Showing posts from March, 2009

Underreporting of farm income to avoid taxes

One of the largest benefits of owning a small business is that a small business can easily hide income and thereby avoid taxes. How large is this problem? That's very hard to tell. Here's John Berry from Bloomberg: According to Internal Revenue Service research, the tax gap isn’t the result of high-rollers hiding income in offshore accounts. Most of it is the underreporting of income by proprietors of small businesses and farmers and the failure to pay employment taxes related to that income. Also not reported: an estimated half of all income from rents and royalties. ... In 2006, the IRS reported the results of a three-year study of individual income tax returns for 2001. It found a gross tax gap of $345 billion, or 16 percent of taxes due. Enforcement activity plus other late payments recovered $55 billion of that, leaving a gap of $290 billion. That figure, as large as it is, doesn’t include income of the deeply underground economy, including most criminal en

Quantifying the "Geithner Put"

The plan is out. The Treasury will buy the toxic assets in an auction, but will allow participants to leverage their investment with non-recourse loans from the FDIC on a six-to-one basis. The taxpayer gets some of the upside because the Treasury invests equity dollar-for-dollar with the bidders. But, because of those non-recourse loans, the taxpayer gets all the downside below the 14% of the purchase price and shares losses dollar-for-dollar with private investors up to 14%. I like the clear way Nemo spells it out. Is it a good idea? Will it work? Brad DeLong says 'Yes' , Paul Krugman says 'No '. There are many other views, but these two guys usually see eye-to-eye . No ideological wrangling here. Hmmmm. Let's do the math. We can only answer this question with some measure of uncertainty about true value of the underlying asset. If uncertainty were small, say a standard deviation (SD) equal to 6% of the purchase price, then the subsidy implicit in th

Confined Livestock and Zoonotic Diseases

When I worked at USDA I remember a few meetings with folks at the Animal Plant Health Inspection Service (APHIS). They were worrying out loud about zoonotic diseases (that was a new word for me at the time). Mad cow was in the press but they were far more worried about other things (I don't recall the details). I think I was trying to make suggestions for how they might try to quantify the social benefits of their monitoring efforts (value of information stuff). Today we have this breaking story by Nicholas Kristof at the New York Times . The late Tom Anderson, the family doctor in this little farm town in northwestern Indiana, at first was puzzled, then frightened. He began seeing strange rashes on his patients, starting more than a year ago. They began as innocuous bumps — “pimples from hell,” he called them — and quickly became lesions as big as saucers, fiery red and agonizing to touch. They could be anywhere, but were most common on the face, armpits, knees and buttocks. D

The Effect of Fast Food Restaurants on Obesity

An abstract from new working paper by Janet Currie, Stefano DellaVigna, Enrico Moretti, and Vikram Pathania . (I went to grad school with Moretti.) We investigate the health consequences of changes in the supply of fast food using the exact geographical location of fast food restaurants. Specifically, we ask how the supply of fast food affects the obesity rates of 3 million school children and the weight gain of over 1 million pregnant women. We find that among 9th grade children, a fast food restaurant within a tenth of a mile of a school is associated with at least a 5.2 percent increase in obesity rates. There is no discernable effect at .25 miles and at .5 miles. Among pregnant women, models with mother fixed effects indicate that a fast food restaurant within a half mile of her residence results in a 2.5 percent increase in the probability of gaining over 20 kilos. The effect is larger, but less precisely estimated at .1 miles. In contrast, the presence of non-fast food restaura