CLARIFICATION OF “REGRESSIVE” AS APPLIED TO TAXATION

An economist posted the following on the Bull City Rising blog. It is an excellent clarification of a term that is used loosely by lay folks:

I'm not taking a side on whether the prepared meal tax is a good idea or not. But as an economist who studies poverty and inequality, I was surprised to see the tax described as regressive.

A regressive tax is one in which lower-income people pay a higher proportion of their income towards the tax than do higher income people. According to the Consumer Expenditures Survey, households in the bottom quintile of the income distribution (who average $9,974 in income) spend 5.2% of their income on "food away from home" (the CEX category that approximates "prepared meals"). The next quintile (average income: $26k) spends 5.5%. The third quintile (average income: $45k) spends 5.8%, and the fourth quintile (average income $71k) spends 5.9%. For the highest-income 20% (average income $151k), the percent drops back down to 5.4%, but is still above the percent of income spent by the poorest group. You can see the numbers here: http://www.bls.gov/cex/2006/share/quintile.pdf

So by the traditional definition, this is a--slightly--progressive tax. Of course, exempting the first $8 of the meal, as someone suggested, would certainly make it more progressive.

The other question I was curious about is, how progressive is this tax compared to the other main means of revenue-raising in Durham, the property tax? A look at the same table, on the line for "housing expenditures," reveals the following [note that economists believe that renters also pay property tax, because landlords raise rents proportionally when property taxes rise]:

Bottom quintile: 39.8%; second quintile: 36.3%; third quintile: 34.3%; fourth quintile: 33.1%; top quintile: 31.9%.

Since the share of income spent on housing falls dramatically with income, while the share spent on food away from home rises slightly, a prepared food tax is significantly more progressive than a property tax. (It's also much more progressive than an overall sales tax, which is highly regressive.)

None of this is to say that the proposed tax in this case is a good or bad idea--but it's not regressive, either absolutely or in comparison to other means at Durham's disposal for revenue-raising.

Post to Bull City Rising Blog

NEGATIVE WORD OF MOUTH

A journalist down the road in Raleigh jumped all over me once for using the term “virulent” to describe a small part of the population there and in other surrounding communities who drive negative word of mouth (NWOM) about Durham.

vir·u·lent (vîr y -l nt, vîr -)

2.Bitterly hostile or antagonistic; hateful: virulent criticism. See Synonyms at poisonous.

3. Intensely irritating, obnoxious, or harsh.

But I’m hardly the first person to use the term in regard to NWOM or for that matter, word of mouth in general.

For years we’ve been tracking the origins of an underlying current of negativity about Durham reported by both visitors and newcomers.

• First, surveys were used to rule out Durham residents as the source or genesis of the negativity.

• We’ve also confirmed that while reports of the negativity are widespread, it is actually fueled by a relatively small, 10-12%, of the adult population.

• Early on our collaborator, Catevo Group, ruled out the news media as the source, explaining that “while journalists are exposed to the same negativity in their every-day lives, and it may seep into content through tone or headlines, members of the media are more often victimized or contaminated than they are the source.
  
  
• We also learned early on that no amount of advertising can “out-gun” the power of negative word of mouth. It takes a far more intricate and sophisticated approach of playing up positives while empowering people who are positive with information to confront water-cooler fables. This presents what blogger Gordon Hotchkiss calls a moral hazard and that is the biggest inhibition to negative word of mouth…risk of looking stupid.
  

• NWOM artists want to be seen as “in the know” and they appeal as Hotchkiss blogged late last year in Out of My Gord, to “the darker side of nature of human nature 0f building oneself up at the expense of others.”
  
  
• We’ve isolated the population who are “carriers” and volunteer negativity about Durham around the “water cooler” and to visitors and newcomers. Research reveals both the carriers and the sources are largely located in nearby communities and the origin seems internal because so many people commute from those communities to Durham to work.
  
  
• Finally, we’ve narrowed the carriers down to slightly more than 1 to 1.5 out of every 10 adults. They are the ones you read gratuitously trashing Durham online with comments at the end of news stories or in blogs and in chat rooms.
  
  Amazing how much economic damage so few people can wreak.

DOUBLE STANDARD CAN SUBTLY UNDERMINE A COMMUNITY'S IMAGE AND IDENTITY

Coverage of this story involving Durham by two news outlets based in nearby Raleigh, NC provides a perfect example of what I mean by imbalance.

Both stories cover the same topic and both are technically accurate. Both written by good reporters. But one reveals the Durham MSA has surpassed the Raleigh-Cary MSA and the other skits that observation by focusing attention only Raleigh-Cary’s percentage of growth. percentage.

http://localtechwire.com/business/local_tech_wire/news/story/3345138/

http://www.newsobserver.com/business/story/1169137.html

Of course you may be wondering if perhaps the one outlet tended to always cover stories about rankings that way. But if you check out this story from the same paper a week earlier you’ll see that’s not the case. http://www.newsobserver.com/news/wake/raleigh/story/1156398.html

Not only is the Raleigh ranking heralded in both headline and stories, this reporter took some things I was saying about Durham’s rankings (such as the statement I made about feelings of superiority leading to complacency) and used them out of context as if I somehow was bitter that Raleigh had received recognition.

The reporter also failed to correct my revelation to him that the early ‘90’s ranking he attributes to Raleigh was really one given to 6 counties and more than a dozen cities and towns including Durham. Maybe he missed that point or maybe an editor thought it muddied the story.

My only beef is that had the story been troubling, it would have emphasized Durham as the location while skirting or generalizing the location if Raleigh was the location such as the troubling event such as happened recently with coverage of a huge gang riot at a mall there. Just compare that to coverage of events at malls in Durham where attribution is not only specific to Durham but repeated.

We’ve consistently been told by the Raleigh paper, repeated by the Raleigh AP office that by policy they seldom acknowledge the location of very positive stories emanating from SE Durham, the location of Research Triangle Park. They claim these are “regional stories.” They may be regional, state, national or international in interest, but the fact is they occur in Durham.

Can you can imagine the outcry if Durham began referring to the “State Capital" separate from Raleigh just because it has “regional or state” significance?

All any community can ask is that attribution be consistent and accurate and the standards applied equally from community to community, regardless of whether the content of a story is positive or troubling.

WHEN COMMUNITY BRANDS FAIL

There are two sure-fire signals a new community brand signature isn’t going to work. And they both involve residents or local stakeholders more than external audiences.

One is when the universal “peanut gallery” reaction (e.g., my baby sister can draw one better than that) fuels on itself rather than subsides. The other is when no one says anything at all, e.g., it just doesn’t resonate…it isn’t memorable.

With all of the scientific research tools available, it still comes down to that one word…resonate. If after deployment, it doesn’t resonate with stakeholders who live and breathe a community and deliver on the brand day in and day out, you’re in big trouble but have lots of company.

It is natural that brand signatures have to grow on you. It’s change, and folks typically don’t jump up and down in excitement about change, except in the current election. But if in a short time a brand signature doesn’t start to grow on people, it’s DOA.

But a real sign things are going in the right direction is 1) when organizations and individuals in your community want to link to it or use it and 2) when community leaders and news editors begin to cite it.

Most people make the mistake of believing a brand is the art work. Actually a signature is just a highly distilled way to remind people of the brand or bring it to their attention.

Saying the signature is the same as a brand is like saying your new hair cut defines your personality. Nope, at least not for long.

Durham gets a lot of credit for 1) attempting not only to distill a brand but an infinitely more complex overarching brand, one that will give all messengers a common voice and 2) introducing a lot of science into the process at least into destination community brands.

But we’re also very, very fortunate that less than two years since deployment that community leaders are regularly using it in conversation and speeches, more than 300 businesses, organizations and individuals are showcasing it, surveys confirm it already has recognition and acceptance by 80% of residents and finally, it made its way onto the editorial pages, the toughest group of all.

ODD COUPLE – SUPPLY AND DEMAND

Supply and demand has never been as simple as it was in those micro/macro economics classes in college. It is true that for the most part supply follows demand.

But there are instances where small shifts in demand follow changes in supply. I don’t mean the inscrutable world of oil prices right now where the principles of supply and demand and price seem disconnected.

I’m also not referring to the overly simplistic “build it and they will come” crowd responsible for so much overbuilding and churn.

I’m talking more about what I learned years ago when airlines were regulated. People in my position worked with airlines and community leaders to secure new routes between city pairs from the Federal Government. I learned something then from an airline executive that I assume is true.

When a new carrier is added to a city pair, even though the existing carrier may be flying that route at far less than capacity, there will be a small increase in the number of people flying the route, regardless of fare changes.

Still, it’s a little puzzling that additional people would jump on a plane at the same fare, just because more seats were available. Some of it brand related, e.g. airline preferences. Some related to more exposure to the fact the route existed at all which includes destination marketing, etc.

Now friend and fellow blogger Bill Geist reports on a PKF analysis that predicts that if the 10% announced reduction in airline seats becomes a reality, it will also cause a 3.9% decrease in hotel occupancies. I haven’t read the report but I can imagine it is due to more sell outs, the hassles that come with a full flight, higher fares as seats because scarce and a shift of leisure travelers in particular to other forms of transportation.

As Bill notes, we’re in for a bumpy ride when it will seem as it does with the price of oil, that no one is piloting the plane.