has regained moneys previously tied up the the asset, and is free to spend or invest those moneys (and will).
In case you don't know, what makes capitalism work is when money moves around. It doesn't much matter how it moves, but it most move. Actually, the economy is strongest when it moves in the least efficient way possible. The manufacture and sale of a new boat which is held onto for a long time - this is a very efficient exchange of funds and assets, and it not as good for the economy as, say, the cascade of transactions accompanying the resale of that boat.
So really, the best thing for the economy is that a person will buy a new boat, then turn around and sell that boat quickly. The more times that boat is bought and sold, the better off our economy. That, my friend, is a fact of capitalism (or as close as we get to facts in economics). So frankly, it is good for the economy if a person buys a boat he cannot afford to keep. It is not good for the individual, but what this does is liquidates some of his money and puts it back into motion in the economy. That's what makes capitalism go around.
Sorry, but this is a red herring in this discussion for the reasons I pointed out above.
I'm not sure you are using the term "red herring" correctly. A red herring is a tactic used to divert attention away from the relevant facts. You may not follow the reasoning, but that does not mean that it was presented to mislead. This is called "ad hominem" argumentation (it means that you attack the source's credibility/motive/character in some way rather than his position). If you don't understand something and have a genuine interest in learning, I would be happy to explain, but don't question my character.
Again, a red herring. The elimination of the tax deduction would affect sales of boats, particularly new boats, which affects the entire supply chain and will lead to lost jobs.
Again, I'm pretty sure that doesn't mean what you think it means. In any case, no, the elimination of the tax deduction is VERY unlikely to have the effect you mentioned. This is high school economics, and is dramatically oversimplified. Every economist knows this, and virtually every major business keenly understands it.
Take car sales for example. Say there's a car for sale for $20,000 including all current taxes and fees. And, just to oversimplify it so we can discuss what's wrong with your statement, a person has exactly $20,000 to spend, not a penny more. Then, a $100 fee is tacked onto the price of all new cars. Does that person simply not buy a car? Does this mean that $100 less is realized as profit by the car dealer?
Nope. It means that the person still spends $20,000. Now, they may go do a different dealer for a less expensive car. The profit margin may be higher for the less expensive car too, but let's not assume too much. A smart dealer sells them a less expensive car with lots of add-ons. This can easily result in a better profit than the sale of the $20,000 car to begin with, and it is almost certainly better for the economy.
It is true that if $100 goes to some tax, that the same $100 will not be immediately available to private parties, but you overlook another VERY important point. The government is the largest industry in our country. Being a non-profit organization, it is very efficient at providing jobs. So, that $100 doesn't evaporate, it goes somewhere. It provides jobs, it provides services and infrastructure that we would otherwise have to pay for somehow.
Now, if you want to take exception, don't oppose taxation. Taxation is not the problem. When tax money is being spent well, we all benefit. I, for one, like living in a literate society (thank you public schools) where anyone can get a degree (thank you financial aid and public universities), and goods and services can be moved freely on public roadways, and there are public places to gather in cities without paying a fee, and anyone can gain access to the water to enjoy it. The list goes on and on. Taxation is the cornerstone of the American way of life. It is the way we pay for things that we want to have in our society, that we can't afford individually, and which we want to be available to all.
However, there are plenty of ways to oppose the way that tax money is being spent. I don't think any of us has to look far to find some way that tax money is used that we disagree with. I'm personally worn out by the the no-taxation crowd. It is patently naive. Sort of makes me wish that one day they would get exactly what they were asking for and see how they liked it.
But, yes, absolutely oppose the way those moneys are spent. The bottom line is that the government won't collect more than it uses. Attack expenditures if you want to attack something.
The person contemplating the purchase of a $100,000 boat may own an existing home, but most likely does not own a second home in addition. To this person elimination of the tax deduction will cost him or her up to $10,000 increase in the price of that boat over the term of the loan.
The deduction you mentioned applied only to boats declared as second homes.
Yet another red herring. We are not trying to analyze the entire economy but instead understand the effect at the margin of eliminating the tax deduction.
No, a digresssion, not a red herring. I didn't receive a copy of the agenda for the discussion.
Not so at all. Most people buying $100,000 boats do not pay cash. They take out a loan secured by the boat, and the $100,000 disappears from the boat builder's goods sold, and instead is invested in treasury notes by the bank. Then, at the margin, the boat builder furloughs two hand lay-up technicians because sales drop.
You've lost me here. Are you saying that, if the buyer finances the boat through a bank, the seller doesn't get the money from the sale? That the bank somehow holds onto that money and doesn't give it to the seller?
I am a bit confused by your use of the phrase "high end". Is that $100,000 , $1,000,000, $10,000,000 ???
It's a relative term only used to compare two goods/services. In this case, I used it to qualify the broad range of luxury items. Presumably these begin at somewhere around the price of a latte and go up indefinitely. I think, by any measure, a boat large and equipped enough to qualify as a second home, would fit this description. The point is that, as the price goes up, the effect of a static price increases goes down.
I made no initial assumption concerning your background.
That response was directed at Ron who made the claim that I did not understand economics.
Btw, also hold the doctorate, albeit in engineering, and I formerly held a tenured professorship.
How is that the least bit relevant to a discussion of economics? Or did I just step into a pissing contest?
However, most but not all, my understanding of economics came from my executive positions in industry where I learned all about supply and demand in reality, rather than in the abstract of a classroom.
You assume way too much about me. I'm not going to get into a game of "my credentials are better than your credentials". I only brought it up because I took exception to Ron (who presumably knows comparatively little about economics) making the assertion that I did not understand the fundamentals. I should have left it alone.
Your background explains a great deal though. You are used to looking at this in myopic manner - looking out for #1. That is, if it's not good for you and your business, it's not good. These are great traits for individual business leaders, however, it is not necessarily good for the country. What is called for is the understanding that, just because I don't buy a widget from Acme, that this isn't a bad thing. It is only bad for the economy if I don't buy anything from anyone.
So, for the health of the economy, it doesn't matter if I don't buy a boat. What is important is that I spend my money somewhere. Fact is, large purchases frequently don't contribute most strongly to the economy. With a boat, for example, much of the cost goes to labor, which puts money into the hands of relatively few people. In terms of overall economic health, we would be better off if they made 1000 smaller purchases.
The problem with trying to protect this industry or that industry is that no one want their industry to be the one harmed by the economic downturn.
I am the first to agree that targeting boats specifically is a weak measure. We should eliminate the second home deduction across the board. Sorry if that harms you (whoever) personally, but the fact is that a second home (except in a few rare instances) is a luxury. If you want to have one, that's fine, but you should not get a tax break for it - floating or not.
Sorry, one more red herring.
Better look that term up. That was an example of the aforementioned ad hominem attack. I was mocking the messenger (in this case Ron) by (almost certainly) correctly guessing that he gets his information from Fox News. It was rude, base, and condescending, but it was not a red herring.
I'm unsubscribing from this thread because I don't think there is any productive exchange occurring here. There are a few people with their minds made up on this, and don't seem to care much about the facts. It's more about being right or winning an argument. No one ever wins an argument about politics, religion, or economics. The best you can hope for is productive dialog, and it isn't happening here.
