As someone who studied Economics in college, I often am interested in how people behave in groups. Carrots and sticks, incentives and disincentives, and the overall world of “Freakonomics.”
I see it regularly in my job. Sectors become “hot” and attract many investors and entrepreneurs. Just as suddenly, they “cool.” People often buy high and sell low, as a result.
Through another lens, founders sometimes try to minimize as much dilution as they can. Sometimes that is for the good of the company (which the legal code defines as founders, employees and investors). In a few cases, you can argue that it is not. VCs also can face the same conundrum: Their incentives, at times, can conflict with what is good for the company as a whole.
The GOP tax bills turgidly coursing through Congress comprise another case study on behavior. Recently, some friends took me and Mrs. T. out to dinner. They remarked that they, this month, were paying next year’s property tax bill, given that deductions for local taxes were going to be limited.
Eric reminded me to pay my Q4 state tax bill, due next year in January, before-year end. In other words, get a 100% deduction for state taxes while you still can.
I also thought that it might make sense to accelerate some of our charitable giving by donating some mutual fund shares. The stock market seems incredibly high.
So, I did all of the above. It was the economically-rational thing to do.
The GOP legislation is significant. It will put pressure on local municipalities’ taxing capacity, and, if supply-side economics is again de-bunked, will greatly increase income inequality. Moreover, if deficits increase, this will encourage the GOP to cut spending on infrastructure and social programs. I fear the de-stabilization that will occur.
So, while many citizens decide to optimize for the incipient tax legislation, I wonder how all this will end up? As I’ve blogged before, Mrs. T. and I have an explicit charitable giving program (more here).
We are doing what we can.