Why people tip in US restaurants

Here, I’ll discuss a tax incentive by the federal government to encourage bosses to have employees paid via tips instead of a typical wage.

The waitress is the only person who knows how much she got tipped. [I flipped a coin to write this example, and she came up female]. And, unless she’s in the narrow band where EIC (earned income credit) kicks in, she pays out a tax on those tips and so wants to understate her tip income.

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The time I went to see a House Ways and Means Committee tax hearing

At this session, the Ways and Means Committee was hosting a show and tell, as roughly forty Congresspersons took three minutes each to talk about their favorite proposal for tax reform. Here, I’ll talk about one common pattern for single-industry reforms.

I went to the hearing partly for serious purposes that are off-topic here, but also as a bit of tourism. Most of the work of Congress happens in committees that conduct business in the office buildings that flank the Congress building itself. You’re free to attend. Security-wise, there’s a metal detector at the building entrance, but it’s much easier to enter the House Ways and Means Committee hearing room than, say, your flight to Chicago.

The House Ways and Means Committee hearing room

The House Ways and Means Committee hearing room.

 

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The time I saw Ezra Klein talk about presenting research

This post and the next are leading up to a discussion of IRS Form 3800. Why should you care about Form 3800, a form you likely have no personal dealings with? Because a form nobody cares about is a great place to hide a lot of things.

I’ll start the story by telling you about the time I saw Ezra Klein, the head of an increasingly popular news outlet. Somebody in one of the World Bank’s research groups invited him to present an explainer to the researchers about how they can get their news out to the public. Continue reading

The space between the signal and the action

In the game-theoretic world, the gunner never shoots: the other side looks at the options down the game tree, realizes that one action will lead to his or her getting shot, and doesn’t take that action. In Game Theory textbooks, cases never go to court: both sides calculate the risk-adjusted expected payoff from trial, and if it is positive for one hyperrational side, then it is negative for the other hyperrational side, and a settlement can be calculated based on that. In both cases, knowledge that an event could occur largely has the same effect as the event itself. Continue reading