Helmut Feels Your Pain

Rand’s Atlas Is Shrugging With a Growing Load

noreply@blogger.com (Jeremy Bourque) — Wed, 03 Jun 2009 18:42:00 +0000

I just read this article by Amity Shlaes on Bloomberg.com. It's about Atlas Shrugged and it discusses how some of the libertarian philosophy in the book relates to the current economic situation. It's a fairly good article overall, but there's a highly specious piece of logic in there that's just begging to be called out.

In the second paragraph under 'Back Ache', the article reads as follows.

In 1986, a year when “Atlas Shrugged” sold between 60,000 and 80,000 copies, the top 1 percent of earners paid 26 percent of the income tax. By 2000, that 1 percent was paying 37 percent, and “Atlas Shrugged” sales were at 120,000. By 2006, the top 1 percent carried 40 percent of the burden.

I think the author is trying to argue that the income tax burden in the U.S. has shifted more and more disproportionately toward the higher-income earners from 1986 to 2006. While this may or may not be true, the argument she advances for it doesn't hold water.

Here's why.

The top 1 percent of earners do not earn a fixed percentage of total gross income for all taxpayers. Rather, the percentage of total gross income earned by the top 1 percent of earners has been growing. Income tax is a percentage of gross income, so we would expect that as the total share of gross income increases for the top 1 percent of earners, their share of the income taxes paid would also go up in proportion.

Let's look at the numbers. Using the same source that the author cites for the numbers in the quote, we find the following. In 1986, when the top 1 percent of earners paid 26 percent of the income tax, those same 1 percent earned just over 11 percent of the taxable income reported. In 2000, the year when the top 1 percent paid 37 percent of the income tax, they earned almost 21 percent of the income. In 2006 the top 1 percent earned over 22 percent of the total income and paid 40 percent of the taxes.

We already know that the income tax share paid by the high-income earners is disproportionate to that paid by the low-income earners because that's how a progressive taxation system works. In order to decide whether the income tax burden on high-income earners is becoming more disproportionate over time, one needs to compare the growth in the share of income earned to the growth in the share of income tax paid. Unfortunately the article doesn't give us that information, and worse yet, it implies that we don't need it.

But since we do need it, let's have a look.

Table 1: Ratio of Adjusted Gross Income (AGI) Share to Total Income Tax Share for Top 1% of Income Earners

Year	Income Share	Tax Share	Ratio
1980	8.46%	19.05%	2.25
1981	8.30%	17.58%	2.12
1982	8.91%	19.03%	2.14
1983	9.29%	20.32%	2.19
1984	9.66%	21.12%	2.19
1985	10.03%	21.81%	2.17
1986	11.30%	25.75%	2.28
1987	12.32%	24.81%	2.01
1988	15.16%	27.58%	1.82
1989	14.19%	25.24%	1.78
1990	14.00%	25.13%	1.80
1991	12.99%	24.82%	1.91
1992	14.23%	27.54%	1.94
1993	13.79%	29.01%	2.10
1994	13.80%	28.86%	2.09
1995	14.60%	30.26%	2.07
1996	16.04%	32.31%	2.01
1997	17.38%	33.17%	1.91
1998	18.47%	34.75%	1.88
1999	19.51%	36.18%	1.85
2000	20.81%	37.42%	1.80
2001	17.53%	33.89%	1.93
2002	16.12%	33.71%	2.09
2003	16.77%	34.27%	2.04
2004	19.00%	36.89%	1.94
2005	21.20%	39.38%	1.86
2006	22.06%	39.89%	1.81

(Data taken from Tax Foundation page http://www.taxfoundation.org/news/show/250.html)

The ratio in the last column measures how disproportionate the tax burden is to the income share. If the top 1 percent earned 10 percent of the income and paid 10 percent of the taxes, the ratio would be 1. If they earned the same 10 percent of income but paid 20 percent of the taxes, the ratio would be 2. The higher the ratio, the more disproportionate the tax burden. According to these figures, the tax burden was more disproportionately skewed to the top 1 percent in 1986 (ratio of 2.28) than it was in 2000 (ratio of 1.8) and then it is almost unchanged from 2000 to 2006 (ratio of 1.81). In fact, the ratio for 1986, which is the article's 'low year' has the highest ratio of tax share to income share for any year listed!

Although they paid a larger share of income tax in absolute terms, the top 1 percent of earners paid a somewhat smaller share of income tax in 2000 and 2006 than they did in 1986 in proportion to the share of total income they earned. Based on this analysis, we must draw the opposite conclusion to what the article does! This aspect of the article is misleading at best, and disingenuous at worst. The moral of the story? Caveat lector -- let the reader beware.

Quicktime without iTunes

noreply@blogger.com (Jeremy Bourque) — Sun, 29 Jun 2008 22:27:00 +0000

I confess. I've given in to the Apple juggernaut and converted to iTunes. There was a time when I proudly ran Winamp and ephPod, but that time has passed. And the truth is, I like iTunes pretty well. It's good gear.

Before I switched over, I wanted to install QuickTime without iTunes and it turned out to be a lot harder than it should have been. I eventually found this page which gave me the link that I needed.

Flickr™ Photos

noreply@blogger.com (Jeremy Bourque) — Thu, 16 Nov 2006 01:31:00 +0000

I finally got my flickr™ photos on the blog! I know it doesn't seem like a big deal to you, and it isn't, but I've been trying to get this up for ages and it's finally done. Of course, I could have just put up the very nice badge that flickr™ generates automatically for you. But I guess that was too easy for me. I just had to customize it.

Many thanks go to Ryan Prins. I learned how to make the badge I wanted on his page about how he made his badge. Thanks Ryan!

Breakage

noreply@blogger.com (Jeremy Bourque) — Thu, 14 Sep 2006 18:15:00 +0000

I was just over at the Chapters/Indigo web site buying Ruby In A Nutshell and The End of Faith. Yes, my taste in books is somewhat eclectic. But that isn't the point of this post. I just wanted to use the word eclectic. Now Chapters/Indigo isn't my favourite place to shop for books online. Amazon is. Especially now that they have a Canadian site. Amazon is just better. For example, on the Amazon page for Ruby In A Nutshell, the cover picture actually shows Ruby In A Nutshell, as opposed to the Chapters/Indigo page, which shows the cover of Ruby Essentials¹. I wonder what book I'll get.

Now don't get me wrong. Chapters is one of my favourite bricks-and-mortar bookstores. I think of them as the Barnes & Noble of Canada. Or maybe the Borders of Canada. Whatever. You take my point. But today I had a couple of books to buy and I had a Chapters gift card lying around, so I figured it made sense to use that. So I did. And in trying to do that, I ran across some brokenness that I just had to share with you.

During checkout process I was given the opportunity to discuss methods of payment with the web site. There were two options that I thought might apply to me: 'Transfer a Gift Card' and 'Deposit a Gift Certificate'. It wasn't immediately clear which was the right one. Eventually I grokked the 'Card' vs. 'Certificate' distinction and chose the first one. From there, I could transfer money from my gift card to my online account, or vice versa. But I didn't know how much was on my gift card and there was no obvious way to check the balance. This was beginning to lose. I was pretty sure I had between $40 and $50 on the gift card, so I split the difference and tried to transfer $45. It worked, and nicely informed me that my transfer had succeeded and that the remaining balance on my card was $1.35. Cool! Since I thought $45 would be more than enough to cover my purchases, I decided to leave the $1.35 on the card and transfer whatever was left over from my purchase back to the card when I was done.

Of course I was wrong. My total after shipping and taxes was actually $46.94. Well if that wouldn't rot your socks! So then I decided I should empty the card, and cover the remaining $0.59 with my credit card. I was briefly impressed when I was able to get to the transfer option directly from the page I was on, rather than having to go back several pages to where I had done it before. But when I tried to transfer the remaining $1.35 from my card, I was informed that the minimum transfer was $5. And suddenly I was less impressed.

What did I do? Well, I was in luck, because I still had $45 in my online account. I transferred $5 from my account to the gift card, and then I transferred $6.35 back from the gift card to my account. And while I was doing this, I was thinking: Why would there be a $5 minimum? There must be an incremental cost per transfer, or something. I guess anything less than $5 doesn't justify the cost. Suckers! I just used two transactions! I've gotten around your silly restrictions and it cost you more than if you hadn't tried to stop me. Fools! You can never stop me! Bwahahahaha...! And then I came to my senses, and I realized that it's really, really unlikely that there's any incremental cost for a transfer. Because if there were, I would bet you dollars to doughnuts² that they would pass it along to the customer and that you would lose $0.50 every time you did a transfer.

Then the realization dawned. There's only one reason I can think of for the restriction and that's to increase breakage. Breakage is the term used for, among other things³, money left on gift cards that is never used. It's the $20 gift card that you got for your birthday and lost. It's the one with $0.74 left on it that you threw out because the wallet-space it was taking up was worth more to you than the net present value of $0.74 in six months. I don't know what the actual numbers are for Chapters/Indigo, but by way of example, if they sold $1 million worth of gift cards last year, and $900,000 worth have been or eventually will be used for purchases, then the remaining $100,000 that won't ever get used is breakage. Sometimes it's expressed as a percentage, so I could also have said that the breakage for that year was 10%. Unless there's an expiry date, I'll never know for sure exactly what the final breakage was, since there's always a chance someone might still use one of those gift cards. But these things tend to average out over time, so places like Chapters/Indigo have a pretty good idea of what the overall breakage is on their gift cards.

I guess it was lucky, after a fashion, that my total for this order was over $45. If it had been $42 then I would have been even more upset because then I wouldn't have been able to transfer my $3 back to the gift card. And there wouldn't have been a whole lot I could have done about it. Except to complain about it on my blog, of course. I would have been stuck with $3 on my web account. There's no telling when I might have used that. And with $1.35 on my gift card, that I could really only use in the store. And I'm not likely to remember to do that for the sake of $1.35.

Which apparently suits Chapters/Indigo just fine. I can only imagine what sort of short-sighted manager or committee -- it was probably a committee -- decided that it should be impossible for me to consolidate the balance of my online account and my gift card when they're both under $5 so that Chapters/Indigo can keep more of my money from unredeemed gift cards. And it isn't as though they don't make money when I use the gift card. They do. But if I don't use it, then they make even more. But having discovered this little 'feature' of the web site, try to imagine whether I'm more or less likely to choose them next time.

So, Chapters/Indigo, is it worth it? You're telling your customers that you prefer to purposefully inconvenience them in the hope of keeping a few dollars, which they (rightly) think of as theirs, rather than allowing them to conveniently spend it with you. I think that's pretty bad. But that's just me. I'm sure most of your customers don't mind.

Final Note: I haven't tried to transfer or consolidate balances for gift cards on any other sites. I have no idea whether Chapters/Indigo is better or worse than anyone else. But it doesn't matter. This kind of thing is a bad way to treat your customers. If everyone does it, then everyone is treating their customers badly.

1. I thought Ruby Essentials was a real book, but I can't find any mention of it at O'Reilly.
2. I sometimes wonder how much longer it will be before a doughnut sells for more than a dollar, and that phrase reverses its meaning.
3. I Googled 'breakage' to find a good definition explaining the term as it relates to gift cards. The first sponsored link used the term in an entirely different sense: the one related to prophylactics.

The Lessor of Two Weevils

noreply@blogger.com (Jeremy Bourque) — Wed, 30 Aug 2006 21:33:00 +0000

I was in Philly a few weeks ago and saw a riverboat advertising Site-Seeing Tours. I thought it looked pretty cool. You could probably see historic sites, archaeological sites, burial sites, well grave sites anyway, possibly even a construction site or two.

Although, if it's things to see you're after, then nothing beats a Sightseeing Tour. I think if I were to go on a tour, then I would prefer to see the sights, rather than the sites, if you catch my drift.

Unless there was an Internet connection on the boat, and some laptops. That would be an altogether different Site-Seeing Tour. Well, it would depend on the sites, I guess. Perhaps sites of historic interest have web sites with pictures of the sights available at the sites. Then the tour guide just tells you what links to click and when. On a riverboat. Oh my!

Natural and Artifical Flavours

noreply@blogger.com (Jeremy Bourque) — Wed, 15 Mar 2006 00:31:00 +0000

I've recently become a great fan of Altoids Sours. They're sour candies made by Callard & Bowser® that come in five flavours: apple, citrus, mango, raspberry, and tangerine. All of the flavours are quite good. My current favourites are mango and raspberry.

You can't really see this on the Altoids web site, but each tin has some text on the front that says whether the candies are naturally or artificially flavoured. Here's what each one says:

Apple Sours	Artificial Flavor
Citrus Sours™	Natural Flavor With Other Natural Flavor
Mango Sours	Artificially Flavored
Raspberry Sours	Naturally and Artificially Flavored
Tangerine Sours™	Natural Flavor

Even though they're labelled as "Made in Great Britain", I guess they must have separate packaging for export to different countries because I notice that these tins, which were all purchased in the USA, use the American spelling of the words 'flavor' and 'flavored' as opposed to the British one. Perhaps this is related to differences between the food labelling rules in various countries.

But leaving aside the spelling, I noticed some interesting variations. It's "Artificial Flavor" for Apple Sours, but "Artifically Flavored" for Mango Sours. Simmilarly Tangerine Sours™ have "Natural Flavor", but Raspberry Sours are "Naturally and Artifically Flavored". The prize definately goes to Citrus Sours™ for "Natural Flavor with other Natural Flavor". What does that even mean?

It caught my attention and I didn't get it, so I thought I should share.

Minarets

noreply@blogger.com (Jeremy Bourque) — Tue, 28 Feb 2006 16:16:00 +0000

"Wow! Those towers are really cool, hey?"

"They're minarets."

"Huh?"

"The towers. They're actually called minarets."

"Why do you have to be like that?"

"I don't know. Sorry."

Helmut Feels Your Pain

noreply@blogger.com (Jeremy Bourque) — Wed, 27 Jul 2005 22:50:00 +0000

So my (now wife, then) fiancée and I are visiting my uncle near Cochrane, Alberta. My wife has never been into the mountains before, so we borrow the truck and head out to Banff for the afternoon. We're driving along listening to the radio when an ad comes on.

Actually, I thought it was some kind of comedy bit, but my wife says it was an ad, and she has a better memory for these kinds of things.

So this ad comes on. I can't remember what the product was, but it's this guy named Helmut, doing a bad Austrian accent, Hans and Frans style. He's a bodybuilder and he's talking about how he never got any respect until he bulked up, beat the crap out of the guys who made fun of him, and got the girl. So it's pretty funny and we're already laughing out loud when he says, "Do you feel small? No one respects you? Well Helmut feels your pain! Helmut remembers when he was so wimpy, he couldn't even lift his car." At this point we're pretty much rolling on the floor laughing. I'm literally wiping the tears out of my eyes so I can keep driving. Maybe you had to be there, but, at the time, it was damn funny.

For the next couple of weeks we're doing 'Helmut' constantly. That was years ago, but that one phrase really stuck with me. Whenever someone says something that I can really relate to, I'll say it, and, like as not, I'll get a weird look. (Yeah, I get a lot of weird looks.)

That's the story. So hopefully, every once in a while, I'll write a post, and you'll read it, and you'll really relate to it, and then you'll say, "Helmut feels your pain."