If the future value, the greatest predictor of real estate values, is all about location, location, location? Then I’m here to tell you that the future predictor for the successful growth of our economy will by far depend upon the level of taxes, taxes, and more taxes we’ll have to pay going forward!
I had a client, smart man, but his education was all clinical research, not economics or finance. We were debating the effect of tax rates on U.S. economic output over the years and he asked a good question. He said, “if your premise on keeping tax rates low in order to achieve maximum economic growth is valid, how do you explain the American expansion that occurred just after World War II when income tax rates were certainly north of 50%, maybe even as high as 70% for some earners, yet the economy stayed in a “boom” mode?” The answer had to do with the existence of two pretty unique circumstances surrounding the U.S. once the war ended. First businesses were starving for available labor, and once soldiers returned home to fill that void, it created a huge housing boom along with the playing of “house” for many a young family, which in turn, created the largest population explosion ever witnessed in the United States (to date), better known as the “Baby Boom” Generation. And two, as we shall see, Demographics should never be ignored in the study of Economic forecasts.
Demographic trends in the United States were way different back in the late 1940’s-50’s than what we are witnessing today. There wasn’t near the amount of retirement aged people choosing to retire that we’re witnessing today. More than 10,000 Americans per month are retiring and leaving the work force, a trend that has been ongoing for quite some time now. Because of our aging population, along with the fact that our manufacturing moved offshore over the past say, three decades, this economy doesn’t have the resiliency to survive high tax rates. The economy is set to suffer once aggregate spending shrinks due to higher taxes as Americans will have less available to spend. Of course, the idiots – the Democrats are completely ignoring the issue that an aging population could face within the confluence of a rising tax burden.
Observing Japan over the past probably three decades, turns out that Japan is a great model for what could happen in these United States should Democrats in Washington get their way and increase both income and capital gains taxes. There the economy has struggled from aging demographics as well as the flight of many younger Japanese professionals who have left their country for better opportunities abroad, further exacerbating the problem of an aging demographic.
