19 ms·

Suspicious discontinuities (2020)

• Simon_ORourke 3y ago
  A friend of mine from a farming family in Europe once told me a story that his family would wait until the year one of his siblings was due to go to college and then invest in new farm machinery. Their reported net income for the year would reduce or go negative and the sibling would get to college effectively for free on a hardship tuition grant.
  • swman 3y ago
    [flagged]
    • Gare 3y ago
      Corporations game the system all the time.
      • deleted 3y ago
        [deleted]
      • layer8 3y ago
        You say that like it’s a good thing.
    • julienreszka 3y ago
      why blame the player
      • layer8 3y ago
        It’s not supposed to be a game.
        • andrewflnr 3y ago
          It is, though, even if the players don't want it to be. The bug is in the rules.
          • layer8 3y ago
            There are unspoken rules, and neither spoken nor unspoken rules are perfectly enforced. It’s only a game if you treat it as such.
            • andrewflnr 3y ago
              > There are unspoken rules, and neither spoken nor unspoken rules are perfectly enforced. Yeah, it's a pretty bad game.
    • generalizations 3y ago
      This is following the rules and using the system the way it was designed. This doesn't even violate (probably) the intent of the law - it just violates the desired outcome of some parties involved.
    • bitcoin_anon 3y ago
      From the article: > Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.
      • nullhole 3y ago
        If we all just followed the letter of the law and not the spirit of the law, society would be a lot worse than it currently is.
        • ikmckenz 3y ago
          Perhaps we’d have better written laws
        • ben_w 3y ago
          From what I hear, most of us don't follow either the letter or the spirit. A former project manager of mine had previously worked as a cop, and I asked him how he determined who to arrest — if I remember right (it was a while ago now), the answer was approximately "if they look sus, arrest first and figure out the exact offence later". What's the quote? Something along the lines of "as a kid I thought adults had it all figured out, then I became an adult and realised none of us know anything and we're all bluffing all the time"? The reason we're not all in jail all the time is that we don't fully enforce almost any law, IMO because we all like to think of ourselves and most of our peers as the "goodies" even as we demand ever stronger crackdowns on ever broader ranges of behaviour. And also we don't like living in police states run by people who tell us we're actually all bastards. Fully enforce road laws? The only people who won't lose their licences, will be people who aren't driving. Littering? The fines would probably raise enough money to replace all taxation and then some. Drug laws? In the UK, heroin users alone are a group nearly three times the size of the prison population, all class-A drugs combined are about 11x the UK prison population, all drugs of all categories are about 31x the prison population — and that's "this year" not "lifetime use" which matters given the length of the prison sentences for different categories: https://www.ons.gov.uk/peoplepopulationandcommunity/crimeandjustice/articles/drugmisuseinenglandandwales/yearendingmarch2023 https://www.ons.gov.uk/peoplepopulationandcommunity/crimeand... Copyright infringement? Imagine if Google (or AltaVista) had been hit by the same sort of lawsuits sent against individuals engaged in P2P file sharing during the Wild West era of the internet. Personal data protection? Even before GDPR, websites should've been asking for permission for tracking cookies.
  • DontchaKnowit 3y ago
    Yep very common tactic for small business owning families.
  • IncreasePosts 3y ago
    At least in America, they usually look at the past 2-5 years of income to avoid these types of shenanigans.
    • ridgewell 3y ago
      In Canada, they use gross income instead of net income for student grants.
      • tocs3 3y ago
        So, what happens if you work in an area where the cost are high but the margin is low? You might make $100K but have $85K in costs. You still have $15K in income. Does this apply to those self employed or only wage earners (gets a paycheck)?
    • groestl 3y ago
      In Austria, we just don't have tuition fees, which also avoids these types of shenanigans :)
  • SilasX 3y ago
    Huh? Wouldn't they have to depreciate it over several years so only a fraction of it would be a deduction in the current? Or is the idea that they'd buy so much capital equipment that even the fraction they could depreciate that year would wipe out all the other income? AIUI, the concept of depreciation exists in tax law precisely to prevent indefinitely deferring taxes via reinvestment (though it can't do anything about the portion of reinvestment going to pay salaries a la Amazon): https://news.ycombinator.com/item?id=15061439 https://news.ycombinator.com/item?id=15061439
    • bombcar 3y ago
      Many countries allow accelerated deprecation of designated equipment. Here's the IRS's - https://www.irs.gov/newsroom/additional-first-year-depreciation-deduction-bonus-faq https://www.irs.gov/newsroom/additional-first-year-depreciat...
• richrichie 3y ago
  > The following histograms of Russian elections across polling stations shows curious spikes in turnout and results at nice, round, numbers (e.g., 95%) starting around 2004. This appears to indicate that there's election fraud via fabricated results Two observations: 1. Why from 2004? Things were much worse in Russia before 2004. 2. The numbers of this election seem to agree with approval rating polls conducted by western agencies.
  • inglor_cz 3y ago
    By 2004, a former KGB spook was in power long enough to introduce a falsification system. The 1990s were worse economically in Russia, but Yeltsin was a relatively liberal politician and possibly didn't want to falsify elections.
    • deleted 3y ago
      [deleted]
    • richrichie 3y ago
      I am not sure. Yeltsin was “our guy”. He was feted by us, he even addressed the congress, etc. Until he was not when he refused to deliver Russia on a plate. Guys that are not “our guys” never win a legitimate election. Remember how integrity of elections were questioned when a guy that is not our guy won an election in 2016?
      • inglor_cz 3y ago
        I am far from sure either, but Yeltsin had some "street cred" speaking for him. I remember the 1990s quite well, being a teenager with intense interest in politics. He got to power by organizing a folk uprising against an attempted coup by KGB generals Kryuchkov et al., who were hardliners and quite skilled people as well; they caught Gorbachev and held him hostage. https://en.wikipedia.org/wiki/1991_Soviet_coup_attempt https://en.wikipedia.org/wiki/1991_Soviet_coup_attempt That coup could very well succeed and that would mean death for Yeltsin, possibly after a torture session in Lubyanka. He certainly demonstrated personal courage there. What followed was "too free Russia". As in, lawless. It had certain advantages. For the first time in Russian history ever, multiple independent media sprang from the ground and journalists would criticize and attack powerful figures in a way that they no longer can; we're used to it, but open media criticism of powerful people is actually not that typical in the world. But at the same time, crooks stole everything and the regular Russian suffered. As a nasty consequence, democracy and freedom became one with poverty and corruption in minds of many Russians. Yeltsin only contested one election, in 1996. His opponent Zyuganov was a classical communist. The result was 54.40% for Yeltsin and 40.73% for Zyuganov. Was this election clean? How can I know? But it wasn't a travesty with 90 per cent for The Leader and paper figures for "opponents"; Zyuganov was a real politician with a competing party and a very different program, and he got 40 per cent of the vote, and nobody fell out of the window etc. Everything is relative, and I believe that for the standards of Russia, Yeltsin was by far the most liberal leader in its history.
• Xcelerate 3y ago
  Haha, I recall seeing a similar plot with a "suspicious discontinuity" when I looked up data on home appraisal price vs sale price. I remember asking the loan officer why the contract was forwarded to the appraiser before they did the appraisal, because that might bias their assessment. She gave me a funny look and replied "that's kind of the point."
  • jeffbee 3y ago
    Yeah of course, the appraiser is a person who is paid to write down the predetermined number. The US federal government should nuke this industry as part of their crackdown on "junk fees". Either the appraiser serves a legitimate arms-length purpose or their whole line of business should go away.
    • sanderjd 3y ago
      I could see a third option as a "lemon detector". That is, instead of their output being a number, it would be a binary, intended only to limit downside risk in the worst cases. I think in practice this is indeed the role they play. If I'm "overpaying" by 20%, the appraiser will probably still "write down the predetermined number", but if I'm overpaying by 100% and taking out a mortgage to do it, there's a pretty good chance that the bank's appraiser is going to sink that deal.
      • bombcar 3y ago
        That's basically what they do, they're not to find the actual value of the property (that's more properly a tax assessor, perhaps) - they are there to make sure the valuation is "in the ballpark" to what it would liquidate for. An appraiser will never get in trouble if a bank forecloses on a $500k property and it sells for $450k or so, but they will get in trouble if the $500k property only sells for $200k - they'd need to explain why.
    • lesuorac 3y ago
      I think it's really a problem of different incentives. Somebody (A) at the bank does not want to give out loans that are well beyond a properties value. Somebody (B) _else_ at the bank is actually the one giving you the loan and makes money from you getting it. So A requires B to have an appraiser so they can't completely run away writing loans. From talking to some real estate agents, the appraiser will only fudge so much for you. An appraiser might agree that the house is worth 750k even if they actually think its 699k but if you try to get a 700k loan for a 350k house they'll write down 350k in their appraisal. -- IIRC, the government's crack down on "junk fees" is mostly that you can't advertise a price and then inflate it later with fees. So as long as the bank states that they require an appraiser and their in-house cost is $X; it doesn't count as a junk fee. But if the bank says that the loan is going to cost say $5k in overhead and then later says it doesn't include appraisal fee then it be a junk fee.
• jeffbee 3y ago
  Similar to car prices, we see the same mental rounding effect in rents. People will rent a home for $2100 or $2200, sometimes even $2150 for those truly dedicated to price finding, but hardly anyone rents an apartment for $2137. Source: my data for the city of Berkeley https://observablehq.com/@jwb/berkeley-rent-board-data#cell-454 https://observablehq.com/@jwb/berkeley-rent-board-data#cell-...
  • Macha 3y ago
    The car pricing seems to be that some amount of people round 79,999 down to 70,000 when determining mileage and so cars with 79,999km on the odometer are penalised much less than cars with 80,000km. I think the rent one is much more driven by "some landlords like round numbers for posting ads/doing their finances".
    • bombcar 3y ago
      The "round prices" is definitely a factor, the math may say to rent for $2134 but the landlord will either round that down to $2100 or up to $2200. And unless increases are limited by some law, they will usually only raise it by even amounts.
    • Izkata 3y ago
      This is the same reason grocery store prices are $x.99, people anchor on the first digit and $5.99 feels like a lot less than $6.00
  • madcaptenor 3y ago
    You might get some of that if rent is raised by percentage. When I started my current job my salary was an integer multiple of $10,000. I got a raise at the end of my first year that was an integer percentage (3%, IIRC) so my salary was then an integer multiple of $100. The following year I got a raise again (it might have been an integer percentage, I don't recall) and my salary was just some random-looking integer. Rent-controlled Berkeley apartments are allowed to increase rent by some fixed percentage, so maybe you can see this in your data? But I don't think the math would work out so cleanly.
• JohnMakin 3y ago
  I went to school at a relatively late age and started in community college. The school/state had a policy where any independent income earners making less than 35,000/year would not pay tuition. A single dollar over that would require paying full tuition of ~$60/unit or about $750 a semester. One year I worked a little more overtime during the holidays than usual and realized with a week to go in the year that I'd go a few hundred dollars over, so I called out of a few shifts and nearly got fired over it. I barely squeaked in under the limit, and if I hadn't, there was pretty much no way I would have been able to continue school. It's not like I could suddenly afford it now that I made $35,001 vs $34,999. I have never understood why things like this don't use some sort of sliding scale, rather than absolute dividing line.
  • hammock 3y ago
    An instructive image of the welfare trap: https://en.wikipedia.org/wiki/File:Welfare_trap.png https://en.wikipedia.org/wiki/File:Welfare_trap.png People making $30K on welfare would need to make $81K at an actual job to have the same income after tax. More info: https://en.wikipedia.org/wiki/Welfare_trap https://en.wikipedia.org/wiki/Welfare_trap
    • autoexec 3y ago
      Something seems very off with that image. I've known a lot of different people who were on welfare over the years, and not one of them had a standard of living anywhere close to what someone who nets $60,000 a year does. That said, there is absolutely a cliff where you could risk a loss just by taking in more money.
      • amanda99 3y ago
        The main feature of that image is "childcare" which seems to be a fixed subsidy of $16k (and "CHIP", ~$4k related to child health care). I don't know what the former means and how these are calculated, but if you don't have children, this graph would look a lot less exciting.
• madcaptenor 3y ago
  (2020), but still interesting.
  • deleted 3y ago
    [deleted]
• lesuorac 3y ago
  > It's generally believed that this is caused by a discontinuity in youth sports: > 2. Within a given year, older kids are stronger, faster, etc., and perform better I've seen a few youth ice hockey games and by god it's just unfair; there's a kid like a foot taller than the rest. I'm kind of surprised there isn't some system that buckets kids by size , it can't be fun for the small kids to get elbowed in the neck every time they bump the tall guy.
  • ddtaylor 3y ago
    I remember playing basketball as a kid and being very entertained beating kids that were much taller than I was. Sure, they had the height, but they lacked so many fundamental skills and sometimes it was clear they didn't think they had to work very hard or do practice drills because they were tall. Fun fact, the ball and hoop don't care about any of that. It lets me steal it from you and it lets me put it into the hoop. The scorekeepers even add two to the scoreboard!
    • gopher_space 3y ago
      > Fun fact, the ball and hoop don't care about any of that. Tangent: I grew up around a high school basketball coach and saw that all of the adults knew exactly who was going to college in which sport, and usually by late jr. high. We'd go to games just because he said some kid on the visiting team was going pro and that's exactly what happened.
      • robk 3y ago
        Can you expound more? How did this work across different fields of sport? I assume a basketball scout can recognize talent early in their domain but how is it crossing sports?
        • gopher_space 3y ago
          We're talking about people dedicated to the idea of "sport" in general getting excited about kids in local communities who are already talented and driven enough to be twice as good as their peers. Sports scouts follow up on phone calls more than they discover talent hidden away in the cornfield, if you see what I mean.
• dang 3y ago
  Related: Suspicious Discontinuities - https://news.ycombinator.com/item?id=28452926 https://news.ycombinator.com/item?id=28452926 - Sept 2021 (54 comments) Suspicious Discontinuities - https://news.ycombinator.com/item?id=22378555 https://news.ycombinator.com/item?id=22378555 - Feb 2020 (297 comments)
• rwmj 3y ago
  Also UK VAT. Companies only need to register for VAT when they turn over more than £85,000 in a year. This adds a great deal of extra complexity for running the company. Predictably a lot of companies earn just less than this amount. The graph is worth a thousand words: https://www.economist.com/cdn-cgi/image/width=1024,quality=80,format=auto/content-assets/images/20230415_BRC700.png https://www.economist.com/cdn-cgi/image/width=1024,quality=8... (from https://www.economist.com/britain/2023/04/11/britains-tax-take-is-getting-bigger-but-not-better https://www.economist.com/britain/2023/04/11/britains-tax-ta...)
  • bluedino 3y ago
    One similar thing is getting a 1099-MISC for 'side work' in the USA For example, I'll do some hands-on work for a former employer. Rack some network equipment, go investigate something, install some hardware...They take it from there, I can bill a couple hours and it's a nice dinner for my wife and I. However, if I hit a certain threshold ($600?), they will send me a tax form and I'll then have to pay income tax on that money.
    • dragonwriter 3y ago
      > However, if I hit a certain threshold ($600?), they will send me a tax form and I’ll then have to pay income tax on that money. No, the threshold at which you have to include the income in your taxable income ($400/yr) is lower than the threshold for the person paying you to provide a 1099-MISC ($600/yr from that payer.)
      • bombcar 3y ago
        Don't you always have to include the income even if you don't get 1099'd? The $400 is only if it's your only income, otherwise plumbers could always charge $399 a visit and never pay tax.
      • gottorf 3y ago
        The threshold at which you have to include the income in your taxable income is $0.01.
• nominatronic 3y ago
  A similar fun example is the distribution of Elo ratings on a chess site, e.g. here's the weekly distribution on Lichess for Bullet games (less than 3 minutes): https://lichess.org/stat/rating/distribution/bullet https://lichess.org/stat/rating/distribution/bullet It's easy to understand why this happens: - Player ratings will fluctuate by small amounts as they win and lose individual games. - People are happy to stop playing when their rating is at e.g. 1503, but if it's 1497, they'd rather play just one more game than leave it that way. - At any given time, most accounts are not playing, so the distribution shows a bias towards values just over a 100 Elo threshold. The other neat thing is that you can see this effect reduce as you look at longer time controls: Blitz (less than 10 min): https://lichess.org/stat/rating/distribution/blitz https://lichess.org/stat/rating/distribution/blitz Rapid (less than 30 min): https://lichess.org/stat/rating/distribution/rapid https://lichess.org/stat/rating/distribution/rapid Which makes sense because the time and effort of gambling just one more game to get the rating back over the line is higher at the longer time controls.
  • chatmasta 3y ago
    > At any given time, most accounts are not playing, so the distribution shows a bias towards values just over a 100 Elo threshold FYI, that graph only includes players who were active (played a game) this week.
    • nominatronic 3y ago
      Yes, but that doesn't change the fact that out of all the accounts included, most of them won't be actively playing games right now.
      • chatmasta 3y ago
        In fact none of them will be, because it's computed by analyzing the rolling last 7 days, and each accounts "ranking" is whatever their ranking was at the end of that period (i.e. "now," more or less). Basically I'm not sure why you're saying that leads to a bias toward "slightly above 100." Ohh... unless you meant slightly above a multiple of 100. I see now. Because people stop playing when they hit a milestone, right.
• deleted 3y ago
  [deleted]
• abnry 3y ago
  Another place this shows up is in online chess ratings. See Lichess: https://lichess.org/stat/rating/distribution/blitz https://lichess.org/stat/rating/distribution/blitz Couldn't find this in Chess.com stats, but maybe they do some smoothing in their plot.
• chubbyFIREthrwy 3y ago
  >One reason people were looking for ways to lose money was that, in the U.S., there's a hard income cutoff for a health insurance subsidy at $48,560 for individuals (higher for larger households; $100,400 for a family of four). ... That means if an individual buying ACA insurance was going to earn $55k, they'd be better off reducing their income by $6440 and getting under the $48,560 subsidy ceiling than they are earning $55k. I had the opposite problem for the 2022 tax year: I turned out that, with investment losses and no earned income, my adjusted income was below the poverty line, which ... means your ACA healthcare subsidy is cut off entirely! https://www.irs.gov/affordable-care-act/individuals-and-families/eligibility-for-the-premium-tax-credit https://www.irs.gov/affordable-care-act/individuals-and-fami... The "logic" there (from reading discussions of the cutoff) is that, "well, if you're below the poverty line, you should be on Medicaid and not on the ACA exchanges at all, silly!" Okay, but if you have wildly varying income, and a high income from previous years, you don't know that you'll be "in poverty" this year, and won't qualify because of the past year. I was tempted to update my taxes to claim phantom income from my imaginary cash-based business, which would then get me the subsidy, but that feels ick. (Which, I know, being retired on crypto, I also feel ick about taking the subsidies to begin with, but that's a different issue.)
  • PaulDavisThe1st 3y ago
    A reminder to anyone reading that there is no actual "opposite problem" to yours (which I'm very disturbed to hear about, hope things work out). For now, there is no income level cut off for ACA premium subsidies, just a limit that says you should never spend more than 8.3% of your AGI (more or less) on health insurance (more or less). This may change next year and/or in the future.
  • mikepavone 3y ago
    > The "logic" there (from reading discussions of the cutoff) is that, "well, if you're below the poverty line, you should be on Medicaid and not on the ACA exchanges at all, silly!" Okay, but if you have wildly varying income, and a high income from previous years, you don't know that you'll be "in poverty" this year, and won't qualify because of the past year. This wasn't setup this way because it was thought to be a good design, but as a political compromise. At the time, it was seen as important to keep the headline cost of the bill below some arbitrary threshold and for it to be revenue neutral (the wisdom of this is questionable in hindsight since the moderate Dems that supported the bill mostly got wiped out anyway and it never got any Republican support). Medicaid is cheaper for the government than ACA subsidies (at least for low income people given the way the subsidies are structured), partly because the government has a lot of negotiating power and partly because Medicaid is stingy. This was made worse when the Supreme Court ruled that the federal government couldn't make receiving existing Medicaid funding conditional on Medicaid expansion (Medicaid is partially funded by the federal government, but the program is administered by individual states) so whether the Medicaid expansion is even available to you largely depends on whether your state is run by Democrats or Republicans (with a few notable exceptions).
• armchairhacker 3y ago
  At least in the government, there should be a law that any hypothetical scenario where someone making more money before government taxes/incentives would cause them to earn less after, must be quickly resolved by replacing hard cutoffs with gradients. No benefits should apply 100% for anyone making under a certain amount and 0% for anyone making over. Instead there should be a range they slowly decrease, so that if you make $1 more before the benefit you still get less than $1 after. Maybe even a lot less, like only $.30. But you should never lose money. This is obvious. It goes to show how bad beaurocracy and subtle misaligned incentives are that these hard cutoffs ever existed in the first place.
  • throwitaway222 3y ago
    This is why people don't want to pay taxes at all
  • baggy_trough 3y ago
    It all comes back to the fact that government is a low accountability sector, despite what many people seem to think.
    • callalex 3y ago
      What is the point of saying something like this? Would you prefer that people just not bother to do anything and let poor people starve to death instead?
      • RhodesianHunter 3y ago
        The "starve the beast" propaganda has been wildly successful and is seeded deep in American culture and psyche.
        • mrguyorama 3y ago
          "Vote for me and I'll show you how bad I can make government" has been supremely effective, somehow
• deleted 3y ago
  [deleted]
• bluedino 3y ago
  I'd bet the race time data looks similar to weight-lifting data for certain thresholds, whether it's the number or plates or such. Goals people set and then they mentally stop themselves at that goal.
• UncleOxidant 3y ago
  We had something like this when we were on ACA one year. I hadn't been working that year, but I ended up getting a job in August and it looked like we were going to go over the income threshold because we have a rental and were getting rental income. I asked the renters to please not pay their rent for Sept-December until January of the next year. They happily complied. We were able to squeak under the threshold, but it was close.
  • hsjsbeebue 3y ago
    I guess you were taxed on cash accounting not accrual?
    • UncleOxidant 3y ago
      Didn't receive the income for 4 months of rent until January of the next year. Reported the income in the year it was received. Isn't that generally how it works? (not an accountant or a tax expert)
    • dragonwriter 3y ago
      Individual income taxes in the US are usually cash basis (it is poasible to change to accrual, but from what I understand it almost never makes sense for an individual to do so.) And only individual income taxes would be directly relevant to individual ACA subsidy eligibility.
• atulvi 3y ago
  Need to add this one here https://twitter.com/martinmbauer/status/1769672126905090386 https://twitter.com/martinmbauer/status/1769672126905090386
• dec0dedab0de 3y ago
  The worst one of these that affected me was money helping people in the 2008 housing crisis. qualifying was based on what percentage of your income your mortgage payment was. So I would have got it if I had made a little less money, or if i had bought a house I knew I couldn’t afford. It felt like being punished for making the right decisions.
  • Karellen 3y ago
    So... people who'd been misled into making bad decisions and were being given help because they really needed it, made you feel like you were being punished by not getting similar help you didn't really need because you were making OK money and had avoided making the same kind of mistake? IMO, that's a really glass-half-empty way of looking at the situation. You did good! Try to give yourself a break. People like you who didn't fall for the sleazy mortgage brokers helped limit the damage that the rest of society had to deal with. And maybe next time some society-wide con goes down, if you (or someone you love) is unlucky enough to get stung by it (because none of us are smart enough to spot the con-men 100% of the time), hopefully you (or they) will get the help that's available that time around when it is really needed.
    • deleted 3y ago
      [deleted]
    • immibis 3y ago
      It's definitely both a glass-half-empty way of looking at things, and also true. I think the point is that the people who did the right thing ended up, at the end, with smaller houses and the same money.
    • dec0dedab0de 3y ago
      I forgot to mention that because of the crash I was underwater on the house and couldn’t afford to sell it even though I wanted to. It was also something silly like the article, where if I made like $5k less annually I would have qualified for much more than that. I was struggling at the time and really could have used it.
  • 3y ago
• sukruh 3y ago
  The discontinuities at the used care sale prices graph seems like an arbitrage opportunity on depreciation. Buy right after a round number, sell right before another, pay less on dep.
• neilv 3y ago
  I was all excited when I saw on Zillow a decent new apartment complex in town with rents that were actually reasonable... until, after hours of studying photos and floorplans and neighborhood, I noticed a statement on Zillow, near the bottom of the scroll, in one of the tabs in right column, that the building is subsidized, and there's a permissible income range. While some of us could qualify while on early startup salaries, I don't know how I'd feel about subsidies as a techbro, and I know I wouldn't feel good about having to move from a nice building (big time investment, moving monetary cost, and quite possibly moving to a crappier building) because the startup was doing OK. I was disappointed, but not surprised. As a middle-class techbro, this is a very lite version of a much bigger problem that has affected many low-income people. News has long had stories about low-income people who are trapped with subsidies they need (housing, food, support for children, etc.). They make a lousy wage, and can't afford to get much of a better wage, because the societal safety net on which they depend would be ripped out from under them before they could afford it to.
  • hollerith 3y ago
    >I know I wouldn't feel good about having to move from a nice building because the startup was doing OK. Subsidized apartment buildings in the US don't make you move out if your income goes up: they just take away your subsidy, i.e., your rent goes up to what HUD calls the apartment's "contract rent". Then HUD (statistically speaking) directs the money they used to use to subsidize your rent to building more subsidized housing. HUD wants successful people living in HUD-subsidized buildings, at least the ones with children in them, to serve as role models.
    • neilv 3y ago
      Interesting; that sounds enlightened of HUD.
• throwitaway222 3y ago
  It's too bad income "cut-offs" even exist. Shouldn't it always be a smooth function?
  • mbork_pl 3y ago
    Smooth - definitely not. Continuous - yes. (SCNR.)
  • simne 3y ago
    It depends on public opinion. In some countries people think, taxes must be equal for all, or linearly grow (and with ideally smooth function). They even sometimes change mind and make experiment with other function. Many experts think, this is because in these countries, laws made entities tax agents (every entity pay all taxes for all hired people), so people just don't bother how many taxes they pay, and how much time spent to calculate all these things and to fill all papers.
• noqc 3y ago
  The author of the marathon paper explains the phenomenon he is observing, and then goes on to "reject that explanation" without attempting to do anything to control for it. >For example, the 2013 Chicago Marathon provided pace teams for 3:00, 3:05, 3:10, 3:15, 3:20, 3:25, 3:30, 3:35, 3:40, 3:45, 3:50, 3:55, 4:00, 4:10, 4:25, 4:30, 4:40, 4:55, 5:00, 5:10, 5:25, and 5:45.T he institution of pace teams then could provide an alternative explanation for the bunching we observe at round numbers. It would be easy to do, even. Restrict to marathons where the pace team spectrum is known to be of a specific type and see if the other spikes disappear. The author certainly has the data to do this, and isn't. That is suspicious.
  • citrin_ru 3y ago
    There is one more reason for discontinuity around 4:00 - many amateur runners make a goal to run in 4:00 or less (hard but achievable) and reduce training intensity once they finished in 3:5x - 4:00.
    • noqc 3y ago
      That doesn't explain a discontinuity, and moreover, the effect of the pace runners has yet to be controlled for, so there is no more explanation required.
• jancsika 3y ago
  > One reason people were looking for ways to lose money was that, in the U.S., there's a hard income cutoff for a health insurance subsidy at $48,560 for individuals (higher for larger households; $100,400 for a family of four). There are a number of factors that can cause the details to vary (age, location, household size, type of plan), but across all circumstances, it wouldn't have been uncommon for an individual going from one side of the cut-off to the other to have their health insurance cost increase by roughly $7200/yr. That means if an individual buying ACA insurance was going to earn $55k, they'd be better off reducing their income by $6440 and getting under the $48,560 subsidy ceiling than they are earning $55k. Except that in real life there is no /dev/null that you can immediately pipe in exactly $6440 to hit your target. You have to spend your time in order to achieve this reduction in AGI. And discontinuities being discontinuous means that the number of people who have the necessary training/experience to confidently achieve this in, say, three hours, is probably in the same ballpark as people who can successfully set up encrypted email in the same amount of time. For everyone else, it's going to take at least a week's worth of time to plan, double check, execute, triple check, etc. (And realistically double that, or more.) At 55K, you've already spent that savings in the value of the time you gave up to get the savings. People often make fun of free software developers for failing to properly value their own time. But at least that's not their domain of expertise. A financial hobbyist spending $2 of their time to save $1 is professional grade irony. Edit: clarification
  • trevithick 3y ago
    The example of buying options given in the article would take literally minutes for anyone with an existing brokerage account.
  • nerdponx 3y ago
    These aren't financial hobbyists. At $48,560, these are mostly people who don't have a lot of money relative to their living expenses, and are doing what they need to do in order to not feel totally broke. < $50k in a lot of places was already getting hard to raise a family on, even before Covid, all the moreso if you're paying full price for ACA exchange insurance, which was then and remains now disgustingly expensive.
• sanketsaurav 3y ago
  aside: if you're on Arc browser, I made a boost that adds some styling to Dan's website to make the reading experience just a little better: https://arc.net/boost/80CE9A49-4D0A-48C6-9C53-13BF02696009 https://arc.net/boost/80CE9A49-4D0A-48C6-9C53-13BF02696009
• mrandish 3y ago
  Coding hard cut-offs like this into legislation, regulation or policies seems crazy almost to the point of negligence, incompetence or malice. Especially when it's so obvious such cliffs will incentivize behavior certain to cause negative or perverse outcomes. It's even more incomprehensible when implementing graduated thresholds is so well understood. A related common failure mode is baking in fixed, absolute thresholds for dynamic domains sure to evolve instead of linking thresholds to dynamic metrics (such as inflation, cost of living, etc).
  • nerdponx 3y ago
    It's often said that the cruelty is the point.
    • thfuran 3y ago
      If it were, why would they offer welfare programs at all? Surely an "indolence tax" assessed on anyone with income below a certain threshold would be more cruel.
      • immibis 3y ago
        What do you think poor people would do if there were no welfare programs?
        • _carbyau_ 3y ago
          This is what I find perplexing. Welfare programs are not for the poor. They are so the poor doesn't "eat the rich". (For those playing at home this is a slogan tossed around with connotations of society wide rebellion - which would not be a comfortable outcome for rich people.)
      • AgentOrange1234 3y ago
        It's frankly amazing that we still have welfare, social security, etc., at all. The pro-cruelty folks have been diligently working to discredit them since FDR enacted them during the great depression.
• rhelz 3y ago
  If you are upset about somebody not wanting to take that $50k a year job because it would cost them a subsidy, just wait until you hear about trust funds and inheritance!! If you think losing a $20k subsidy is demotivating, imagine inheriting $25 million. So instead of knuckling down and working hard to contribute their fair share, they are incentivized to just loaf. No telling the costs to society from these freeloaders.
  • philomath_mn 3y ago
    - Trust fund babies are far more rare than people making ~$50k - Trust fund babies will not qualify for much government assistance It is a net good for the economy and the individual if a person who is capable of making ~$50k does so within the workforce, rather than avoid improving their own life in order to qualify for assistance. This is not a moralization of the use of government assistance, it is a criticism of the incentive structures within those assistance programs.
    • rhelz 3y ago
      > It is a net good for the economy [for individuals to improve their lives] I agree. If you've just inherited $25 million, it would still be better for you and for society for you to get a job--even a job paying $50k a year if that is all you could get. But...are you going to be incentivized to do so? If you care about somebody not wanting to make $50k because they'd lose a $10k subsidy, how much MORE should you care about a $25 million subsidy disincentivizing somebody to improve themselves and contribute to society as a productive citizen. > Trust fund babies are far more rare than people making ~$50k That just means that imposing enough inheritance tax to incentivize them to work wouldn't effect enough people to have a negative effect on the economy. And lets not forget, the person being taxed is dead. They will feel absolutely no ill effects from the tax. Its all upside. Not Trolling here. I advocate a 100% inheritance tax, the proceeds of which should be dedicated to education, nutrition, and housing for the next generation, to achieve the following goal: Equal ability should be given equal opportunity to succeed. And just giving free money to one kid and nothing to another is the absolute diametrical opposite of that.
• 2devnull 3y ago
  The problem is labels, and beyond that political parties. Politicians like labels because the parties depend on labels for branding. They want to use rhetoric to group people, like “poor” or “rich” and the second you do that you create the discontinuity. Avoiding benefit cliffs requires more than understanding the issue of discontinuities, it requires the reduction of identity politics which neither party is on board with. Parties themselves are labels. They cater to the human desire to simplify and form tribes around those labels.
• whimsicalism 3y ago
  > However, a tax system that encourages people to lose money, perhaps by funneling it to (on average) much wealthier options traders by buying put options, seems sub-optimal. In expectation, they're likely not really funneling that much money to options traders. Indeed - if the option pays out, they likely will not have to worry about medicare/healthcare for quite some time.
• inopinatus 3y ago
  I remember my deep disquiet at a tax return where my reportable income was exactly 2^n-1 for some integer n, naturally provoking obsessive checking and audit on my part.
• BWStearns 3y ago
  It's interesting how the marathon discrepancies mostly disappear at left and right of the curve (looking at 2:30 and 6:30). Presumably top runners are putting out 100% of sustainable effort the whole time so there's no reserve energy and the slowest are similarly doing all they can just to get the race done. The folks in the middle are the ones who are putting in something less than 100%.
• mrguyorama 3y ago
  For those of you that are fans of Jon Bois, he once noted in a video that the statistics for ball placement by an NFL ref is notably skewed towards 5 yard lines. Because, he thought, refs are human.
• bparsons 3y ago
  This is one of the many reasons that means tested, rather than universal programs end up producing perverse outcomes. People in countries with universal healthcare, daycare and education do not have to limit their participation or productivity in the real economy in order to access essential services.
• qazwsxedchac 3y ago
  Marginal rate discontinuities in the UK income tax system [0] are driving highly undesirable (from the taxman's point of view) behaviour. The increase in marginal tax rate from £100K p.a. upwards has already led to: - doctors going part-time to keep their income below £100K, in the middle of a shortage of doctors across the health system - employees turning down promotions because with the combined effects of income tax, student loan repayments and loss of childcare subsidy the effective marginal rate of income tax between £100K and £117K is > 100% (!) - single high earners (core voters of the present government) effectively subsidising families of middling earners (the opposition's core voters) because the discontinuities apply to single person's income, not combined household income The behaviour changes are simple first order effects. The second order effects on public service workforce availability and overall tax take were also highly predictable. [0] https://www.telegraph.co.uk/multimedia/archive/03270/tax_3270753a.PNG https://www.telegraph.co.uk/multimedia/archive/03270/tax_327...
  • heavenlyblue 3y ago
    But these tax rates are all under the current government, why would single high earners vote for it?
    • deleted 3y ago
      [deleted]
  • stephenbez 3y ago
    If I understand the linked chart, there are discontinuities in the marginal tax rate, not the effective tax rate. So in that case yeah at certain levels the amount you owe on each additional dollar goes up, but that would not mean that making 105k is worse than 100k unless the marginal tax rate is greater than 100%. This ignores stuff like losing childcare subsidies that is likely not included on the graph. In the us you hear stories of people decreasing their income to be in a lower tax bracket and often it is due to them not understanding that the tax brackets are for marginal tax rates.
    • qazwsxedchac 3y ago
• nickpsecurity 3y ago
  “Some other discontinuities are the TANF income limit, the Medicaid income limit, the CHIP income limit for free coverage, and the CHIP income limit for reduced-cost coverage.” I know more than one person who intentionally keep low, part-time hours for this. One had a good, work ethic when on the job. Just didn’t want to lose those benefits. Policy makers should definitely weight this into any decisions about reforms.
• vhcr 3y ago
  We have some discontinuities in our tax code in Argentina, if you are an independent worker, and earn up to 11,916,410 pesos ($11,682) per year, you pay 793,332 pesos ($777) in taxes, around 6.6%, but if you earn one more peso, you enter the general regime, and start paying >50% in taxes.
  • y04nn 3y ago
    A simple solution (probably used in many places) to this problem is to have brackets. Everybody is taxed 6.6% on its income until a certain threshold and the rest is taxed at 50%. You can add more brackets as needed. And so, there is no incentive to be just bellow a certain bracket threshold.
• vavooom 3y ago
  This article is so straightforward and well articulated to hammer in the main concept: statistics are funky!!
• YoshiRulz 3y ago
  Okay but can we talk about how beautiful that Polish language exam score histogram is?
• renewiltord 3y ago
  Is this true? You can't mark cap losses against income to reduce income more than a few thousand. You have to actively make less, not make bad investments.
  • mbrubeck 3y ago
    > You can't mark cap losses against income to reduce income more than a few thousand. You can if a significant part of your income is capital gains.
• bachmeier 3y ago
  During the pandemic, as was the case for many organizations, my employer implemented pay cuts. In the name of fairness, they did it by income so that those with the highest incomes would pay a larger percentage. That sounds good, but they did it with discontinuities. What upset me was couples with combined salaries far greater than mine but individually a little less so they were just below the cutoff. Their combined cut on considerably more income was less than mine. We were living on one income, and the cuts would have been tough to absorb if not for the stimulus checks.
• SmartHypercube 3y ago
  I don't think this is a problem about "discontinuity". It's about the monotonicity of the function from income before tax (and insurance, etc.) to income after tax. So I don't think "sharp threshold" is a problem, as long as the law is "if you are making more than this amount, the extra part should be taxed at a higher rate." From other comments I learn that some laws indeed do not work like this. Really?! That's awful.
• frozen4212 3y ago
  h
• dgemm 3y ago
  Thresholds are almost always a bad solution (in engineering or otherwise) - the only advantage I have found for them is that they are usually easier to understand than the alternative.
• cranky908canuck 3y ago
  Specific to the welfare/UBI/public benefits subthread of this (with a digression): I saw the phrase "middle class solution to lower class problem ['MCSLCP']" applied to stuff like this years ago; that characterisation is possibly not politically correct today. It was discussing various forms of 'credit fine print' --- the ad for "Buy this recliner today, no interest, no payments for three months!!!" ... followed by five lines of fine print at the bottom of the ad (likely double the verbiage of this posting) about need to pay promptly, the upfront fees, etc etc, and the (somewhat usurious) rates and fees payable if the process wasn't followed to the letter. What makes it 'MCSLCP' is that for a large percentage of the population that would look at this, if you have the time / savvy to assess the deal and make it work, you probably have better credit options available. [1] It's super easy to comply with the terms if you have a personal organization system ('tickler') that works. Maintaining that system is really tough if you're a single parent/double job trying to keep the ship afloat... and also to have the funds to keep the deal working on the day that the tickler is triggered. But the 'MCS' of the MCSLCP is, just buy it with the cash-back credit card, and pay the balance in full before the due date. Easy percentage, and you already do that as part of the monthly bill-payment chore. For the vendor, the deal is a moneymaker since the majority of the takers will not (be able to) comply with the letter of the terms, and the fees and rates become the profit. The public benefit aspect is that, the space to screw it up and lose the benefits is politically a feature, not a bug. The legislators can paint themselves as guardians of the public purse and the people who blew the cliff as thwarted welfare cheats. [1] if I could 'ping' patio11 on this... I think some recent posts from 'bits about money' are in the same area as this.
• cycomanic 3y ago
  I disagree with the proposed solutions, all way to complex. The thing to do is simply give the subsidy to everyone and make up for it with higher taxes. That is how you achieve more equable outcomes, give fixed subsidies to everyone and recover via proportional taxes. Instead we end up with a situation where we have arbitrary cutoffs, a large buerocracy just checking for eligibility and often even progressive subsidies (giving more to those with higher incomes)
• aubanel 3y ago
  I love the example with Russian elections! It's impressive that they allow themselves to be that low-effort in their fake results.
• zh3 3y ago
  There's also Poincare and the Bakery [0], which is quite possibly apocryphal but often told - esentially a departure from the normal disibution showing something odd going on. I vaguely recall reading that the technique was used in the second world war to catch black marketers; if the distribution of weights of rationed items had a discontinuity near the weight limit, it was evidence that the seller was keeping the heavier portions back for private sales. [0] https://houstonstatisticians.wordpress.com/2013/01/11/poincare-and-the-bakery/ https://houstonstatisticians.wordpress.com/2013/01/11/poinca...
• _xnmw 3y ago
  I suspect the inconvenience and weirdness of dealing with a hard cut-off is easier than the complexity of dealing with some kind of continuous scale. Laws need to be, first of all, easily comprehensible so that all parties can plan accordingly. It's easy enough to plan to keep your income under $X, but hard to figure out the optimum benefit/income sliding scale and plan accordingly. The only other simple and fair option I can think of would be to implement a "judge" to issue approval on a case-by-case basis instead of a hard number.
• Beldin 3y ago
  This happens in other countries as well. An option here is to donate to a charity. It is tax-deductible, carries no risk of accidentally making you more money, and typically does some good instead of lining the pockets of the wealthy. Do check if that would work for you before wasting money on useless put options.
• physicsguy 3y ago
  We have some of these in the UK tax system, some of which are being resolved (or at least improved) but many which aren't. Currently, if you have a child, you're entitled to a cash payment called child benefit. For a first child it's worth £26 per week and then any subsequent children you'd get £15.90 per week. However, you only get this if the highest earner's income is below £50,000. Between £50k and £60k, it's on a sliding scale, so at £55k you get 50%, £57.5k you get 25%, etc. Side effects of this are that if you have two earners both on £49999, you get the full amount, and one earner on £60000 you get nothing. It means there's a crazily high effective marginal rate on people. If you put money into your pension, it can bring you down below the threshold again, so many people (if they can afford to) will do this. From next month, they're changing the threshold to £60-80k over which it drops off, which is a big improvement, but the marginal tax rate effect is still there.