good to know, politics, USA

Considering the “FairTax”

Until recently, I wasn’t aware that “progressive” had an opposite. Surely, many Democrats would prefer that Republican or conservative were seen as opposites of progressive, but they’re not. “Regressive,” I now know, actually is the opposite of progressive, at least in taxes. (And in hindsight, I feel dumb for not having thought of that.)

Fairtax advertisementThis is a distinction I didn’t know would ever matter, and perhaps it never will. Nonetheless, it’s useful as at least a few presidential candidates–mostly Republicans, and none of the frontrunners–are promoting wholesale tax reform, like the “FairTax.”

Before we go too far, a brief introduction. In the simplest terms, taxes can be progressive, proportional, or regressive. Income tax in America is progressive, in that the more you earn, the more you (theoretically) pay–both in pure cash value and in proportion to income.

A proportional tax is something like conventional sales tax, in which all citizens pay the same percentage. That means that regardless of income, all citizens are effectively charged the same tax for their purchases (this fluctuates geographically, but that’s a separate issue.)

Thankfully their are no widespread and regressive taxes that I can use as an example. The rate of a regressive tax decreases as income increases. Which means that, if assessed on income, hedge fund manager are taxed less than their secretaries. This is currently true, but it is generally considered a problem with the tax-code rather than good policy.

Instinctively, I think most Americans would feel that progressive taxes are ideal, fixed taxes reasonable depending on circumstances, and regressive taxes barbaric. Our tax code usually supports this idea, though some interesting issues crop up when one looks critically at these distinctions.

The sales tax as it currently exists could be considered regressive. After all, on goods bought under the tax, the extremely poor and the extremely wealthy have to buy similar quantities of essentials–food, toiletries, clothes. Yet, in relation to income (or wealth), richer people pay a lower proportion or their net worth than the poor.

This distinction can be made to seem erroneous if one remember that sales tax is a tax on consumption not income. But if it were to become the sole tax administered in the country, the distinction would become a much more important one.

The FairTax, supported most prominently by Mike Huckabee and Ron Paul, is effectively a flat national sales tax. In order to abolish the IRS (which seems to be the basis for most of the plan’s support), FairTax legislation would mandate a flat tax (of 23%) be assessed against all retail sales. This means that against income, the tax would be far more regressive than America’s current income tax structure.

In order to “assure” that this tax is the good progressive kind, the program would entitle all people to a “prebate.” This rebate would assure that there would be effectively no tax paid on “necessities” (calculated from the federal poverty line). This sounds good, but what about those living below the poverty line who fail to receive the prebate? In the situation of the homeless, there seems a dangerous possibility that the FairTax might be regressive. But I have to admit it’s an admirable plan–far more so than I originally saw (see below).

EDIT (11/30/07): This piece contained a factual error, pointed out by Alejandro Gonzalez, regarding the rebate of the FairTax. I had mistakenly believed it to be a rebate only for those below they poverty level; it’s truly a “prebate”–paid in advance–to all citizens to subsidize the price of “necessities.” The final paragraph has been amended to correct the error.

good to know, politics, world

HSBC Finds Unexpected Attitudes Toward Climate Change

Climate Confidence Data TableYesterday, published a story about HSBC’s Climate Confidence survey, the results of which are intriguing, if not a little surprising. The basic table of result is at right (click for full size, cribbed from HSBC’s results).

The results show that though citizens of so-called developing countries are generally thought to be more concerned about development, etc than they are about climate change, this is not borne out by the data. Rather, HSBC’s survey results show that “developing” countries have higher levels of concern than most developed countries. Whether this is due to bad information, either in the US or in Brazil, is an interesting question, but it’s not one the survey answers (or could).

HSBC has categorized their surveyed countries into four groups. The “skeptical pessimists,” those European countries surveyed, are characterized by low levels of concern for the problem, and low optimism about solving it. Americans are alone among the nine surveyed countries in both doubting that there is a problem, yet being more willing than Europeans to believe that the problem can be solved. The level of concern in India, Brazil and Mexico is far greater than that in either America or Europe, although those countries suggested great optimism about the world’s ability to solve the problem. Finally, China and Hong Kong shared relatively high levels of concern, as well as the highest level of confidence that the problem was being adequately handled.

The results are also revealing about individual countries. For example, in the USA climate change was a fourth concern, after terrorism, health care, and constantly later ages of retirement. In China, climate change was the top concern, followed by child’s future, health care, and terrorism (in that order). The difference is striking, and whether it reflects where concerns actually should be or where media and political powers want them to be is a different question.

In any case, these are fascinating results whose implications are not entirely clear. Thus, for concluding remarks, I will cede the floor to The Economist:

Perhaps it is not surprising that people in the developing world are worried. Rich countries are in the temperate parts of the globe; it is the world’s hotter, drier nations that will feel the effect of climate change first. Indeed, they may already be affected: rainfall patterns are going awry in China, and the earlier melting of Himalayan snow is damaging agricultural productivity in bits of the Indian subcontinent. Concern about climate change may also be bound up with broader environmental worries, which are mounting in China in particular.

Still, these findings certainly overturn previous assumptions about attitudes around the world. Does that matter? For those who think that governments should be taking stronger measures to avert climate change, it probably does. The interesting implications are not so much for Europe and America. People in those regions don’t think climate change is the most important problem in the world; but nor are their governments behaving as though it is.

What these data change is the debate about involving poorer countries. When developing-country governments resist pressure from Europe and America for action, they can still use the argument that climate change is mostly the rich world’s fault. But the argument that their people have other priorities for government action looks harder to sustain. Whether they choose to listen to their people’s concerns is, of course, another matter.

good to know

Good To Know: founder vs. flounder

For quite some time, I’d assumed that I simply didn’t understand these two words. I’ve seen the verb “to founder” in print, quite often where I expected “to flounder.” As such, I decided that flounder probably wasn’t proper English, but rather a perversion of the real word, “to founder.”

I even went so far as to inform people of my error in this matter. None of them thought (or knew) to correct me, so I proceeded to think that I had solved the mystery.

It wasn’t until recently that I finally got around to investigating the difference, and was surprised by what I found.

First, both founder and flounder are real English verbs. And indeed they are used in roughly the same context, though they do mean different things.

This usage guide, from the American Heritage Book of English Usage, is perhaps the best and most simple explanation I can find:

People often confuse the verbs founder and flounder. Founder comes from a Latin word meaning “bottom” (as in foundation) and originally referred to knocking enemies down; people now use it also to mean “to fail utterly, collapse”: The business started well but foundered. Flounder means “to move clumsily, thrash about” and hence “to proceed in confusion.” Thus if John is foundering in Chemistry 1, he had better drop the course; if he is floundering, he may yet pull through.

Thus, I floundered with this distinction. But, by looking it up, I saved myself from foundering. And that’s good to know.