On Taxes

An AJC story this morning summarized the positions of the candidates for Saxby Chambliss's Senate seat on the federal government's debt.

The statements of Chambliss and Jim Martin reflect what have been the stances of the Republican and Democratic candidates for president this election cycle. Chambliss's position can be summarized as "Cut spending, but don't ask me for specifics." Martin's counter, paraphrased: "Bush is awful, stop giving tax breaks to oil companies, and get out of Iraq."

The only interesting response came from the libertarian candidate, Allen Buckley, who suggested making over the income tax by (a) raising standard exemptions to the poverty line, (b) taxing the first $25,000 of income above the exemption amount at 20 percent, (c) taxing income above that amount by a rate set annually to guarantee that the budget would be balanced, and (c) offering only four deductions: mortgage interest, charitable contributions, and two deductions related to health care.

Without researching the thoughts of experts who know about the probable effects of such a system, this proposal seems appealing, for a few reasons (I do not consider myself a libertarian, but Buckley's idea, to my mind, concerns how the government should fund itself, not how much of a role the government should play in society, though the two are not unrelated.)

First, through the exemptions and the taxing of the first $25,000 of non-exempt income at 20 percent, such a tax structure is progressive, at least to some extent. To many on the right progressivity has become a dirty word, synonymous with "redistribution" or "class warfare". It is therefore a little surprising to see it as part of this proposal.

(Conservatives do make another point when arguing against Obama's tax plan, which is that the federal income tax proposal is already quite progressive (in fact, about one-third of taxpayers pay no federal income tax). Obama counters, in impressively forthright fashion, that those taxpayers do pay federal payroll taxes and state and local sales, property, and income taxes. These taxes are either flat or progressive to only a very limited degree, and sales taxes in particular operate in an regressive way. This to me is an argument for reforming state and local taxation, since using the federal tax system to counter state and local regressivity is, well, blunt- an overlay spread across thousands of localities with different tax structures- and arguably not an appropriate goal of the federal government. In addition, the more the tax burden for the federal government is shifted to wealthier taxpayers- the more people, that is, who pay little or nothing to fund it, the harder it may ultimately become to restrain spending.

All this being said, I do believe that the tax system as a whole should be progressive and at least one study has found that the overall tax burden for most people, regardless of income, is around 40%. So we basically have a national flat tax. I therefore accept Obama's and the Democrats' general position that making the federal system more progressive than might otherwise be preferable, in the absence of flat or regressive state and local tax systems, may be the best we can do, at least for now, in an imperfect world.)

I doubt that the libertarian proposal is as progressive as the current income tax structure, so perhaps it would be preferable to modify the proposal in that direction.

The idea of a top tax rate that floats in order to guarantee revenues sufficient to balance the budget is interesting, since that could lead to real political pressure on Washington to confront difficult realities. Perhaps the biggest objection is that it might make it hard for people to budget their finances for a given year.

But the biggest appeal of the libertarian proposal is its simplicity. This point has of course been made ad nauseam, but it's truer than ever that federal taxes are just too complicated, and neither major presidential candidate has a plan for making them less so. Maybe I can't claim to be reasonably intelligent, but I don't think even reasonably intelligent people have an easy time figuring out all the deductions and credits that are available, whether they qualify for them, etc. It is laudable to be sensitive to the needs of people in different circumstances and, to some degree, to tailor the tax code to address those needs, but at a certain point the system becomes so complicated and intimidating, I suspect, that many of the people intended to benefit simply don't take advantage. Hiring a tax professional or using software is a solution for some of these people, but that is ultimately inefficient and not available for everyone. An excessively complicated system, particularly in the realm of business taxes, benefits those who can best afford good advice and, by increasing the possibilities to modify their actions to reduce tax liability, distorts behavior more than a simpler one.

Comparing the libertarian proposal to reform the tax system and balance the budget reveals how timid are the proposals of the Democratic and Republican candidates for national office this year. Much of the debate about whether it is appropriate to "spread the wealth", for example, concerns an increase in the marginal tax rate for people making over $250,000 of 4.6 percent, while McCain's boldest notions are to lower the corporate income tax by 10 percent, when 70 percent of businesses don't pay any income tax to begin with, and to lower the capital gains tax in an economy rife with capital losses. This timidity is predictable, of course, and even understandable. But when it comes to the candidates' claims to be transformative, maverick-y, agents of change, warriors, etc., these proposals don't provide much support.

Bradley Effect Part II

This is a quick post as a follow-up to yesterday's discussion about the Bradley Effect. Interestingly, the guy managing the internal polls for Tom Bradley's opponent for the California gubernatorial race has written an article stating that in the couple of days before election day, their internal polls actually showed the race to be a dead heat. He doesn't believe there was any latent racist impact on the race whatsoever, that the race had just tightened up in the last week or so before election day. He points out also that some of those polls showing a commanding lead for Mr. Bradley before the election had serious sampling errors-- meaning that the results would be skewed or would have a large margin of error. Even most of the mainstream polls had shown the race to be very tight.

So maybe there never was a Bradley Effect at all!

Tom Bradley, by the way, was the mayor of Los Angeles for twenty years, from 1973 to 1993. The airport-- which I have seen more than a few times-- is named after him. He died in 1998 at the age of 80.

The Bradley Non-Effect

I have had several recent discussions with friends and relatives about the so-called "Bradley Effect"; that is, the under-reporting in polls of voters who will vote against a certain candidate-- in this case, Barack Obama-- because they're racists but do not want to admit it to a pollster. Typically, these people will respond "undecided" to a poll rather than say they're voting against someone, but once the "curtain falls" in the voting booth (do any of them still have curtains by the way?), they'll vote their prejudice. Most of those who have approached me have real fear of the vigor of the Effect and its implications for the current race for president of the United States. Does Obama leading in the polls really mean that he is going to win? Does he have to have a 10-point lead in order to be considered "ahead?"

While no one really knows what, if any, Bradley Effect there will be on this race, most of what I have read shows that there is no longer any effective Bradley Effect in play. I say "effective" because I think that there may very well be some of that input into the polls, but it seems to have decreased according to many studies at some point in the mid-90s, presumably as an older generation became itself marginalized and as the civil rights era of the 1950s and 1960s became more distant in time. I write as a "young" 35 year-old who grew up in the South, incidentally, someone to whom, while I was growing up, the various race riots, sit-ins, speeches, protests, both peaceful and violent, and segregation in cities across America was something that I read about in history books and seemed scarcely real, or at least no more or less impactive than the Civil War. (Of course, over time and reading and meeting many people who lived in that era, I have personally come to know more about the struggles of the age and also to be struck by the parallels between the struggle for equal rights for African Americans and women and gay/TG rights. But I digress.) There are a number of factors as to why the Bradley Effect seems to have disappeared, faded away, or even become a "reverse" Bradley Effect.

(Incidentally, the Bradley Effect was named for Tom Bradley, a black man running for governor of California in 1982; while the polls seemed to show him with a significant lead prior to the election, he nevertheless lost).

First, and I think I have already made this argument in a certain way already, persons under about 45 don't really have the same built-in prejudices or exposures to institutional prejudice that those older than that age do. They just don't have the same "us versus them" kind of context and the whole of history to deal with. We grew up with equal rights a matter of fact and segregation as something obviously wrong. Now, there are always exceptions, but I think that it is apparent and clear that society has decisively changed for the better in this respect. If nothing else demonstrates this fact, we all seem to have that grandfather or grandmother who spouts off those utterly embarrassing racist declarations every once in a while-- but note that this is your grandmother and grandfather, not your mother or father (again, with exceptions, but the exceptions prove the rule here I believe).

Second, empirical evidence suggests that the reverse Bradley effect is greater than the Bradley effect. The strongest evidence of a Bradley Effect hurting Barack Obama would have been found in the primaries. Analysis shows that while there was some Bradley effect in certain states, mostly Appalachian states like West Virginia and Kentucky, but also New Hampshire, the reverse Bradley Effect-- that is, people voting for Obama because of his ethnicity for whatever reason or motivation-- was greater; more states were affected, including all of the South and most of the Northeast. If there is a Bradley Effect, you would have expected it to show up in the Democratic primaries, where people who nominally should have supported Obama just wouldn't-- with the addition of Republicans, people who mostly won't vote for him anyway, the impact of racism is minimized. There is not much of an effect if a bunch of hardcore Republican racists do not vote for Obama, because they would not have voted for him anyway.

Third, and I think this has been overlooked a bit, most polls now are done via computer. That is, a person responding to a poll does not have the same kind of peer-pressure to respond a certain way to a question. Who cares if the computer is disgusted with your reason why?

There is more to say about this topic, but I refer my readers to the post of Nate Silver, an excellent statistician and analyzer of polls, to cover the more statistical details and points.

Walking and Chewing Gum

It is not getting much attention amid coverage of the financial crisis and electoral politics, but the news on climate change continues to get worse.

First, global emissions of greenhouse gases jumped by three percent in 2007, despite rising fuel prices and a slowing world economy. The increase exceeded the assumptions in the scientific models used to predict how quickly climate change will occur. Those models were gloomy enough; reality, it appears, might be worse.

Second, even countries more committed to reducing emissions than the United States are having trouble actually doing so. In 1991, Norway became one of the first countries in the world to impose a carbon tax. Norway now reports that, instead of declining since the tax was instituted, its emissions have increased by fifteen percent.

Finally, the warming that has already occurred may have started natural processes that will accelerate the rise in temperatures. Recently Scientists traveling along Siberia's northern coast found foaming seas above deposits of methane that had formerly been locked under the sea bed. The permafrost above those deposits may have begun to melt, allowing the pent-up methane, which is twenty times more powerful than carbon dioxide at trapping heat, to bubble to the surface. Positive feedbacks like this will make it much more difficult to stop runaway warming.

If we seriously intend to prevent disastrous climate change, then we must act quickly. But many seem to think that we can't tackle more than one problem at once. This week some politicians warned that the world, particularly the U.S., already has its hands full with a slowing economy.

But, while having two problems at once may be unfortunate, it doesn't make either less urgent. What if we could solve both at the same time?

A couple of studies done recently suggest that we might be able to. According to a report released earlier this month by The U.S. Conference of Mayors, companies focused on clean energy and energy efficiency could be the economy's fastest-growing segment in the next three decades, creating over three million new jobs.

Thirty years is a long time, though. Another study published by the Center for American Progress says that with aggressive government investment of $100 billion over two years could add two million jobs to the economy. The same amount of money invested in the oil industry, the report states, would increase employment by only a quarter as much.

Such an investment would eventually provide a number of other benefits, of course. Fewer (or no) oil imports would mean less money for terrorists and for dictators in Iran, Venezuela and Russia. Public health would improve as air pollution declined. Renewable energy and efficiency industries would develop, with the potential for exports. We might have a chance to halt climate change.

Finally, it would be virtually impossible to invest too much. Unlike the housing market, where the bubble attracted so much investment that we ended up with a bunch of houses that we don't need, if we spend too much, in purely economic terms, on a green recovery we will just end up with cleaner energy, more efficient buildings, more competitive industries, and healthier people. Can we have too much of any of that?