Month: October 2019
California state taxes are too high and that is a problem
Among top-bracket California taxpayers, outward migration and behavioral responses by stayers together eroded 45.2% of the windfall tax revenues from the reform.
That is from a new NBER working paper by Joshua Rauh and Ryan J. Shyux. Here is the full abstract:
Drawing on the universe of California income tax filings and the variation imposed by a 2012 tax increase of up to 3 percentage points for high-income households, we present new findings about the effects of personal income taxation on household location choice and pre-tax income. First, over and above baseline rates of taxpayer departure from California, an additional 0.8% of the California residential tax filing base whose 2012 income would have been in the new top tax bracket moved out from full-year residency of California in 2013, mostly to states with zero income tax. Second, to identify the impact of the California tax policy shift on the pre-tax earnings of high-income California residents, we use as a control group high-earning out-of-state taxpayers who persistently file as California non-residents. Using a differences-in-differences strategy paired with propensity score matching, we estimate an intensive margin elasticity of 2013 income with respect to the marginal net-of-tax rate of 2.5 to 3.3. Among top-bracket California taxpayers, outward migration and behavioral responses by stayers together eroded 45.2% of the windfall tax revenues from the reform.
You can file this one under Arthur Laffer: “these days definitely underrated.”
Daryl Morey vs. ESPN
Daryl Morey wrote a pro-Hong Kong tweet and had to retract it, and then both the Rockets and the NBA had to eat crow. ESPN — part of the Disney empire I might add — has given only tiny, tiny coverage to the whole episode, even though it is a huge story on non-basketball sites. I’ve been checking the espn/nba site regularly over the last 24 hours, and there is one small link in the upper corner, no featured story at all.
The ESPN pieces I’ve seen seem to be studiously carefully worded and non-incendiary.
Disney of course sells a lot of movies in China and presumably would love to sell more.
Everyone is upset about Morey, I haven’t seen anyone attack ESPN or even mention this.
Should we be so captive of the “endowment effect,” namely that deleting a tweet is more a form of visible “kowtowing” than is downplaying the story in the first place?
Didn’t Bastiat teach us about the seen vs. the unseen? Right now people are overreacting with respect to the seen.
If you let your emotions be so whiplashed by “the seen,” you will find it harder and harder to understand the unseen. Do not be a lap dog to the seen!
Addendum, from the comments: “The ESPN story that is on the top-right corner doesn’t even have a byline. It appears to be a reproduced AP story. So ESPN has not assigned a single reporter to produce a story about an NBA event that is on A1 of the NYT.”
And this: “ESPN forbids discussion of Chinese politics…“
What should I ask Ted Gioia?
I will be doing a Conversation with Ted, no associated public event. He is a musician and most of all a music historian, above all for jazz and blues, with numerous excellent books on those topics.
Here is his home page. Here is Ted on Twitter, one of the very best follows. Here is his latest book Music: A Subversive History, due out next week. And there is more:
Gioia was raised in a Sicilian-Mexican household in Hawthorne, California, a working class neighborhood in the South-Central area of Los Angeles. Gioia was valedictorian and a National Merit Scholar at Hawthorne High School, and attended Stanford University. There he received a degree in English (graduating with honors and distinction), served as editor of Stanford’s literary magazine, Sequoia, and wrote regularly for the Stanford Daily. He was a member of Stanford’s College Bowl team, which was featured on television, and defeated Yale in the national finals. Gioia also worked extensively as a jazz pianist during this period, and designed and taught a class on jazz at Stanford while still an undergraduate.
After graduation, Gioia received a degree in Philosophy, Politics and Economics at Oxford University, where he graduated with first class honors. He then received an MBA from Stanford University.
Gioia has enjoyed successes in the worlds of music, writing and business. In the business world, Gioia has consulted to Fortune 500
companies while working for McKinsey and the Boston Consulting Group. He helped Sola International complete an LBO and IPO on the New York Stock Exchange in the 1990s. He has undertaken business projects in 25 countries on five continents, and has managed large businesses (up to $200 million in revenues). While working amidst the venture capital community on Sand Hill Road in Silicon Valley, Gioia stood out from the crowd as the “guy with the piano in his office.”
His knowledge of varied musical genres is virtually without parallel. So what should I ask Ted?
U.S. taxes are progressive
Here is the opener, by the excellent David Splinter:
U.S. federal taxes are progressive, as shown by Congressional Budget Office and Tax Policy Center estimates, with average tax rates increasing with income. In fact, the OECD (2011) estimated that the U.S. has the most progressive household taxes among developed countries. Moreover, the 2017 tax reform is expected to have little effect on overall tax progressivity (Tax Policy Center, 2017; Joint Committee on Taxation, 2019). But Saez and Zucman (2019) argue that average tax rates are nearly equal over the income distribution. To examine this claim, this paper compares other estimates of average tax rates by income group,all of which suggest a high degree of progressivity. Three issues are found to bias the average tax rates presented in Saez and Zucman (2019). After correcting for these issues, their estimates align more closely with other estimates that show U.S. taxes are progressive.
Here is the full (short) piece. See also this Jason Furman thread. Here is the Kopczuk thread. There is a great deal of Twitter malpractice on this issue circulating these days.
Tuesday assorted links
2. Good Elaine Showalter review of the new Sontag book.
3. Quantum computing investments.
4. Veronique on Trump and trade (NYT).
5. China cancels all NBA broadcasts.
6. “Greenland went from a fertility rate of 7 children per woman to a fertility rate of 2.3 children per woman in *eight years*.” Link here.
The real China shock came to Mexico
Mexican manufacturing job loss induced by competition with China increases cocaine trafficking and violence, particularly in municipalities with transnational criminal organizations. When it becomes more lucrative to traffic drugs because changes in local labor markets lower the opportunity cost of criminal employment, criminal organizations plausibly fight to gain control. The evidence supports a Becker-style model in which the elasticity between legitimate and criminal employment is particularly high where criminal organizations lower illicit job search costs, where the drug trade implies higher pecuniary returns to violent crime, and where unemployment disproportionately affects low-skilled men.
That is from a recent paper by Melissa Dell, Benjamin Feigenberg, Kensuke Teshima, forthcoming in AER: Insights.
The NBA, Daryl Morey, and China
I changed my mind on this issue after pondering it for a while, here is my Bloomberg column on the topic. Here is one bit:
True to form, I find myself in disagreement with the consensus: Morey committed a blunder, and deleting the tweet was the correct thing to do.
And more:
American politicians and leaders should offer greater support for the more liberal sides of the Hong Kong protest movement. But not all businesspeople are in the same position, especially if they are actively involved with China or other countries whose behavior is under consideration.
To provide a slightly more neutral example, the NBA is currently trying to market its product to India. In the meantime, I don’t think NBA executives should be tweeting or commenting about the status of Kashmir. Those strictures should hold even if the tweets or remarks are entirely correct.
There is simply too much tension between the fiduciary obligations of the potential speakers and the issues under consideration. For better or worse, the NBA is committed to a major expansion in China, and it is entirely normal for the association — like any other business — to demand that its executives do not conduct diplomacy, engage in negotiations or make political commentary on the side. The NBA’s mistake was simply to insist on this in far too clumsy and public a manner.
What they should do is simply pull the training camp out of Xinjiang, no squawking required. By the way, here are much better American corporate targets than the NBA. And the close:
As for the practical question of where things go from here, I’ll be watching to see what NBA players — most of all the stars, many of whom have contracts with Chinese companies — say next.
Finally:
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
There is much more at the link, more than usual. Many of you love the doux commerce thesis, namely that trade ties encourage peace among nations. Yes that is usually true, but sometimes the role of the corporations is to promote lies, or at least not speak the truth too loudly. That is part of the Montesquieu bargain, whether one likes it or not. You are installing an intermediary with incentives for cooperation and good will, not an arbiter of truth.
We are overreacting on this one because it is our main geopolitical rival — China — forcing a major American institution, namely the NBA, to eat crow, because of the sequencing of events. But in reality, there is nothing wrong with a sports league that steers its major executives away from commenting on external politics and that is very often the norm in the corporate world, in countries both nasty and nice.
*Joker*
I read so many scathing — forgive me long and thorough and scathing — reviews of this one that I figured something had to be up. And indeed there is. However unpleasant and disturbing this movie may be, it is excellent along all major dimensions of cinematic quality, including drama, script, characterization, performances, cinematography, color, music, and more, not to mention embedded cinematic references.
But here is the catch: it is the most anti-Leftist movie I have seen, ever. It quite explicitly portrays the egalitarian instinct as a kind of barbaric violent atavism, and it is pointedly critical of Antifa and related movements, showing them as representing a literal end of civilization. Only the wealthy are genteel and urbane and proper. On crime and law and order, it is right-wing in a 1970s “Death Wish” sort of way, though anti-gun too.
I believe the critics simply could not see straight. I hesitate to recommend such a non-entertaining and indeed reactionary movie, but I am very glad I saw it. If you have been put off by the reviews, with this blog post I am adding my dissenting voice of reason.
The two must-read books on Pakistan
Anatol Lieven, Pakistan: A Hard Country.
Christophe Jaffrelot, The Pakistan Paradox: Instability and Resilience.
They won’t make my best of the year list, because neither is fresh out, but they are two of the best books I have read this year, Lieven being a reread.
Monday assorted links
The Formative Years
People born between 1963 and 1965 are less likely to drive a car to work, are more likely to commute using public transit and are even less likely to own a car than people born just before or after those years. Why? It’s a great puzzle. Give it a guess.
Severen and van Benthem have a compelling answer:
An individual’s initial experiences with a common good, such as gasoline, can shape their behavior for decades. We first show that the 1979 oil crisis had a persistent negative effect on the likelihood that individuals that came of driving age during this time drove to work in the year 2000 (i.e., in their mid 30s). The effect is stronger for those with lower incomes and those in cities. Combining data on many cohorts, we then show that large increases in gasoline prices between the ages of 15 and 18 significantly reduce both (i) the likelihood of driving a private automobile to work and (ii) total annual vehicle miles traveled later in life, while also increasing public transit use. Differences in driver license age requirements generate additional variation in the formative window. These effects cannot be explained by contemporaneous income and do not appear to be only due to increased costs from delayed driving skill acquisition. Instead, they seem to reflect the formation of preferences for driving or persistent changes in the perceived costs of driving.
Here’s a nice figure from an excellent piece covering the Severen and van Benthem paper in the Washington Post by Van Dam. Van Dam also covers a paper by Malmendier and Shen which shows how unemployment in formative years can change behavior through a lifetime even absent differences in income.
Louis XIV and his motto
Louis XIV was both King of France and a global ruler with global ambitions. He founded colonies in America, Africa and India, tried to seize Siam (as Thailand was then known), sent missionaries and mathematicians to the Emperor of China and launched the struggle for France’s global markets which continues to this day. The motto he adopted early in his reign, in 1662, expressed his hopes and desires: “Nec pluribus impar” (literally “Not unequal to more”), meaning “not incapable of ruling other dominions”, as well as “not unequal to many enemies”.
That is from the new Philip Mansel book King of the World: The Life of Louis XIV.
The new Flynn effect?
People can type almost as fast on a phone screen as they do on a computer keyboard, suggests a study.
Average typing speeds on mobiles are now 38 words per minute (wpm) compared to about 52 on a standard PC keyboard.
The gap was narrower among people aged 10-19 who averaged about 10wpm more than older users, it found.
The amount of time that people spend using their phones every day has honed typing skills, said the team that carried out the work…
The fastest phone typist hit a speed of 85wpm, the study found.
Oh, and this:
Phone speeds were helped by auto-correct systems but hindered by other aids that seek to predict what word a person had begun to type.
The time it took people to work out whether a predicted word was correct ended up slowing them down, it found.
By contrast, auto-correct systems that eliminated the need for a few thumb strokes helped people finish messages faster.
Here is the article, via Michelle Dawson.
Sunday assorted links
2. Silicon Valley residents are turning against self-driving cars.
3. The Indonesian woman who killed Kim’s brother with VX.
4. People weight reiterated messages too heavily (pdf).
5. “The distrust persists even half a century after the [Great Chinese] Famine, has been transmitted to the subsequent generation, and has spilled over to a broad range of political attitudes unrelated to the Famine.” Link here.
6. Interview with Amartya Sen. He can’t bring himself to admit that Modi is fairly popular.
Hotel room hacks
Here is a WaPo article on hotel room hacks, a recent viral topic, and here are other recent sources.
My #1 suggestion is simply that some pillows are too high and too hard, so bring enough of your own cloth material so you can build your own pillow if need be. And travel with an eye mask. And always travel with a sweater, even in the summer — it is a remarkably versatile object.
I would also say this: when in doubt simply turn the heating system off, if you can.
What are your hotel room hacks?