Suspicious Discontinuities (2020)
danluu.com122 points by tosh 4 hours ago
122 points by tosh 4 hours ago
I cracked up when I got to the marathon example. When I ran a half marathon I realized about 80% of the way through that I was on track to finish under 2:30:00 and pushed myself to make it happen. I should have guessed that sort of behavior would show up in the statistics!
After this year's Paris marathon, I ran the same per-minute graphs, and they match perfectly the "overall study" graphs with more than 9 million finishes in the article. I also added graphing by age category and gender. I don't want to deduce too much but I think it showed that young men are the most "competitive" (what I mean by that is targeting a specific time) since there are the clearest "goal time" peaks in the graphs.
> A simple fix for the problems mentioned above would be to have slow phase-outs instead of sharp thresholds.
How about the even simpler fix of not having phase-outs? This generally works: the cost of a subsidy generally does not increase as the recipient pays more taxes, so the higher total tax paid by a higher-income person will easily pay for the cost of a subsidy. And giving higher-income/wealthier people the same subsidies as poor people may help them appreciate the ways in which the subsidies are helpful and the ways in which they suck, which can help the whole system improve.
The UK tax system also has a bunch of unfortunate cliffs, and tapers that create >60% marginal tax rates and worse. There's a calculator here that illustrates it well https://tax-cliffs.britishprogress.org/calculator
The childcare cliff edge is probably the worst, but the personal allowance taper isn't ideal either as it's compressed over a relatively short income range
And of course all the thresholds remain frozen, creating plenty of fiscal drag on top.
The Economist has this crazy graph of UK VAT thresholds and how they are causing companies to stay small, to keep their turnover under the threshold which avoids a lot of paperwork. It's the most infuriating thing, we are literally throttling our companies, the engines of growth, because of some accounting stupidity.
Graph: https://www.economist.com/cdn-cgi/image/width=600,quality=10... from this article: https://www.economist.com/britain/2024/04/22/how-to-fix-brit...
Same in slovenia for eg. kindergarten prices, 1eur over the line, 90eur more per month in fees.
I also appreciate discontinuities and while I won't comment on the data in the paper itself without cross-referencing, I will say that a couple of these examples hold true for me from applied observation over the years. When I was old enough to start caring about insurance for health and property, or became a parent and had to begin forecasting costs for college and what loans really represented, I began looking at observable data much differently. Working in the software industry, you begin to see the complicated systems at work at the C-Level, and the seemingly odd relationships with unrelated organizations start to become clear. Being an educated voter, a discerning consumer of products, and turning a critical eye on world news all require the ability to see processes, their patterns and the discontinuities within them. While there may not always be a useful explanation behind all of them, seeing them in the first place is essential to navigating so-called reality successfully.
Would test score problem be solved if teachers graded individual questions, not entire test?
The reddit explanation in the post addresses your question I believe. If someone is at a 28 or 29 a few "charity" points can be found in subjectively-graded tests.
I think that really just reflects the fact that on subjectively graded tests the score really doesn’t have that many significant figures of accuracy. That a regrading can find 3 to 5 points by being more generous - or presumably take 3 to 5 off by being harsher - says that really you could save a lot of effort by treating the final grades as bucketing into 10 point bands and treating 25-35 as the actual cutoff.
yeah, slow phase-outs seems ideal- I have often wondered about that with gross and and taxable income.
[ EDIT: Since the undated article is actually from Feb 2020, predating the expansion of federal health insurance subsidies, I withdraw everything I said below. ]
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The opening story is fabricated and/or bullshit.
Last year (2025) there was no limit on income for health insurance subsidies. That ended for this year, but last year there would have been no reason for anyone who knew what they were doing to try to lose money to drop their income (especially in the cited range of $48-55k/year).
That is the case this year, in most states (thankfully not where I live), but that's not what TFA is talking about.
Suspicious? It certainly makes me skeptical that the author has got the details of the other examples correct.
The post is from February 2020.
I can't see a date on the post (on mobile) but the archives link has month and year.
This might vary state-by-state, CA MediCal for instance did limit the subsidies based on income last year. I don't think it was an all-or-nothing cutoff, but I do think there were points around the 50k mark where the delta between your subsidy and the one for the lower bracket was higher than the loss you'd take by a few thousand dollars.
The subsidies were from the federal government, managed as part of your federal income tax return. They had nothing to do with additional state subsidies.
The basic story was that until the end of 2025, nobody in the USA had any reason to pay more than (roughly) 8.3% of their AGI for health insurance.
I never understood why taxes or similiar absolute points aren't gradients instead.
It's especially hard when you have a combination of many government programs at all levels (federal, state, local, many different kinds of taxes, many different kinds of welfare). Even if every individual program uses a gradient, that doesn't guarantee that summing all the programs together leads to a >100% effective marginal tax rate.
Why do we have legislated cliffs instead of gradients? Because approximately nobody understands lerp. And linear interpolation is the simplest (nontrivial) gradient scheme. Consequently, we get cliffs or, if we're lucky, lookup tables that approximate gradients with stair-step successions of small cliffs.
I think because the gradient is simply too confusing for laypeople to understand.
Even for a simple system like US social security that has a gradient. For every $2 you make over the limit, you lose $1 in benefits. I've heard countless times misconceptions of people thinking they'd be losing money (as in literally having less money net) by working.
A single benefit usually has an appropriate incentive structure, but a lot of people get multiple benefits -- even from different levels of government (local, state, federal) -- and adding up phase-outs in different systems can result in marginal phase-outs rates above 100%. It's hard to avoid that entirely given that we want to have a lot of transfers to the bottom of the income distribution while phasing those out by roughly the median. It would be easier to avoid phase-outs above (say) 80% of marginal income is we only had federal and state aid as predictable money transfers, but for various reasons we provide a lot of transfers in-kind or with limited authorized uses. Those limitations aren't necessarily wrong, but they do mean that transfers aren't fungible, so there's an incentive to provide transfers for other "good" uses, and that diversity is what makes it hard to bound the marginal phase-outs for everyone.
This does happen in Finnish tax system. Your tax rate (percent with one decimal) is calculated based on your annual gross income. Rates are supposed to be calculated smoothly, and they are certainly calculated for each individual separately.
In reality they are step functions. It is surprisingly common to have people refuse promotions because if would put them above an income tax threshold, bump up their rate, and end up with less money after taxes in the end.
The UK tax system is far from fair but at least it has clear brackets: income above threshold X is taxed at rate Y.
Are you talking about this tax system? <https://nordisketax.net/pages/en-GB/taxation/?country=finlan...>
Because that is a marginal system, (and unless they've messed up the calculations, which they haven't in this case) you should never end up with less from earning more. Can you give an example of two income amounts where the lower income ends up with more money after-taxes than the higher income?
Or is it the additional municipal, church, or health levies mentioned on that page which have the discontinuities?
I agree, but almost everyone today can use a computer or smartphone. They can type in their income, and the computer can calculate it, providing them an average number of what their percentage of actual taxable income was- I think Turbo Tax and other software might do something like this.
They don't have to understand how it works to do their own taxes.
You might just be taking people too literally.
I've heard the same thing -- if they take a job they will lose money. What they really mean is that if they take a job (trade time for money), they will lose some of the pension they have already earned. This is a real economic loss (even if they might have a few more bucks at the end of the week) to say nothing of their lost time.
It's very well established internationally that income taxes are defined by gradients. I have no idea why politicians want to reinvent them so often in other kinds of taxes.
Because that's harder to write the laws for
Not if you assume people could understand basic math, such ... oh, any continuously valued polynomial ....
I hear this explanation a lot but I think it's a convenient fiction. Lawmakers, at least in the US, don't seem to write their own legal texts very often. Sometimes they don't even read them [1]! Congress has no problem producing monstrously complicated laws, in any case.
I think it's likely that politicians and their funding sources have found ways to profit off of these discontinuities. The infamous Medicare "donut hole" [2] was arguably a "benefit discontinuity" of the sort mentioned by the author and pharmaceutical companies profited off of it (more than a hypothetical Medicare structure without a donut hole, not relative to the spending cap that replaced it—which profits them even more).
[1] https://www.pennstatelawreview.org/penn-statim/dont-be-silly... (2013) ...which argues that this is a good thing!
[2] https://www.medicalnewstoday.com/articles/what-is-the-medica...
