Perverse Government Incentives

Category : Political Science & Economics
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In 2001, President Bush decided to lower the estate tax as part of his tax cuts and stimulus after 9/11.  The death tax, as some call it, is a tax on people’s estates valued over a certain amount.  In 2001, the limit was $675,000 and anything over that amount was taxed at 55%.  The Bush Administration’s plan was to phase out the estate tax by 2010 by both raising the amount that was protected and lowering the tax rate.  The yearly table from wikipedia shows that 2009 estate tax limits are $3.5m in assets, above which anything will be taxed at 45%.

In 2010, the estate tax is completely repealed.  The Bush Administration’s plan ends in 2010, meaning that in 2011, the estate tax will go back to $1m and 55%, unless Congress passes another bill to change it, which is doubtful with this economy and the Democrats in power.  Whether you think the estate tax is a good idea or not, the current situation sets up some perverse incentives that could save or cost people millions.

Imagine a person with a father who has $10m in assets who is sickly and may die in 2009.  If the father were to die in 2009, $6.5m of the money would be taxed at 45%, or close to $3m, but if the father were to live until Jan 1, 2010, the person would save all of that money.  The government’s monetary incentive is to keep older, sick people alive, even if it against the person’s best interest.  The father might even try to hold on longer than he normally would, just to save the extra money.

Now fast forward to December 2010.  The same person from the example above would not have to pay any taxes if their father were to die before the end of the year.  If the father were to live until 2011, $9m of the $10m estate would be taxed at 55% or almost $5m.  People would have the incentive to make sure that their parents died before the tax rate changed.  Now imagine super rich people who have billions.  The difference is real money.

Now I don’t think that most people will be influenced by these incentives, as most people care more about their family than money, but I can see situations where someone might (Mom, if you read this, don’t worry!).  The estate tax changes are just another example of government policies creating unintended incentives and consequences.  Hopefully nobody tries to “take advantage” of these changes.

Social Media’s Response and an Iranian’s Possible Last Post

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I talked about Twitter’s influence and response to the Iranian uprising compared to Google’s in a post a few days ago here and here.  Google had been removing YouTube videos of the sometimes violent demonstrations because they “contained violence,” which violated their terms of service.

Google has now reversed itself, recognizing the social and political importance of videos about the Iranian protests that have been posted to YouTube.  Iranians and their supporters had been petitioning Google to change its front page logo for a day to show support for the protests.  Instead, Google launched a Farsi to English translator that allows people all over the world to translate Farsi bloggers, tweets and emails.  Google did not want to insert itself into the conflict,  but it did want to help out:

We feel that launching Persian is particularly important now, given ongoing events in Iran. Like YouTube and other services, Google Translate is one more tool that Persian speakers can use to communicate directly to the world, and vice versa — increasing everyone’s access to information.

As with all machine translation, it’s not perfect yet. And we’re launching this service quickly, so it may perform slowly at times. We’ll keep a close watch and if it breaks, we’ll restore service as quickly as we can.

Facebook also realized how its service was being used to help spread information and quickly translated its service into Farsi as well:

Since the Iranian election last week, people around the world have increasingly been sharing news and information on Facebook about the results and its aftermath. Much of the content created and shared has been in Persian—the native language of Iran—but people have had to navigate the site in English or other languages.

Today we’re making the entire site available in a beta version of Persian, so Persian speakers inside of Iran and around the world can begin using it in their native language.

Its clear that Twitter, Google and Facebook all recognize the important role they are playing in the Iranian uprising.  All three have been amazing tools to get information from inside Iran to the outside world.

I’ll leave you with a blog post (translated by google translator) by an Iranian my age who is ready to protest tomorrow, even in the face of the Supreme Leader’s declaration that protesters will be punished tomorrow.  He basically threatened to allow the army and the Basij to violently suppress the uprising.  Many think that tomorrow’s protests will be put down, a la Tienanmen Square. 

“I will participate in the demonstrations tomorrow.  Maybe they will turn violent.  Maybe I will be one of the people who is going to get killed.  I’m listening to all my favorite music.  I even want to dance to a few songs.  I always wanted to have very narrow eyebrows.  Yes, maybe I will go to the salon before I go tomorrow! There are a few great movie scenes that I also have to see.  I should drop by the library, too.  It’s worth to read the poems of Forough and Shamloo again.  All family pictures have to be reviewed, too.  I have to call my friends as well to say goodbye.  All I have are two bookshelves which I told my family who should receive them.  I’m two units away from getting my bachelors degree but who cares about that.  My mind is very chaotic.  I wrote these random sentences for the next generation so they know we were not just emotional and under peer pressure.  So they know that we did everything we could to create a better future for them.  So they know that our ancestors surrendered to Arabs and Mongols but did not surrender to despotism.  This note is dedicated to tomorrow’s children…” 

Hopefully she will be able to do all of these things tomorrow night too.  I wish all of the protestors good luck and hope to see more posts tomorrow.

Iran: A New Media Watershed Moment?

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CNN broke the mold and became one of the world’s most respected news sources during the first Persian Gulf War, as they were able to deliver amazing pictures and video of events on the ground, much more quickly than anyone else.  The tables are turning with the Iranian election and the subsequent protests.  I think we may be seeing a watershed moment in news gathering: a final, permanent switch from the old media to the new media.

Andrew Sullivan’s blog is probably the world’s leading source of news coming out of Iran right now.  Sullivan and his team have been aggregating video, twitter feeds, photos and comments from people inside and outside Iran, as is Nico Pitney’s blog on the Huffington Post.  I wrote about it yesterday and its fascinating.  The cable news networks are mostly useless, still debating Palin vs. Letterman and other useless drivel, while spending a few minutes on Iran, but not really digging deeper.  Another article in the Atlantic talks about the information disparity between people who are getting their news from blogs, Twitter and YouTube, while this exchange from Fox and Friends is pretty representative of what most mainstream media outlets are talking about on the air.

The Obama Administration and the State Department realize that the new, social media is incredibly important to the coverage and organization of the protests, prevailing on Twitter and its hosting company to stop scheduled maintenance that would have brought Twitter down.  Part of the reason this uprising is so digital is that Iran boasts the 3rd most bloggers in the world.

As I said, I think we may be at a watershed moment in media history, similar to CNN’s huge surge in popularity during the Persian Gulf War.  The information divide between what is available online, both from primary and secondary sources is so much greater and more informative than what is available on the news and in newspapers, its astounding.  Newspapers and radio have been struggling with news gathering and Iran’s  uprising might be the last straw, especially if the old media does not adapt.

Do you think this is a watershed moment in the development of new media?  What do you think about the coverage of the Iranian election?

Social Media and the Iranian Election

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I wrote the other day about how Iran’s election could be swayed by Iran’s failure to qualify for the 2010 World Cup in South Africa.  When I saw the first results stating that President Ahamdinejad had been declared the winner by almost a 2-1 margin, I was a confused, as most polls before the election had the election being pretty close.

After the probably-rigged election, the government shut down foreign radio and tv, all text messaging, social networking sites and told Moussavi, the reform candidate, that he had won.  This forestalled massive protests, but not for long.  Iranians who believed that their votes had not been counted started to protest, using foreign proxy internet connections to connect to Twitter, social networking and other news sites.  While the BBC showed people how to view their feed and asked for pictures, videos and comments from people on the ground, most of the rest of the mainstream media has been pretty much useless. 

Since text messaging is down and many foreign correspondents have been kicked out, many Iranians have turned to Twitter to get their message out.  I’m a noted Twitter skeptic, as I think its mostly used by businesses, politicians and self centered, self indulgent people in America, but this is one of the times that Twitter is an amazing service.  Its amazing to see Twitter used as a tool to organize mass protests and get the story from the participants on the ground, as they happen.  I don’t have a Twitter account, but I have been following the feeds of lots of the organizers on the ground.  Here are a few messages, but you can view more here:

Tehran University dorm is heavily under attack people need HELP noone is helping, spread word #IranElection 

RT: To world press in Tehran: People have died tonight, be a witness at least. Don’t let them die in the dark #iranelection … 

Iran: RT: some students w/urgent need of med attn I’m calling out to all ppl who can come here don’t leave us #iranelection 

: RT: have no more news from uni dorm. i must go to pray now. today we will need god. #Iranelection

I’ve been getting goosebumps watching videos and reading updates like these from people my age protesting for their rights.  Twitter had scheduled its “monthly critical update” which would have brought the site down for 90 minutes at about 10am Tehran time, but the pleas of the demonstrators and other interested parties persuaded Twitter to agree to postpone the updates.

Contrast Twitter’s response to the protests with Google’s.  Google partnered with China’s communist government to censor its search results and now its pulling Iran protest videos because they contain violence.  While the videos might be against YouTube’s terms of service, the videos are socially and politically relevant and important.  It’s interesting that a company who’s original motto was “Don’t be evil” is stifling politically relevant free expression.  The Boston Globe has some great photos available here as does Andrew Sullivan’s blog.

It will be interesting to see if the protests lead toward a revolution and if they do, how social media continues to play its part.  Which company do you think has a better plan to deal with the protests, Google or Twitter?  Do you think news reporting will move even farther from traditional news sources?