Wednesday, November 6, 2013

When it Rains, it Pours Surprise

Sometimes it rains. Sometimes it rains in Austin, TX. Sometimes it rains in the Atacama Desert, although in that last sentence "sometimes" is a word meaning "really almost never."

Me in the rain. Approximately.
People have always had their little methods to determine when it's going to rain: checking the weather reports, feeling the ol' rheumatoid arthritis, the sky that's a funny color, and looking at whether my hair has expanded to encompass two zip codes. 

This fall has been rainy in Austin, but don't tell anyone, because they're too busy complaining about the DEADLY DROUGHT. A few weeks ago, one day was especially noteworthy. All of the signs pointed to rain. The Weather Channel app said it would rain. The nearly-100%-humidity said that it was very moist. My hair said we should start building an ark. And yet I did not take an umbrella

Why did I neglect to grab such a handy apparatus? Well, probably because by the time I'm heading out the door on any given morning, I've generally eaten into any buffer time I gave myself, and it's imperative that I eventually get around to actually crossing the threshold and leaving my apartment. We call this the "Lot's Wife Directive for Getting Ready: DON'T LOOK BACK." So even though I walked out the door and my hair immediately started heading for the hills (the hills are everywhere and so was my hair), I thought "nah, I won't need an umbrella!" 

This, children, is what we call "a foolish decision." Of COURSE I needed an umbrella. Just the week
Prior Adventure: Wading in
the Beltway
prior, I had been on my way back from an interview in D.C. and had taken public transportation instead of a cab because I had to prove it to myself that my urban skills had not completely dissipated after a few years of lying fallow. That had ended with my drying off some very wet interview clothes with approximately one forest's worth of paper towels. You'd think the lesson "getting caught in the rain is a big bummer," would be into my head by now. You'd be wrong. 

So anyway, I set off and made it to school without a single drop hitting me. Hooray! But when it was time to go home later, the weather was very different. Downpour different. You're-not-leaving-here-dry-if-we-have-anything-to-do-with-it different ("we" being the personified raindrop army). So I waited as long as I could, then put my things in my backpack, reminded myself I was not the first human to get caught in a rainstorm, and blazed on home. 

There is a reason no dive bar has ever done a "wet pencil skirt contest." It's just not a good look on anyone. 

Theoretically, I should always carry an umbrella—but my backpack isn't that big. Theoretically, I
should always have an umbrella in my locker—but that's only good one way. Theoretically, I should at least carry an umbrella when all the warning signs point to needing an umbrella. But I didn't. 

As we so often do, we can be warned repeatedly that something (walking without an umbrella, investing in speculative markets, eating cauliflower) is a bad idea, and yet we continue to try it, convinced that maybe this time we'll get lucky. Free tip: luck is highly unlikely. 

We rarely take precaution, however, because we're opportunistic and running late and caution is expensive. So instead of
2008's Face of the Year: Shock. 
planning for the worst (business planning, investments, etc.), we're always surprised to hear that a bubble popped or geopolitical rumblings changed the price of oil, or any number of things.

The world would be exhausting if you had to plan for 100 contingencies every time you made a decision—and few of us are creative enough to anticipate all of the possible disasters waiting to greet us. Fair enough. The point is not that caution is always required; but rather that surprise at the downpour (particularly if all signs point to imminent doom) is rarely justified.

I got caught in a downpour in:
Grayish pencil skirt, semi-sheer cobalt tie-neck blouse, magenta blazer with three-quarter-length sleeves, blue glass earrings, gold and rhinestone bangles, and floral-print peep-toe stilettos.

Tuesday, August 20, 2013

Taxes Aren't Bigger in Texas

Nothing says "Amurhica"
like Texas flag overalls.
Every August, Texans take a break from their normal routine of eating great BBQ, shooting excellent firearms, and wearing the state flag in every conceivable manner, and participate in that great American activity: shopping.  

"Big deal," I can hear you thinking. "Everyone shops, right?" Well yes, Texans have sartorial needs too. But each August, in addition to its no-income-taxes-ever policy, Texas ALSO suspends sales tax on certain back-to-school purchases, including clothing under $100, for an entire weekend. Happily, Texas avoided the intuitive but burdensome slogan "Taxes is just another way to spell Texas," and instead has famously low tax rates. 

 A simple Google search reveals that tax-free weekend has been happening since 1999, and CBS reported that it results in
Texas: Cutting taxes since before
approximately $8 saved by consumers for every $100 spent, and nearly $79 million in state and local taxes that will not be collected Friday through Sunday." 

This is a little tricky to estimate, though, because the tax break is designed to boost sales as parents do back-to-school shopping. It's a high-revenue weekend, but the rebate drives additional sales. Thus, it's hard to know by how much bargain-driven shoppers are increasing their spending, and thus where the number would be without the shopping boost. Still, let's take the numbers the nice journalists provided for us, and dig in. 

If consumers are saving $8 for every $100 spent, that's eight cents on the dollar. Hardly going to make or break the budget one way or the other, but resulting in an alleged loss of $79 million. On its face, this sounds crazier than a Nicki Minaj hairstyle. But I think it's actually pretty brilliant. 

Gemstones. Also multifaceted. 
Tax policy is a multifaceted debate, but this provides a nice opportunity to do some isolated analysis. First, we're only dealing with sales tax for a single weekend. Yes, $79 million is a gigantic number. But it's not like we completely suspended taxes forever (property tax, the main revenue driver in a no-income-tax state, was not suspended for a back-to-school special). Additionally, many businesses are not open on the weekends, not all businesses charge a sales tax, and only certain items are eligible for the tax-free status. The government will not shut down. 

Second, since this is a long-standing tradition (awkward moment where you realize that 1999 was actually a long time ago), people expect it and can plan their shopping accordingly. If consumers are planning to drop a hefty chunk of change already, they're usually more willing to purchase additional items, thus boosting them into higher amounts saved. Suppose a family would normally buy $185 of back-to-school items over three weeks of piecemeal shopping—with $14.80 in taxes, the total is $198.80. Suppose that same family, incentivized to buy a little more, now spends $200 on back-to-school items in a single weekend. The
The House of [Cheap] Shoes. 
end price is about the same, but you can think of it as either getting $15 in "stuff," or keeping $16 that you otherwise would have had to spend. Either way, that's a great-looking pair of sale shoes (yes, I really have bought shoes for under $15, and yes, they look great). 

Third, stores will run tax-free weekend specials to stretch dollars even further. This allows them to concentrate sales on a single weekend and actually charge full-price at other times, which helps reverse the trend to constantly cut prices at the expense of profit margins. Retail isn't necessarily representative of all business, but it's the business that consumers tend to think of most immediately. Stores can thus drive sales, which ultimately allows them to stay in business, employ people, and provide stylish clothing for the masses. 

Fourth, tax-free weekend creates a perverse incentive to shop, because it creates crowds. There really are some people who would rather not shop on tax-free weekend, because the crowds aren't worth it for them. As a crazy bargain-hunter, this is inconceivable to me. "I WILL BATTLE THE CROWDS! I
"The Boston Tea Party." Or, "The
breaking point of tax elasticity."
WILL SAVE SMALL AMOUNTS OF MONEY! I WILL BUY AN EXTRA PAIR OF SHOES!" tends to be my mantra. But, if you have people who purposely avoid tax-free weekend, then neither stores nor the government are putting all of their revenue-driving eggs in a single basket. This illustrates the price elasticity of sales tax, or what people are willing to trade to not pay tax. 

Fifth, tax-free weekend is a great political move. Especially now that it's established, people expect it, which means they anticipate it with joy and would cry foul were it abolished. That helps promulgate an overall attitude of lower taxation, because it creates a more direct correlation between public approval and tax rates. Otherwise, the problem of decentralized costs and aggregated benefits arises: if the tax rate goes up by 1%, it's a small harm to everyone, but potentially a large revenue raise. After a few moves like this, though, people have a high tax rate and are truly struggling, but the gradual
He loves gradual change. And flies.
change has prevented them from caring enough to hold politicians accountable. Politicians thus enjoy the continued benefit of cutting taxes without having to go through the political process of cutting them anew. 

Most importantly, for one glorious weekend, Texas is even more of a bastion of liberty than usual. Instead of a nanny state that insists that it needs additional tax dollars to provide back-to-school supplies for everyone's children, we have a weekend in which families are encouraged to take care of their own children, and given tax incentives for doing so. At the end of the day, a government that lets people decide how to spend their own money is a government that believes in liberty. 

Liberty: Drawing your own lines
on your own piggy bank. 
I ended tax-free weekend in:
Neon green pencil skirt, lime and yellow ikat blouse, silver hoop earrings, neon green zipper cuff bracelet, and gray ankle-strap platform d'orsays.