Do Farmers Lie on their Taxes?

I ran across this 2007 paper in the Economic Journal by Naomi Feldman and Joel Slemrod.  The authors used an interesting method to identify people who might have shortchanged the IRS.  In particular, they look at (unaudited) IRS tax returns and calculate the ratio between charitable giving and reported taxable income.  Their assumption is that that the "true" ratio should be relatively constant across households who receive their income in the form of wages/salary from an employer and those who earn their income from a small business or farming (that is, there is little reason to believe a salaried employee is more or less generous toward charities than a business owner; this is an assumption they test and discuss in detail in the paer).  Of course, the crucial difference here is that salaried employees have their incomes directly reported by their employer to the IRS, which isn't always true of people who earn income in other ways.  

From the paper:  

“We find that the implied amount of noncompliance on non-wage-and-salary income is substantial and that it varies among these sources of income as well as between positive and negative values of each type of income. On average, reported positive self-employment, nonfarm small-business and farm income must be multiplied by a factor of 1.54, 4.54 and 3.87, respectively, in order to obtain true income.”

elsewhere they write:

“Farm income is estimated to have a compliance rate of 25.9% and Schedule E income has an estimated coefficient of 4.54, which corresponds to the lowest compliance rate in this study – 22.0%.”

Nutrition and Genetics

“But this new study, funded by the National Institutes of Health and the U.S. Department of Agriculture, shows that different people may need radically different ratios of the substances in their diet depending on their genes, and it supports the growing evidence against a one-size-fits-all approach to nutrition and for highly personalized advice.”

That's from this article in the Washington Post discussing some recent research that has found a genetic variation that is much more prevalent among vegetarians.  The author writes:

“Cornell University researchers have found a fascinating genetic variation that they said appears to have evolved in populations that favored vegetarian diets over hundreds of generations. The geography of the vegetarian allele is vast and includes people from India, Africa and parts of East Asia who are known to have green diets even today.

Researcher Kaixiong Ye said that the vegetarian adaptation allows people to “efficiently process omega-3 and omega-6 fatty acids and convert them into compounds essential for early brain development.””

Optimal fat tax

In the Washington Post article Catherine Rampell raises an important point with regard to the emerging debate over whether to tax soda.  

“Instead of arbitrarily singling out one category of bad foodstuff for taxation — and the categories of bad foodstuffs will always be somewhat arbitrary — a more effective route to reducing consumption of excessive sugar or calories might be a universal, graduated sugar or calorie tax.

But even that still doesn’t quite seem fair or, for that matter, efficient. After all, a calorie tax would also hit people who consume more calories because they are very active, such as marathoners. Besides being regressive, a tax on calories or sugar would also effectively, if unintentionally, make it more expensive for trim people to exercise.

In other words, a lot of inputs go into determining whether a person is obese. Taxing some of those inputs distorts the relative prices of those inputs, but it doesn’t necessarily change the desired output: obesity rates.

Which raises the question: Why not just target the output, rather than some random subset of inputs? We could tax obesity if we wanted to. Or if we want to seem less punitive, we could award tax credits to obese people who lose weight. A tax directly pegged to reduced obesity would certainly be a much more efficient way to achieve the stated policy goal of reducing obesity.”

Yet, people don't seem to like the idea of a fat-person tax.  Why not?

“Maybe it’s because they’re regressive (but so are soda taxes). Maybe it’s because it sounds like we’re shaming fat people (but arguably so does any policy aimed at reducing obesity). Maybe it just feels unfair to tax people based in any way on their genes, which, like diet and exercise, can also be a determinant of weight.

But if we assume it’s impossible for obese people to lose weight by any combination of inputs they do have control over, it’s hard to simultaneously argue that making one of those inputs more expensive could lead to some nationwide weight-loss miracle. Pop goes the pop-tax rationale.”

Synthetic biology

This is the third installment in my effort to share some photos associated Unnaturally Delicious (by the way, I noticed today that the book was reviewed by Nadia Berenstein for Popular Science).

In the fourth chapter, I talk about synthetic biology.

“If yeast can convert sugar to alcohol, what else can it do? As it turns out, yeast is more than just an alcohol factory. Yeasts can eat up sugars to make flavors, fats, and fuels. And more. Yeast can make whatever its instructions tell it to make. By instructions, I mean the yeast’s genetic code, or DNA.”

When people think about biotechnology and "GMOs" they tend to think about big chemical and pharmaceutical companies, but as I reveal, even teenagers and young adults are getting in on the action.  

“Some of the most exciting developments in food bioengineering aren’t even among the Silicon Valley–like start-ups. They’re being conceived by kids who haven’t even finished high school or college. For more than a decade students around the globe have been assembling for an annual competition once hosted by MIT but now put on by the nonprofit International Genetically Engineered Machine (iGEM) Foundation. iGEM has become the premier competition in synthetic biology for graduate, undergraduate, and high school students”

I talked to a team from the City University of Hong Kong who made a pro-biotic to fight obesity (the modified bacteria "eats" undesirable fat and turns it into more desirable omega 3 fatty acid).  I also talked to the prize winning team from UC Davis who created a bacteria to test for rancid olive oil.  

“According to Ritz, as much as 70 percent of the olive oil imported into the United States is rancid by the time it reaches the consumer. Rancid oil has gone stale. It isn’t necessarily harmful or even bad tasting to the average consumer. In fact, the UC Davis team conducted some blind tastes with consumers and found that many people actually preferred the rancid oil to fresh oil—perhaps because it is what they have become so accustomed to eating. Ritz said that fresh olive oil creates a tingling feeling in the throat—a phenomenon unfamiliar to many American consumers. Being habituated to blander, stale oil has its costs. Rancid oil does not have the same healthy compounds—like antioxidants—that are associated with fresh olive oil.”

Here are some photos of that taste test and the entire UC Davis team.  

Econ Talk

I've long been a fan of the podcast EconTalk, so it was an honor to join the long list of illustrious guests that have been on the program.  You can hear my conversation with Russ Roberts, along with the transcript and other links here.