Monday, February 22, 2016

tax basics and EITC awareness

How much more federal income tax do you owe if you earn one additional dollar?
  • Starting from zero, you owe no tax on the first $10,300. Before the federal government starts taxing income, it subtracts a chunk from the amount you earned.
  • If you earn one more dollar, then you owe 10 cents. Above $10,300, you enter the 10% tax bracket. The first $10,300 still does not get taxed, but that one additional dollar gets taxed at a rate of 10%.
Taxes are more complicated, but that's the basic idea. What I just said is true for a typical unmarried person, but the same process---subtracting a chunk, then applying a tax rate to one additional dollar---applies to everyone.

One complication that I want to focus on in this post is a program that gives refunds to people who earn income. The program is called the EITC. An unmarried person with a child who earns $9,720 can claim a refund of $3,305, even though that person did not pay any taxes.

Two families could cooperate to make use of this tax refund. Suppose there are two single unemployed mothers, Denise and Emily, each of whom has one child. If Denise pays Emily $9,720 over the course of a year to babysit, and Emily pays Denise the exact same amount over the year to babysit, then both of them can get the $3,305 tax refund.

There are a few puzzles about the EITC.
  • Many people who are eligible for this tax refund do not claim it. Sending them mail explaining the EITC helps.
  • Many people who could easily become eligible by babysitting for each other, like Denise and Emily in my example, do not become eligible.
I would like for people to spread awareness of the EITC, the way the NWRO spread awareness of benefits in the 1960s.

Saturday, January 16, 2016

How to pay for parking in Israel

People say it is tough to find a parking spot in Tel Aviv, but I never had trouble finding a spot. There are many curbs painted blue and white, and it is legal to park next to a blue-and-white curb as long as you pay. Good luck figuring out how to pay.

There are no parking meters. You could pay at a pay station, which spits out a receipt that you put on your dashboard, but pay stations are surprisingly rare. Most parking spaces are not within line of sight of a pay station, and I am unaware of any good method for locating nearby pay stations.

Israelis use smartphone apps to pay for parking. The two popular ones are Pango and Cellopark. Just put in your teudat zehut* number or connect your Israeli credit card, and you're all set. If you don't have a teudat zehut number or an Israeli credit card, you cannot use these apps.

The best (only) method I found to reliably pay for parking as a non-Israeli was to buy an electronic device called an EasyPark, which is basically a do-it-yourself parking meter. You put money on the EasyPark the way you would a prepaid debit card. When you find a spot, you turn on the EasyPark, tell it what city you're in, and hook the device onto your window so parking attendants can see that you're paying. The device deducts money from your prepaid account until you turn it off. Add money to your EasyPark account at any gas station.

Where can you buy an EasyPark? The post office of course! Post offices in Israel function as many-purpose municipal outlets. If you get a parking ticket, maybe because you didn't know about EasyPark yet and couldn't find a pay station, then you can pay the parking ticket at a post office. I've been told you can also open a bank account at a post office. Israeli post offices keep strange hours. The post office I tried in Tel Aviv was closed at 2pm. But the post office at Ben Gurion Airport--yes, there's a post office at the airport--is open nearly 24 hours a day.


* National identification card for citizens = תעודת זהות

Is there a map?

My Israeli sim card from Cellcom was too large for my Galaxy S5 phone. A friend told me that cell phone stores can clip the sim cards to fit different phones. Neither Cellcom's website nor google maps was helpful in identifying a Cellcom location, so I went to the Ayalon Mall, which I assumed would have an outlet. Seeing no map at the entrance, I approached a woman at a nearby kiosk.

Me: Excuse me, is there a map?
Woman: Where do you want to go?
M: Is there a Cellcom store?
[She points to her right.]
W: Go all the way to the end of this wing, it will be on your left.

I felt this interaction was pretty typical of my experience in Israel. I often don't know how to do something or where to find something, but usually there's a person around who can help if I ask. On one hand, it's nice that somebody is there who is willing and able to help. On the other hand, why can't there just be a map?

Thursday, November 26, 2015

Four policies better than the minimum wage

Some of my friends are joining the “fight for 15”, a campaign to raise the minimum wage to $15 an hour. I expect the campaign will succeed in many states and maybe at the federal level, and I commend their apparent desire to help poor people. However, if the goal is to help poor people, the minimum wage is an inferior policy tool.

Here are four alternatives that I think would help poor people more than raising the minimum wage:
  1. EITC - Expand the eligibility or generosity of the Earned Income Tax Credit.
  2. HCVP - Fully fund the Housing Choice Voucher Program, which currently assists just one out of four people who are eligible for assistance.
  3. SNAP - Expand the eligibility or generosity of the Supplemental Nutritional Assistance Program.
  4. Personal exemption - Raise the personal exemption on federal income tax, or convert the personal exemption into a refundable tax credit. A refundable tax credit with universal eligibility would be equivalent to a basic income.

These policies share the feature that their cost is visible in the form of higher government spending or reduced tax revenue. Raising the minimum wage might be more palatable to Congress because it has no direct budget impact. The cost of the minimum wage is less obvious.

One cost of the minimum wage is borne by employers who pay employees a higher wage. The burden on employers deserves consideration but doesn't bother me. What bothers me is the social cost of the minimum wage, which is borne partially by poor people.

Consider the following thought experiment. If raising the minimum wage is good, why should we stop at $15? Why not $20, or $50, or $500? It would be wonderful for everyone to earn $500 an hour, but I suspect that many employers who pay lower wages now would employ fewer people rather than raise wages to $500 an hour. Losing jobs is bad for poor people.

This intuition is consistent with basic economic theory, which suggests that raising the minimum wage (a price floor) is good for some workers but reduces overall employment. The empirical consensus among economists is that the short run effect on employment is small. I think we should care more about the long run effect on employment, which my colleague Isaac Sorkin argues hasn't really been measured empirically.

The minimum wage helps some poor people and hurts others. Raising it a little would probably on balance be good but not great for poor people. The alternative policies I suggested are better at helping poor people and put the burden where it belongs: taxpayers.

Saturday, October 10, 2015

Hamilton, Babylonia, and antibiotics

Again, this blog post is due to encouragement from my brother Yonah, who blogs at meiselspot.blogspot.com.

Listening to Lin-Manuel Miranda's excellent new musical Hamilton reminded me of a lesson from American history. Americans did not suddenly begin governing themselves with no prior experience after a successful revolution. The capacity for self-government developed over the course of decades, aided by the British policy of salutary neglect. Selective British law enforcement facilitated the institution of American self-government.

Another institution--mobile identity--received similar assistance from repression that was only partial. This may be a conceit of my Jewish education, but I am currently under the impression that Jews were the first group with a mobile identity.* The story is that most gods were local, so when a person moved to a new place she would discard the gods of her origin and worship the gods of the new locality. Monotheism helped change that. When a Jew moved to a new place she could continue worshiping the god of her origin, who she believed was also present in the new locality.

The partial repression that aided mobile identity was the Babylonian exile.** Ancient empires that conquered new areas sometimes deported the local population to quash rebellion. There were two unusual features of the Babylonian exile. First, it was incomplete. Many Jews remained in the Kingdom of Judah. Second, it was brief. Jews were permitted to return from Babylonia after about 50 years. The Babylonian exile made Jewish identity mobile by:

  • establishing a myth of exile and return (or strengthened it if you believe the exodus from Egypt is actual history), and
  • establishing a model for a permanent diaspora community.

Partial British repression fostered American self-government, and partial Babylonian repression fostered Jewish mobile identity. And since I like comparing human institutions to biological phenomena, I'll conclude with the observation that a partial course of antibiotics can foster antibiotic-resistant superbugs.

* In this post I use Jews interchangeably with Hebrews and Israelites, which I'm sure is wrong but I doubt is consequential.
** I'm not sure where historical myth ends and actual history begins, but I believe the exodus from Egypt is probably historical myth and the Babylonian exile is actual history.

Friday, March 6, 2015

Why does AIPAC love the Purim victim narrative?

My brother Yonah over at meiselspot.blogspot.com encouraged me to get back in the blogging game.

This week, Jews observed one of the happier holidays, Purim. Traditionally, Purim is observed by reading the story of Esther, dressing in costumes, getting drunk, delivering goody bags to friends, performing farcical skits, and baking triangular pastries--variously called hamantashen (Haman's pockets) or oznei haman (Haman's ears). The observance is something like American Halloween meets American St. Patrick's Day.

The story of Esther goes something like this: King A* of Persia summons Queen Vashti to strip at his party and executes her when she refuses. To replace Vashti, King A holds a beauty pageant, which is won by Esther, a nice Jewish girl. Esther's cousin Mordechai refuses to bow down to the King's chief minister, Haman. Haman gets very pissed off, learns Mordechai is Jewish, and decides to kill all the Jews. Haman gets a rubber stamp from King A for his murderous plan. Meanwhile, Mordechai discovers a plot to kill King A and turns in the conspirators. King A rewards Mordechai, which adds salt to Haman's wound. Mordechai informs now-Queen Esther of Haman's plan to kill all the Jews. Esther fasts then invites King A and Haman to dinner. She reveals she is Jewish and that Haman is trying to kill all the Jews. King A executes Haman and tells the Jews to defend themselves, which they do.

There's an old joke that the summary of every Jewish holiday is, "They tried to kill us. We survived. Let's eat." Purim fits that mold probably more than any other, but I would say that Passover does not fit that mold. Passover commemorates the exodus from Egypt. "We were slaves to Pharoah in Egypt, and now we are free." The theme of Passover is freedom, and it is used all over the place as a justification for other ethical requirements. "Do not oppress the stranger, for you were strangers in the land of Egypt." I'm a Passover Jew. I think collective memory of oppression and appreciation for freedom is inspiring and meaningful.

Purim is different. The lesson from Purim is that they're out to get us. Powerful villains in general want to kill all the Jews, and a Persian villain in particular wants to kill all the Jews. This lesson is not entirely wrong. Some people hate Jews. Antisemitism is real. But that is a terrible starting point for building identity.

On the other hand, it is a great starting point for AIPAC. Thematically, Purim is spot on for AIPAC lobbying Congress about Iran in so many ways. Persian villain who wants to wipe Israel off the map? Check. This year the role of Haman was played by the Ayatollah. (Mahmoud Ahmadinejad was a better fit, but he left office two years ago.) Well-placed safe Jew who has the opportunity to defend Jews in danger? Check. The role of Esther is now played annually by American Jews at the AIPAC policy conference. The religious resonance is deafening.

So, are American Jews reenacting a biblical story as spokesperson-defenders of Jews against a determined Persian villain, or dressing up in costumes for a farce? It depends how you view the threat from Iran. I believe Israel's security professionals when they say that "deterrence works against state-like entities" and that ISIS is scarier than Iran.

* The king's name is Achashverosh in Hebrew, which for some reason is written as Ahasuerus in English. Either way it's too complicated, I'll use King A.

Monday, February 20, 2012

bargaining power

Voluntary trade is often beneficial for both traders. If you buy an apple at the farmer's market, hopefully both you and the farmer are better off after trading at whatever price you pay. This paper* asks how the benefits from trade get split among the traders. Who got the better deal, you or the farmer?

One thing that affects this is bargaining power. In this paper, bargaining power is determined by the number of other trading opportunities a particular trader has. If there is one farmer with one apple at a stall and two hungry buyers, it is natural to think the farmer has more bargaining power.

This paper formalizes the intuition that more trading opportunities often increase a trader's bargaining power, and thereby increase her share of the benefits from trade.

* Manea AER 2011 Bargaining in Stationary Networks