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Numerous Groups Back Verizon In Appeal of RIAA DMCA Subpoena
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Numerous Groups Back Verizon In Appeal of RIAA DMCA Subpoena

BY Dugie Standeford

The U.S. Appeals Court, D.C. should either strike down Sec. 512(h) of the Digital Millennium Copyright Act (DMCA) as unconstitutional or read it to permit subpoenas forcing disclosure of the identity of alleged Internet infringers only in the course of a pending copyright case, 45 business and consumer groups said May 16. In an amicus brief filed in RIAA v. Verizon Internet Services, the groups -- which included ISPs, privacy advocates and consumer organizations - - said the key issue in the bitterly contested litigation between RIAA and Verizon was "whether fundamental First Amendment anonymity and privacy rights can be trampled with an unreviewed subpoena that is issued based on hastily generated paperwork and rests merely on a 'good-faith' allegation of copyright infringement." Although Verizon at first attacked Sec. 512(h) on other grounds, most recently it has insisted that the statute is unconstitutional on 2 grounds: (1) It authorizes federal courts to issue process in the absence of a case or controversy, in violation of Article III. (2) It abridges Internet users' free speech rights. However, the U.S. Dist. Court, D.C., ruled last month that neither argument had merit (WID April 25 p1). The court stayed both its order requiring Verizon to provide information on the subscriber named in the first subpoena and another order denying the ISP's motion to quash the 2nd subpoena, allowing the company to seek relief from the appellate court. The 45 amici criticized the lower court decision on several grounds. First, they said, there was no basis for the First Amendment analysis that because alleged copyright infringement was the expression targeted by Sec. 512(h), the First Amendment provided minimal protection: "Proven infringement of copyrights is not protected by the First Amendment, but allegations of copyright infringement are inherently no more reliable than allegations of obscenity, defamation or other types of unprotected speech." Copyright law necessarily implicates free speech, amici said, because it places significant restrictions on public debate and expression of ideas. The groups said, the court was wrong to suggest that Sec. 512(h) didn't directly affect political and other speech entitled to First Amendment protection by forcing disclosure of someone's identity and to "bless" the statute's "supposed procedural safeguards" as adequate to protect a user's speech and rights of association. The DMCA subpoena violates the Fifth Amendments's Due Process Clause, the groups said, because it: (1) Substantially affects private interests such as privacy and the right to anonymous speech. (2) Carries a substantial risk of being either misused or mistakenly applied to Internet users who aren't involved in infringement. (3) Wouldn't offend the legitimate interests of the govt. and content owners if additional safeguards were put in place. (4) Fails to require notice to individuals whose personal information is subpoenaed, give them an opportunity to be heard and to require prior judicial determination before process is issued. "After canvassing the area, the consumer amici cannot find a single state of federal statute or rule that permits a court subpoena to impinge upon First Amendment rights without either a lawsuit being filed (also required by Article III) or prior court approval," the groups wrote. To sidestep the "case or controversy" problem, they said, the appeals court should interpret Sec. 512(h) as "creating a supplemental subpoena procedure" that applies only in pending copyright infringement suits. Last week, Public Citizen urged the appeals court to make RIAA and Verizon follow the same procedures to protect Internet anonymous speech that courts had required in other cases (WID May 19 p8). On May 16 the D.C. Circuit gave RIAA until June 13 to file its brief and until June 20 to file its amici. Verizon's reply is due July 3, final briefs July 11. The case is set for oral argument Sept. 16 at 9:30 a.m. Business and consumer groups signing the joint filing include the Alliance for Public Technology, American Assn. of Law Libraries, American Civil Liberties Union, American Civil Liberties Union Capital Area, American Legislative Exchange Council, American Library Assn., Assn. of Research Libraries, Caprica Internet Services, Citizens for a Sound Economy Foundation, Competitive Enterprise Institute, Computer & Communications Industry Assn., Computer Professionals for Social Responsibility, Consumer Action, Consumer Federation of America, Consumers Union, DigitalConsumer.org, Digital Future Coalition, Electronic Frontier Foundation, Electronic Privacy Information Center, European Internet Industry Assn., Frontier & Citizens Communications Cos., InKeeper Co., Media Access Project, Mercury Network Corp., National Assn. of Consumer Agency Administrators, National Coalition Against Domestic Violence, National Consumers League, National Grange of the Order of Patrons of Husbandry, N.Y. State Telecommunications Assn. Inc.,e Pacific Research Institute, Privacy Rights Clearinghouse, Privacyactivism, Progressive Internet Action, Public Knowledge, SBC Internet Services, Southern Star, SticNet LP, Tex. Internet Service Providers Assn., U.S. Internet Industry Assn., U.S. Internet Service Provider Assn., U.S. Telecom Assn., Utility Consumers Action Network, Wash. Assn. of Internet Service Providers, WiredSafety.Org, and ZZAPP Internet Services.

01/01/2003
Insurer Stops Sale of Auto Policies W.Va.
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Press Release

Insurer Stops Sale of Auto Policies W.Va.

From the Charleston Gazette January 1, 2003, Wednesday Copyright 2003 Charleston Newspapers Their motto says, "Like a good neighbor, State Farm is there," but that's no longer true for state residents looking to buy auto insurance. Effective Dec. 16, the state's largest insurer stopped writing new auto policies in West Virginia, company officials said. State Farm insures about one of every three drivers in the state.

01/01/2003
Creating Jobs and Generating Economic Growth
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Press Release

Creating Jobs and Generating Economic Growth

I have spoken with many people in Southern Wisconsin who are worried about losing their jobs. Others have already been laid off and have been struggling to make ends meet. Nearly 23,000 Wisconsin workers have been affected by job cuts, and areas of Wisconsin - especially portions of the First Congressional District - are experiencing unemployment rates that are even higher than the national average.

01/01/2003
Halt cuts in budget, education chiefs ask
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Press Release

Halt cuts in budget, education chiefs ask

The Senate gave educators and economic development experts an opportunity Monday to plead for no more budget cuts in the next two years, but they had to share the floor with about 60 people from an anti-tax group who showed up to oppose any tax hikes. Senate budget writers allowed several members from North Carolina Citizens for a Sound Economy to make their case that the state should rein in spending, instead of adopting a lottery or raising taxes.

01/01/2003
Citizens for a Sound Economy Holds a Luncheon Briefing
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Citizens for a Sound Economy Holds a Luncheon Briefing

ORGANIZATION: Citizens for a Sound Economy holds a luncheon briefing on "What does America Actually Think about the President's Economic Plan?" TIME: 12:30 p.m. LOCATION: 1302 Longworth House Office Building CONTACT: RSVP to Paul Hilliar, 202-942-7658; e-mail, philliar@cse.org; Members of the public should contact, Brenna Hapes, 202-942-7629; e-mail, bhape@cse.org; http://www.cse.org PARTICIPANTS: Ed Goeas, president, The Tarrance Group and Paul Beckner, president, Citizens for a Sound Economy

01/01/2003
Tort Reform's Magic Number
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Tort Reform's Magic Number

BY Marcia Coyle

With Republicans now controlling both houses of Congress, everything old is new again in the battle over tort reform. Several past proposals--to cap medical malpractice awards and restrict class actions, for example--will be reintroduced in the upcoming session. But even proponents of these measures recognize that GOP control can't guarantee ultimate success, since the party's tiny Senate majority won't be able to bring a bill to a vote in that chamber without Democratic help. At least tort reform proposals are less likely to get killed in a Senate committee, says Matthew Webb, director of legal reform policy at the U.S. Chamber of Commerce. In particular, he's cheered by Orrin Hatch's return as Senate Judiciary Committee chairman. However, Webb notes that in order to avoid a filibuster, "the issue in the Senate, like always, is getting 60 votes, and that hasn't changed." Thus any tort reform accomplishments will have to be bipartisan. Still, in the November passage of the bill that created the Department of Homeland Security, the GOP demonstrated its willingness to push for tort limits whenever the opportunity arises. Senate Democrats were unable to strip the bill of several business-friendly provisions already approved by the House. Among other things, the Homeland Security Act eliminates punitive damages in suits against companies that make antiterrorism technology, requires physical injury as a prerequisite to any recovery, and reduces damages by the amount of collateral source compensation. Federal contractors for antiterrorism technology will also enjoy the government's sovereign immunity in product liability actions, provided that the contractors comply with specifications and inform the government of all known risks. Additionally, the law limits the legal liability of manufacturers of thimerosal, a mercury-based additive used in vaccines that is alleged to cause autism in children. Given that all of these provisions stayed intact in a bill passed by the old Democrat-controlled Senate, tort reform proponents hope that their other pet proposals will fare equally well in the new Congress. Key among these is Representative James Greenwood's medical malpractice bill, which the Pennsylvania Republican plans to reintroduce in the upcoming session. Capping Malpractice Damages Greenwood's bill, dubbed the Help Efficient, Accessible, Low-cost, Timely Healthcare [HEALTH] Act, already cleared the House last September. It would cap punitive damages in med mal suits at $250,000, and eliminate punitives entirely in actions against the manufacturer or distributor of a medical product that complies with Food and Drug Administration standards. The bill, backed by the U.S. Chamber of Commerce, the American Medical Association, and other business groups, would also limit lawyers' contingency fees to 15 percent of any amount in excess of $600,000. And it would eliminate joint and several liability in favor of proportional liability. But even if the House okays Greenwood's measure for a second time, it will face a tough battle in the Senate, predicts Carlton Carl. A spokesman for the Association of Trial Lawyers of America, Carl notes that the Senate considered a "less draconian" medical malpractice proposal last summer that nonetheless went down to defeat, 57 to 42. The ATLA official adds, "I didn't see that many votes changing on November 5." However, Webb at the U.S. Chamber of Commerce remains optimistic about the changes for both medical malpractice legislation and class action legislation, which is another priority for his group. "There's a very good possibility of [either] or both of them happening next year," he says. Like the medical malpractice bill, class action legislation passed the House last year only to go nowhere in the Democrat-controlled Senate. The intent behind the various proposals was to require most class actions to be filed in federal courts. Webb predicts "fairly quick" action in the new Congress, adding, "We've been doing a very aggressive effort to get to 60 votes." But Jason Thomas, a staff analyst at the conservative Citizens for a Sound Economy, still considers class action legislation "a long shot." The one bill that the business lobby doesn't want to see reintroduced in the new Congress is the Patients' Bill of Rights, which would establish a limited right to sue HMOs. Though the bill passed the House in August 2001, it fell into a legislative black hole after the September 11 attacks that year. ATLA's Carl says that his association will continue to push for the bill. "But will it pass?" he asks. "I don't know." As with every other question about tort reform, the answer will depend on which side can reach the Senate's magic number.

01/01/2003
"Death tax" deception
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"Death tax" deception

BY Hunter, Rosie; Collins, Chuck

The federal estate tax, or "death tax," isn't dead yet, but a powerful clique of wealthy families and interest groups will stop at nothing to kill it. Their move ment makes small business owners and family farmers its poster boys. But those who stand to gain the most from repeal are a few thousand very wealthy households. The effort to turn the public against the estate tax, and ultimately abolish it, is a case study in conservative movement tactics-the campaign uses distorted facts, dirty tricks, and front groups, and it's bent on repealing the nation's only tax on inherited wealth. The decade-long public relations and lobbying campaign seemed to pay off when President George W. Bush signed his $ 1.35 trillion tax cut into law in 2001. The bill included a gradual phase-out of the estate tax over ten years (see sidebar). But because the tax bill--a bizarre assortment of delayed activation dates and gimmicks that money guru Jane Bryant Quinn called "a contemptible piece of consumer fraud"--was structured to "sunset" at the end of 2010, the estate tax will be fully repealed for only one year, after which tax rules revert back to what they were before passage of the bill. The anti-estate tax lobby is now pushing hard to make repeal permanent. With Republicans back in control of both houses of Congress, repeal proponents on both sides of the aisle are emboldened. And they understand that they must move quickly because as the budget deficit grows, permanent repeal will become politically more difficult to justify. Can this juggernaut be stopped? Perhaps, but only if progressives take a hard look at the anti-estate tax campaign, debunk its claims-and its "grassroots" facade--and then organize like never before. THE CASE FOR PRESERVING AN ESTATE TAX Abolishing the estate tax would further concentrate the nation's wealth in the hands of the super-rich at a time when the distribution of wealth is already more unequal than at any point since the 1920s. It would also drain resources from strapped states and charities. Among the pressing budgetary reasons to preserve the tax are these: * Making the repeal of the estate tax permanent would contribute to a fiscal train wreck, draining government coffers of $ 850 billion between 2011 and 2021. * Repeal would eliminate one of the few progressive taxes in our federal system, resulting in the transfer of hundreds of billions of dollars to the trust funds of the nation s wealthiest families while shifting the burden of taxation (or cuts in services) onto those less able to pay. * States--already straining to balance their budgets-stand to lose $ 9 billion a year in state-linked revenue by 2010 as a result of the planned estate tax phase out. * Estate tax repeal would also shrink charitable giving and bequests, particularly from estates in excess of $ 20 million. Without the incentives provided by the estate tax (which encourages charitable bequests during life, in anticipation of the tax, as well as at death), the Treasury Department estimates that charitable giving may decline as much as $ 6 billion a year. But the estate tax was meant to do more than bolster budgets and aid charities. From its inception, it was meant to ward off the emergence of a hereditary aristocracy in the United States. Established in 1916, the tax was a populist response to the excesses of the Gilded Age. President Theodore Roosevelt justified it by arguing that society has a claim upon the fortunes of its wealthy. Roosevelt pointed out that most great civilized countries have an income tax and an inheritance tax. In my judgment both should be part of our system of federal taxation." Such taxation, he noted, should "be aimed merely at the inheritance or transmission in their entirety of those fortunes swollen beyond all healthy limits." A number of modern-day millionaires--who are themselves subject to the tax--understand its historical importance. As part of the opposition to repeal, over 1,200 wealthy individuals signed a petition calling for preserving-but reforming-the tax. The signers (who include William H. Gates, Sr., George Soros, and Ted Turner) argue that the tax is an essential means to moderate the excessive build-up of hereditary wealth and power. Investor Warren Buffett argued in the New York Times that repealing the estate tax would be comparable to "choosing the 2020 Olympic team by picking the eldest sons of the gold-medal winners in the 2000 Olympics...Without the estate tax, you in effect will have an aristocracy of wealth, which means you pass down the ability to command the resources of the nation based on heredity rather than merit." Petition-signers and other activists say they support raising the cap on exemptions to further reduce the already-miniscule number of small businesses and farms affected by the tax. For som e, the call to raise exemption levels is in part tactical--a means to gain congressional support for tax preservation. THE PUSH FOR REPEAL How did legislation benefiting only a narrow slice of the wealthiest Americans advance so far? Who is behind the push to abolish the estate tax? Repeal backers describe their movement as "grassroots," but peek behind the curtain and you find a well-funded public relations, lobbying, media, and research apparatus (led by sophisticated operatives, many with deep connections to the Republican Party). In the early 1990s, a group including the heirs to the Mars and Gallo family fortunes embarked on a long-term effort to eliminate the tax. They enlisted the help of Patricia Soldano, an Orange County, California, advisor to wealthy families. She formed a lobbying organization (the "Policy and Taxation Group") to provide an "outlet" for wealthy families "interested in communicating their concerns to members of Congress." Soldano channeled funds to congressional backers of repeal and hired the powerful lobbying firm Patton Boggs. By the mid-1990s, Soldano's outfit and other early pro-repeal groups had joined together with a veritable anti-tax industry of think tanks, lobbying firms, and interest groups in Washington, D.C. to form a powerful "death tax elimination" lobby. Conservative think tanks, including the Heritage Foundation and the libertarian National Center for Policy Analysis, produced "policy backgrounders" criticizing the estate tax, and made the requisite opeds and TV appearances as well. The antigovernment group Citizens for a Sound Economy encouraged its members to lobby their senators and representatives against the tax. Other groups involved in the anti-estate tax crusade include the private campaign organization Club for Growth; the political arm of the libertarian Cato Institute; the American Conservative Union; Grover Norquist's Americans for Tax Reform; and the 60 Plus Association, a self-styled conservative alternative to the American Association of Retired Persons. At the center of the lobbying effort is the Nati onal Federation of Independent Businesses (NFIB), a business trade association and one of the most influential organizations in Washington. The NFIB's lobbying web site sends faxes to Congress urging estate tax repeal. In 1993, U.S. Representative Christopher Cox (R-Calif.) introduced the first repeal legislation with just 29 cosponsors. Soon, Sen. Jon Kyl (R.Ariz.) became a chief ally, along with Reps. Jennifer Dunn (R-Wash.) and John Tanner (D-Tenn.). Within a year, elimination of the "death tax" occupied a central plank of the G.O.P.'s 1994 "Contract with America." By 1998, repeal legislation had over 206 House sponsors including the entire Republican leadership. At NFIB's 2002 Small Business Summit, Bush strategist Karl Rove said "the NFIB and the Bush administration work hand-in-hand because we see eye-to-eye." Referring to NFIB's failed effort in June 2002 to make the repeal of the estate tax permanent, Rove assured his audience, "Don't look at it as a defeat. This is a war, and we need to make an ongoing commitment to winning the effort to repeal the death tax." DEATH TAX LINGO In perhaps its greatest public relations feat, the pro-repeal lobby has managed to portray the estate tax as a "death tax" on most Americans. The phrase suggests a tax imposed upon death itself, although over 98% of those who die go untaxed. The "death tax" label has proven a major asset to the campaign, yet its authorship is disputed. James L. Martin, president of the 60 Plus Association and Bush family friend, credits himself. Rep. Dunn credits Seattle Times publisher Frank Blethen. Whatever the origin of the tag, Republican pollster Frank Luntz masterminded its widespread use. Luntz urged conservative legislators and candidates to exclusively call the estate tax a "death tax," and in a 1994 memo he suggested legislators hold anti-estate tax press conferences at local funeral homes. Republicans employ the "death tax" label so effectively that the term is now used in the mainstream press. Martin has thought up plenty of other labels for the tax as well, including "grim-reaper's tax," "grave robber's tax," "cruelest tax," "pine-box tax," and "success tax." Martin travels the country to spread the word that "taxing cadavers is gross public policy," and to ask the public, "Should Uncle Sam, rather than a blood relative, be the first in line when you die?" At one point Martin ran a contest to generate new catch phrases; the winner--"last--grasp tax"--got $ 100. Martin, Luntz, and other Republican spin-doctors recognize that success hinges on how the debate is framed. Martin told The American Prospect, "it's all a matter of marketing." DECEPTIION DOWN ON THE FARM Pro-repeal literature is packed with claims that the estate tax forces working farmers to sell their farms. When Congress passed legislation to repeal the tax in 2000, it delivered the bill to President Bill Clinton on a tractor to symbolize the "down on the farm" effects of the bill. On the campaign trail later that year, George W. Bush declared, "To keep farms in the family, we are going to get rid of the death tax!" Starting in the spring of 2001, a number of investigative reports began to question the veracity of these claims. They found that stories of farmers losing the farm to the estate tax are so rare that experts and investigators have been unable to find any real examples. Neil Harl, an Iowa State University economist whose tax advice has made him a household name among Midwest farmers, said he searched far and wide but never found a case in which a farm was lost because of estate taxes. "It's a myth," said Mr. Harl, "M-Y-T-H." The New York Times reported that when the pro-repeal American Farm Bureau Foundation was challenged to produce one real case of a farm that was lost because of the estate tax, it could not cite a single example. In April 2001, the Bureau's president sent an urgent memo to its affiliates stating, "it is crucial for us to be able to provide Congress with examples of farmers and ranchers who have lost farms... due to the death tax." Still, no examples were forthcoming. DISABLED AMERICANS AGAINST THE DEATH TAX? In early 2001, Responsible Wealth (a project of the popular education organization United for a Fair Economy) initiated the petition of wealthy individuals calling for preservation of the tax. The petition prompted a swift counterattack by the pro-repeal lobby, which issued a barrage of advertising and media events to undermine the Responsible Wealth effort. One example provides an illustration of pro-repeal tactics. In March of 2001, full-page advertisements appeared in several daily newspapers around the country including the Wall Street Journal and the Washington Times. The advertisements were produced by a new organization, dubbed "Disabled Americans for Death Tax Relief." Its leader, a young woman from Austin, Texas, named Erin O'Leary, claimed she had just formed the organization two weeks earlier and already had over 1,000 members. O'Leary was "deeply offended by the callous and heartless comments made by 125 so-called 'millionaire' signers of the Responsible Wealth ad that appeared in the New York Times." She alleged that there are "2.5 million disabled people who are family members of millionaires, a number that would grow to 8 million over the next thirty years," and that with rising medical costs, these individuals needed their inheritances. The text of the advertisement continued: In order to live a full life, these Americans may require medical help, nursing and living assistance far beyond that which is covered by medical insurance. Warren Buffet, Bill Gates, Sr. and George Soros believe that these people should be denied full financial help from their parents. The "Disabled Americans" stunt was the creation of conservative communications maven Craig Shirley (whose public relations firm represents the National Rifle Association, the Heritage Foundation, and the Republican National Committee). Fox News and several conservative talk shows kept O'Leary busy with interviews, but most other news media recognized O'Leary's advertisement for the charade that it was. Disabilities experts responded, including author Marta Russell, who felt that "using disabled people to front for the interests of the wealthiest members of our society is an outrage and a disgrace." Russell disputed the claim that millions of disabled people could be adversely affected by the tax. O'Leary's figures made no sense given the economic profile of the disabled population in this country. The disabled are one of this country's poorest groups, and highly dependent on the very tax-funded social services that repeal of the estate tax could put at risk. SHAPING PUBLIC PERCEPTION Print and radio advertisements are key weapons both in molding public perception and attacking members of Congress who vote against full repeal. The owner of the Seattle Times, Frank Blethen, sees estate tax repeal as his personal crusade. (Blethen believes that the estate tax is responsible for the decline of family-owned newspapers.) He started a website and organizes an annual "Death Tax Summit" in Washington, D.C., to mobilize other independent newspapers and business groups to lobby Congress. Blethen has used the Seattle Times as a vehicle for his anti-estate tax cause, both on the editorial page and through advertisements, stirring concerns from the paper's editors about his lack of impartiality. Further, he circulated the anti-death tax ads he developed to other newspaper owners; they were published in over one hundred independent newspapers nation-wide. The estate tax is also a favorite issue for conservative groups seeking to exercise political influence through issue ads. In the months prior to the 2002 election, pro-repeal organizations ran estate tax issue ads in South Dakota, Missouri, Minnesota, Iowa, and Arkansas. In Missouri, the United Seniors Association and Americans for Job Security (phony grassroots organizations fronting for corporate interests) targeted former Senator Jean Carnahan's position on the estate tax. In Minnesota, Americans for Job Security ran full-page newspaper ads attacking the late Senator Paul Wellstone for voting against full repeal, and flew a banner at the Minnesota state fair: "Wellstone Quit Taxing the Dead!" DIVIDING DIVERSE CONSTITUENCIES Another pro-repeal strategy has been to thwart progressive and diverse groups that might be inclined to preserve the estate tax. Over the past five years, pro-repeal forces worked to convince the public that the estate tax is particularly detrimental to women and people of color as well as farmers. In doing so, they spin an illusion of a rainbow coalition in opposition to the tax. For example, the NFIB and front group called the Small Business Survival Coalition recently organized press conferences with women business owners and alleged that "women--not men--are the chief victims of the tax" because women generally outlive men. They mobilized women's business organizations including Women Impacting Public Policy and the National Association of Women Business Owners in support of repeal. But claims that the estate tax burdens women business owners are misleading. The great majority of all businesses fall below the taxable level (see sidebar). Relatively few businesses of any kind face the tax, and because women-owned (and minority-owned) businesses are smaller than average, they are affected even more rarely. As for the argument that women outlive men, the only families subject to the tax are those who own assets at least 20 times greater than the net worth of the median family. Therefore few widows lose any inheritance to the estate tax. And those who do are among the wealthiest 2% of households, not hard luck cases. On the other hand, women--and people of color--benefit disproportionately from social programs (including small business loans and education spending) funded by the tax. Anti-estate tax groups have similarly put forward minority business groups, such as the Hispanic Business Roundtable and the National Black Chamber of Commerce, as visible allies. Frank Blethen enlists minority-owned newspapers in opposing the tax. He tells readers of the newsletter that it is important to "educate" members of Congress that the estate tax is "a minority and female-owned business issue and an environmental issue." In April 2001, billionaire Robert Johnson of Black Entertainment Television and a group of other African-American business people ran ads in the New York Times and the Washington Post. Johnson invoked race in his ads, claiming to speak for African Americans broadly. The ads asserted that the estate tax unfairly takes wealth away from the black community and that repeal would help African Americans gain economic power. Although there are no statistics available on the number of African Americans subject to the estate tax, African Americans are clearly far less likely than white people to inherit fortunes large enough to face taxation. The median net worth for African-American households (excluding homeownership) is $ 1,200, compared to $ 37,600 for white households. (The median Hispanic household is lower still, with zero net worth.) One in four African-American households own no positive wealth at all, compared with one in seven white households. And there are only two African Americans on the Forbes 400: Oprah Winfrey and Robert Johnson himself. Nevertheless, President Bush moved quickly to quote Johnson in his speech to the Council of Mayors, saying "as Robert Johnson of Black Entertainment Television argues, the death tax...weighs heavily on minorities." Soon after, Bush tried to convince the members of the National Council of La Raza, a major Latino advocacy group, to join him in supporting estate tax repeal. Bush described a Mexican-American taco-shop owner who said he wanted "to get rid of the death tax so I can pass my business from one generation to the next." It turned our, as even the Wall Street Journal noted, the taco shop Bush described was valued at $ 300,000, far below the over $ 1 million exemption the current law allows owners of businesses. George W. got it wrong. The taco shop would pass to heirs untaxed, just as the vast majority of small businesses do. Like the allegations about small farms and family enterprises, pro-repeal forces repeat these allegations about women and people of color over and over through their media work and lobbying efforts. A principal tactic of the campaign has been to get the minnows to front for the whales. But the truth is, few or no folks are losing their taco shops--or their farms--to the estate tax. In fact, in 1998, only 776 estates where family-owned business assets represented over half the value of the estate were "taxable" under estate tax rules, out of 47,482 total taxable estates, and 2.3 million individual deaths. So the great majority of estates taxed under the estate tax are not estates built on family-owned businesses and farms, but other forms accumulated wealth--stock investments, nonproductive assets, fourth homes, art collections, luxury items, etc. ALL OR NOTHING REPEAL The architects of the repeal effort are zealots. They advocate nothing short of complete repeal and consistently oppose any reform or compromise. They understand that partial reform will not benefit the principal patrons of the repeal effort-the very wealthy interests who bankroll the campaign would not be covered by exemptions. (Their wealth is so great it would exceed even a very high cap.) But this strategy may backfire when the groups that have bought into the misrepresentations realize that, rather than family farmers or small business owners, the vast majority of whom will never owe any estate tax, the windfall of estate tax repeal will go to the heirs and heiresses of the country's 3,000 wealthiest estates. This elite group will inherit billions in appreciated stock and real estate, enormous capital gains that have never been subject to taxation. The Wall Street Journal has estimated that George W. Bush's heirs alone would stand to gain from $ 6 to $ 12 million if the tax is repealed, assuming his estate remains the same size up to his death. Cheney's heirs would save between $ 10 and $ 45 million. And the heirs of the Gallos and Marses stand to make even more. CONCLUSION In the bid to eliminate the estate tax, anti-repeal forces have used slick advertising, explicit falsehoods and deception. But we should not have to endure the triple whammy of lost federal revenue, state revenue and charitable giving in order to give a handful of millionaires and billionaires a tax break, no matter how well disguised in a misinformation campaign. With Republicans back in control of the U.S. Senate, the push is already on to permanently repeal the federal estate tax. For now, even with their new majority and Democratic party supporters, repeal proponents fall short of the 60 votes they need under budget rules that expire in April 2003. If the budget rules are not extended, however, they will be able to advance their anti-estate tax agenda with only a simple majority. This juggernaut can be stopped, but time is running out. RELATED ARTICLE: The estate tax: the basics The federal estate tax is the only tax on accumulated wealth in the United States, It is a transfer tax, levied at the time of death when assets transfer to heirs. It falls on the country's wealthiest households--less than 2% of all estates--but still generates significant revenue (currently $ 30 billion annually, or about 9% of the non-military discretionary budget). Under the 2001 tax cut, the amount of wealth exempted from the estate tax rises from $ 1 million ($ 2 million for a couple) to $ 3.5 million in 2009 ($ 7 million for a couple). As a result, the number of households subject to the estate tax will shrink from 50,000 to about 6,000 a year. Even at its current level, the estate tax affects only a small percentage of businesses and farms. This is in part because family-owned businesses and small farms receive special treatment under the tax, including large deductions when the business or farm represents at least 50% of the estate, and assessments that reduce the estimated value of assets. These special rules frequently allow family-owned businesses and farms to pass on $ 5 to $ 8 million, tax-free, to heirs. Those family-owned businesses that are subject to the estate tax rarely pay the top marginal rate, and are given a generous 14-year payment schedule. The estate tax is a graduated tax with a rate structure that starts at 32% and increases to a top rate of 55% on estates exceeding $ 3 million. The 2001 tax bill reduces the top rate to 45% between now and 2009. The "effective rate," the percentage of the total value of the estate actually paid in taxes, averages about 30%. Rosie Hunter is a researcher with United for a Fair Economy in Boston. Chuck Collins is thc Program Director at United for a Fair Economy and co-author, with William H. Gates, Sr., of Wealth and Our Commonwealth: Why America Should Tax Accumulated Fortunes (Beacon Press, January 2003). For information on how to get involved in efforts to preserve the estate tax, go to .

01/01/2003
An almost ideal demand system model of household vehicle fuel expenditure allocation in the United States
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An almost ideal demand system model of household vehicle fuel expenditure allocation in the United States

BY Gbadebo Oladosu

The Energy Journal, Vol. 24, No. 1. Copyright 10 2003 by the IAEE. All rights reserved. The author acknowledges the help of Mark Schipper of the Energy Information Administration in locating and acquiring survey data. The paper also benefited from the comments of two anonymous referees. The author remains solely responsible for any errors or omissions. Assistant Professor of Environmental Policy, School of Environmental Science, Engineering and Policy, Drexel University, 600 Nesbitt Hall, 33rd and Market Street, Philadelphia, Pennsylvania 19104, USA. E-mail: gao22@drexel.edu

01/01/2003
An Almost Ideal Demand System model of household vehicle fuel expenditure allocation in the United States
null
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An Almost Ideal Demand System model of household vehicle fuel expenditure allocation in the United States

BY Oladosu, Gbadebo

In this study I model vehicle-fuel expenditure allocation in multi-vehicle households based on the Almost Ideal Demand System (AIDS). Using data from surveys conducted by the Energy Information Administration in 1988, 1991 and 1994, I estimate the AIDS model, augmented with a comprehensive set of household and vehicle characteristics for households owning 1 to 4 vehicles ordered by vehicle age. Results show that vehicle characteristics are the most significant factors in the expenditure allocation process. Mean and standard deviation of price, expenditure and Allen substitution elasticities are calculated across households. Own-price elasticities for all vehicles are close to 1. A lien substitution elasticities indicate that all vehicle pairs are substitutes, and only vehicle 1 is found to be expenditure inelastic. The approach taken in this study enables a disentangling of vehicle allocation/substitution effects from aggregate household vehicle use behavior. This will be useful in the analysis of efficiency and distributional effects of policies affecting household transportation. INTRODUCTION The United States transportation sector has important energy, environmental, and policy implications. With a quarter of total national energy use, about 95 percent of which are petroleum products, the sector is deeply affected by energy security issues such as dwindling domestic oil reserves, fluctuating world oil prices, and tightening refining capacity. Light trucks and cars, which are mostly driven by households, consume about two-thirds of total transportation energy use in the United States (EIA, 2001). This contributes to several serious environmental problems including ground-level ozone, carbon monoxide poisoning, particulate emissions, and greenhouse gas emissions. Although fuel prices in the US are among the lowest of the OECD economies, transportation energy policies remain a highly sensitive subject as demonstrated by the Clinton energy tax proposal of 1993 (Yohe, 1993; Burns, 2000). On the one hand, the ubiquity of transportation in social and economic activities means that effects of such price-based policies are rapidly transmitted throughout the economy. On the other hand, the effectiveness of price as a means of intervention in the transport market is subject to numerous externalities and price distortions (DeCiccio and Mark, 1998). Given this, policy makers tend to shy away from price-based policies for resolving energy and environmental issues in the transportation sector. Instead, less visible measures, such as technology and emission standards, are employed. This is exemplified by the Corporate Average Fuel Efficiency (CAFE) standards. Established in 1975, CAFE standards led to a "doubling of passenger car economy and more than a 50 percent increase in light-truck MPG (1) from 1975 to 1984" (Greene, 1998). A host of other state and federal regulations, including provisions in the 1990 Clean Air Act, also address environmental problems emanating from the transportation sector. These programs, not unlike price-based policies, are sources of controversy. Some analysts argue the success of CAFE in reducing US transportation energy use, while others object on several grounds. Among the arguments that recently swayed the US Senate towards rejecting increases in the CAFE standards are safety and cost issues. The extent of take-back or rebou nd effects of the CAFE standards is another matter of debate. In addition, the US Environmental Protection Agency (EPA) contends that increases in households driving are offsetting ozone control achieved through clean-car regulations (EPA, 1993). Studies on transportation energy issues increased tremendously after the energy crunch of the 1970s. The majority of studies examine the effect of price changes, as well as income changes, on household transportation fuel use (see Espey 1998 for a meta-analysis). Others deal with the effectiveness of policies such as the CAFE standards (Greene, 1998; Greene et al., 1999; Goldberg, 1996). Most of these studies employ aggregate econometric models, sometimes modified by adding a vehicle choice model to correct for selectivity bias. However, aggregate models cannot capture the effects of many structural factors that are important determinants of household vehicle use. Golob et al. (1996) and Greene et al. (1999) pursue innovative approaches aimed at addressing this issue. Golob et al. (1996) employ a structural equations model of vehicle miles traveled (VMT) in two-vehicle households as a function of household and vehicle characteristics. The model was used to examine the direct and total effects of other endogen ous variables (driver age, gender and employment) and exogenous variables on VMT for each vehicle. Starting from a household production function framework, Greene et al. (1999) specify a transportation model for five groups of 1-, 2-, 3-, 4- and 5-vehicle households. Each group's model consists of three simultaneous log-linear equations for vehicle use (miles), fuel economy (miles per gallon), and price ($ /mile). Independent variables include household and vehicle characteristics. The model was used to calculate price elasticities and examine the size of the rebound effect. The current study follows the Golob and Greene path in developing a model of vehicle use in multi-vehicle households taking vehicle holdings as given. (2) We employ an Almost Ideal Demand System (AIDS) model of vehicle-fuel expenditure, and include households with 1-4 vehicles. Our focus is on fuel expenditure allocation among vehicles rather than aggregate vehicle holdings use. Such a model enables an examination of price and income effects for individual vehicles. In addition, by capturing household, vehicle and market factors a comprehensive evaluation of the effectiveness, efficiency, and equity effects of current and proposed household transportation policies and technologies can be performed. The model is described in the next section, and the database used for its estimation is summarized in section 3. In the fourth section, estimation results and various elasticity calculations are discussed. The paper ends with a concluding section. II. MODEL DESCRIPTION We assume a two-stage budgeting model of household consumption decisions in which vehicle-fuel expenditure is weakly separable from all other goods in the household's budget. Vehicle-fuel expenditure in the lower stage is specified using the Almost Ideal Demand System (AIDS) of Deaton and Muellbauer (1980). For a household, h, having x = 1.. .i household characteristics and owning v or z = 1...j vehicles each described by r = 1...k vehicle characteristics, we define the following notations: [e.sub.h] is total fuel expenditure on vehicle holdings; [u.sub.h] is household utility from vehicle holdings use; [p.sub.v] is the fuel price for vehicle v; [y.sub.s, h] is the dummy for household h's characteristic x; [C.sub.r, v, h] is the dummy for characteristic r of vehicle v in household h; [m.sub.v,h] is the efficiency rating of vehicle v in household h; [g.sub.v,h] is a value function derived from vehicle v's k characteristics in household h; P, [Y.sub.h], [C.sub.v,h], [M.sub.h], [G.sub.h] are vectors/matrices of [p.sub.v], [y.sub.x,h], [c.sub.r,v,h], [m.sub.v,h] and [g.sub.v,h], respectively; [[alpha].sub.0], [[alpha].sub.v], [[gamma].sub.v,z], [[phi].sub.v,x], [[mu].sub.v,z] [[theta].sub.v,z], [[beta].sub.0], [[beta].sub.v] are parameters of the model; [beta], [alpha], [gamma], [phi], [mu] and [theta] are vectors/matrices of [[beta].sub.v], [[alpha].sub.v], [[gamma].sub.v,z], [[phi].sub.v,x], [[mu].sub.v,z] and [[theta].sub.v,z], respectively. The complete AIDS expenditure system, augmented with household and vehicle characteristics, is: (3) ln [e.sub.h] ([u.sub.h], P, [Y.sub.h], [G.sub.h]) = ln a(P, [Y.sub.h], [G.sub.h]) + [u.sub.h] ln b(P) (1) where ln a(P, [Y.sub.h], [G.sub.h]) = [[alpha].sub.0] + [summation over (v)] [[alpha].sub.v]ln[p.sub.v] + 1/2 [summation over (v,z)] [[gamma].sub.v,z] l[np.sub.v] l[np.sub.z] + [summation over (v,z)] [[micro].sub.v,z] l[np.sub.v] l[nm.sub.z,h] + [summation over (v,x)] [[phi].sub.v,x] l[np.sub.v][y.sub.x,h] [summation over (v,z)] [[theta].sub.v,z] l[np.sub.v][g.sub.z,h] (2) lnb(P) = [[beta].sub.0] [[PI].sub.v][p.sup.[beta]v.sub.v] (3) [g.sub.v,h] = f([C.sub.v,h]) (4) f(*) is a functional transformation of vehicle characteristics. Fuel expenditure share for each vehicle, [w.sub.v,h], is derived by applying Shepard's Lemma to equation 1: (4) [w.sub.v,h] = [[alpha].sub.v] + [summation over (z)] [[gamma].sub.v,z]ln[p.sub.z] + [summation over (z)] [[micro].sub.v,z]ln[m.sub.z,h] + [summation over (x)] [[phi].sub.v,x][y.sub.x,h] + [summation over (z)] [[theta].sub.v,z][g.sub.z,h] + [[beta].sub.v]ln([e.sub.h]/[Q.sub.h]) (5) where [Q.sub.h] is a household price index given by ln[Q.sub.h] = [[alpha].sub.0] + [summation over (v)] [[alpha].sub.v]ln[p.sub.v] + 1/2 [summation over (v,z)] [[gamma].sub.v,z]ln[p.sub.v]log[p.sub.z] + [summation over (v,z)] [[mu].sub.v,z]ln[p.sub.v][m.sub.z,h] + [summation over (v,x)] [[phi].sub.v,x]ln[p.sub.v][y.sub.x,h] + [summation over (v,z)] [[theta].sub.v,z]ln[p.sub.v][g.sub.z,h] (6) and [[gamma].sub.v,z] = ([[gamma].sup.*.sub.v,z] + [[gamma].sup.*.sub.z,v])/2 (6) Since the AIDS does not satisfy the conditions for household utility maximization automatically, the conditions are usually imposed in empirical estimation. However, it is impossible to impose monotonicity and non-negativity conditions globally. We impose adding-up, symmetry and homogeneity on the system, leading to the following restrictions on parameters: (5) Adding up: [summation over (v)] [[alpha].sub.v] = 1; [summation over (v)] [[gamma].sub.v,z] = 0; [summation over (v)] [[beta].sub.v] = 0; [summation over (v)] [[mu].sub.v,z] = 1; [summation over (v)] [[phi].sub.v,x] = 0; [summation over (v)] [[theta].sub.v,z] = 0 (7) Symmetry: [[gamma].sub.v,z] = [[gamma].sub.z,v] (8) Homogeneity: [summation over (z)] [[gamma].sub.v,z] = 0; (9) III. DATA AND ESTIMATION Estimation of the above system is based on data from the 1988, 1991 and 1994 residential transportation energy surveys (RTECS) conducted by the Energy End Use and Statistics Division of the Energy Information Administration. Each of the surveys collected private transportation data from a sub-sample of respondents to the preceding year's residential energy consumption survey (RECS). Data collected include household characteristics, vehicle characteristics and use, and fuel prices. The EIA has tabulated these databases in considerable detail (EIA, 1990; EIA, 1993; EIA, 1997). Table 1 summarizes household and vehicle variables from the 1994 database. Distribution of area type, region, household size, age, race and gender in the sample matches those in the 1994 Statistical Abstract of the United States closely (US Census Bureau, 1995). The data show that about 87 percent of surveyed households own at least one vehicle, and almost 60 percent own at least two vehicles. However, less than 3 percent of households own more than four vehicles. There were 5,414 vehicles in the 1994 database, giving an average of about two vehicles per household. Numbering of vehicles in the survey was done by individual households, and can be expected to reflect both household and vehicle characteristics. (6) Body type is composed mainly of Cars, with between 57 percent for the third vehicle and 68 percent for the first vehicle. Pickup Trucks come second with between 14 percent for the first vehicle and 27 percent for the third vehicle. Sport Utility vehicles, Minivans, Station Wagons, and Large Vans follo w in that order accounting for between 2-7 percent. The remaining vehicle characteristics shown in Table 1; age, engine size, number of cylinders, fuel system, transmission type, and drive type affect vehicle performance and household driving pleasure. These will in turn affect allocation and fuel economy of vehicle use. Categorization of household and vehicle attributes for inclusion in the model is based on the need to separate out different effects, and available data. Table 2 is a summary of vehicle fuel use and expenditure data from the three RTEC surveys. Mean fuel efficiency rating for each vehicle is between 21-26 miles/gallon with a standard deviation of between 6-7 miles/gallon. Fuel price has a mean of about $ 1/gallon and a standard deviation of around 10 percent in each survey. Considerable variation in vehicle use across households can be observed with a standard deviation of about 50 percent for each vehicle and total miles driven. Mean use across vehicles is between 6,000-11,000 miles, while total mileage is around 18,000 miles. Dependent and independent variables for the model are derived from the database as follows. Fuel expenditures shares are based on real expenditures. We use the consumer price index (base 1994) to calculate real expenditures ([10.sup.3]$ ) and real prices ($ /gallon) from nominal values. Fuel efficiency rating ([10.sup.1] miles-per-gallon) is the [MPG.sub.EPA55/45] data. Each household and vehicle characteristic category shown in Table 1 is converted into a dummy variable. We include data for households with 1-4 vehicles since the number of observations for more than four vehicles is small. As explained in section 2, vehicle characteristics enter the model through the value function, [g.sub.v,h], which we specify as: [g.sub.v,h] = [vo.sub.v,h] x exp([summation over (r)] [[lambda].sub.r,v] [c.sub.r,v,h]) (10) where [vo.sub.v,h], is a dummy variable equal to 1 if a household owns the [v.sup.th] vehicle, and zero otherwise. Parameter [[lambda].sub.r,v], captures the effect of vehicle characteristics [c.sub.r,v,h] in an exponential manner. This transformation follows the practice in vehicle choice studies where logit or multinomial models use the exponential function to derive latent vehicle values from characteristics (see Kayser, 2000; Mannering and Winston, 1985; and Henscher et al. 1989). Given this specification, vehicle effects in our model are captured through parameters [[theta].sub.v,z] and [[lambda].sub.r,v]. We refer to these as vehicle-ownership and vehicle-characteristics effects, respectively. To simplify the AIDS model, the price index, [Q.sub.h], is usually approximated using the Stone's index. We adopt this practice here, so that [Q.sub.h] is calculated from the data as ln [Q.sub.h] = [summation over (v)] [w.sub.v,h] ln[p.sub.v] (11) A stochastic term is added to each share equation in the system. We assume that these error terms sum to zero across vehicles for each household; but are not independently distributed. We also assume that the error terms have the same covariance matrix for each household (Jorgenson et al. 1982). Dropping the household subscript, the estimated system of equations is: [w.sub.v] = [[alpha].sub.v] + [summation over (z)] [[gamma].sub.v,z] ln[p.sub.z] + [summation over (z)] [[micro].sub.v,z] ln[m.sub.z] + [summation over (x)] [[phi].sub.v,x][y.sub.x] + [summation over (z)] [[theta].sub.v,z][[vo.sub.z] exp ([summation over (r)] [[lambda].sub.r,z][c.sub.r,z])] + [[beta].sub.v]ln(e/Q) + [[epsilon].sub.v] (12) where [[epsilon].sub.v] is the random error term. This is a simultaneous 4-equation model with a singular covariance matrix. By assuming that [[epsilon].sub.v] is normally distributed, we can use a maximum likelihood (ML) estimator to estimate parameters of three of these equations and calculate those of the fourth equation using equations (7) to (9). The ML estimator is invariant to which equation is dropped. In addition, the first category of each household and vehicle characteristic in Table 1 is dropped from the model. Therefore, the reference household for the model has (i) the dropped household characteristics, and (ii) ownes 1-4 vehicles, each of which is described by the dropped vehicle characteristics. Based on the above, 7,272 of the 9,033 observations in the database are suitable for model estimation. The equations are estimated using the Full Information Maximum Likelihood (FIML) facility of the Time Series Processor (TSP) econometric software. Parameter estimates are used to calculate price elasticities, expenditure elasticities, and substitution elasticities for each household and vehicle in the sample. Elasticity calculations are based on the following equations: Uncompensated Price Elasticity, [[epsilon].sub.v,z]: [MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII] (13) Expenditure Elasticity, [[eta].sub.v]: [eta].sub.v] = 1 + [[beta].sub.v]/[w.sub.v] (14) Compensated Price Elasticity, [U.sub.v,z] [MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII] (15) Elasticity of Substitution, [[sigma].sub.v,z]: [[sigma].sub.v,z] = 1 + [[gamma].sub.v,z]/[w.sub.v][w.sub.z] for v [not equal to] z and [[sigma].sub.v,z] = [[epsilon].sub.v,z]/[w.sub.v] for v = z (16) IV. RESULTS Several versions of the above system of equations are estimated as summarized in Table 3. The model specification in section 2 is the "unconstrained" or null model (Model 1). Homotheticity and non-positivity of diagonal elements of the price coefficients matrix, [gamma], are then imposed on the system (Models 2-4). Models 2-4 are compared against Model 1 based on goodness-of-fit criteria ([R.sup.2] and Likelihood-Ratio tests), mean own-price elasticities, mean expenditure elasticities, and mean own-Allen elasticities. Non-positive own-price elasticities and Allen elasticities are necessary but insufficient conditions for regularity of the household expenditure function. Based on the LR test alone, we cannot reject Model 1 for any of the alternative models. However, all models have very good, almost identical, [R.sup.2] values for each share equation in the system. Own-price elasticities for all models lie between -0.36 and -1.01, with Models 3 and 4 having larger absolute values than Models 1 and 2. Models 1 and 2 have high and positive values for three of four mean own-Allen elasticities, whereas three of four in Models 3 and 4 have negative signs. Expenditure elasticities for the non-homothetic models (Models 1 and 3) are virtually the same and close to unity. We report the results for Model 3 in this paper since it preserves non-homotheticity of the system, while having non-positive mean own-price elasticities. A. Parameter Estimates Tables 4 and 5 contain parameter estimates (and standard errors) for the model. Statistically significant parameters are identified with super-script numbers in the table. We provide a discussion of these estimates below. Constant, Price and Efficiency Rating The constant term is significant for vehicles 2 and 3, with estimates of 0.78 and 0.16, respectively. The calculated value for vehicle 4 is 0.07. Interpretation of the constant term as the intercept is not strictly applicable in this model. When all variables take a value of zero (corresponding to the reference household, a price level of $ 1/gallon, total real fuel expenditure of $ 1000, and vehicle fuel efficiency rating of 10 mpg), the vehicle value function, [g.sup.v,h], takes a value of unity. Thus the product of dummy variable, [vo.sub.v,h], and the vehicle-ownership parameter, [[theta].sub.v,z], become constant terms in the share equations. For a 4-vehicle reference household, the resulting values are the column sums of the constant terms and elements of the vehicle-ownership parameter matrix. These values are 0.23, 0.19, 0.28, and 0.30 for vehicles 1, 2, 3, and 4, respectively. For a 1-vehicle reference household only vehicle 1's share equation is relevant, and the resulting value is 1.12. Of course, th e share value for any 1-vehicle household is necessarily unity. All elements of the price parameter matrix ([gamma]) are insignificant and close to zero. Given the direct relationship between fuel economy and use, Table 4 shows that only three of the sixteen efficiency parameters are insignificant. All diagonal elements are negative, while all off-diagonal elements, except [[micro].sub.3,1], are positive. This implies that efficiency increases will have negative own-vehicle effects and positive cross-vehicle effects on expenditure allocation. One area of discussion in the literature is the symmetry of price and fuel economy effects on household fuel use. Greene et al. (1999) found that symmetry of price and efficiency effects is not rejected for most of the samples in their study. Symmetry in the current model requires price and efficiency coefficients to have the same magnitude, but opposite signs. Since this is not the case in Model 3, we impose these conditions and re-estimate the model. The 2xLR for the two model variants is 230. Therefore Model 3 (non-symmetry of price and efficiency effects) cannot be rejected. (7) Expenditure Coefficients of the log of "real" expenditure are significant for vehicles 1, 2, and 3. According to Deaton and Muellbauer (1980), these coefficients should be negative for necessities and positive for luxuries. Interestingly, the estimate for vehicle 1 is negative, while those for the remaining vehicles are positive. These estimates are consistent with simultaneous shifting of some transportation load away from the first vehicle, and increasing total expenditure. The size of the coefficient estimates suggest that the shifting effect is largely restricted to vehicles 1 and 2. Household Characteristics Only a few household characteristic parameters prove to be significant. Income categories 3 and 5 are significant and negative for vehicle 3. None of the area type dummies is significant, and only the West is barely significant among regional dummies. Among member and driver size dummies, household size category 3 for vehicle 4 and driver size category 3 for vehicle 3 are significant. Education category 2 is significant for vehicles 1 and 4, while category 3 is significant for vehicle 2. Vehicle Characteristics All elements of the vehicle-ownership parameter matrix are significant at the 1 % level. This suggests that vehicle interaction is an important factor in household fuel expenditure allocation. Among vehicle characteristics, vehicle type, age and cylinder size are significant for most vehicles, while engine size, fuel system, transmission type and drive type are less so. The effect of a change in characteristic r of vehicle z on vehicle v's expenditure share, [[DELTA].sub.r,z] [w.sub.v], can be stated as: [[DELTA].sub.r,z] [w.sub.v] = [[theta].sub.v,z] [vo.sub.z][ exp ([[lambda].sub.r,z]) - 1 ] (17) When [vo.sub.z] is equal to 1, vehicle-characteristics effects (captured by the term in square brackets) will be negative, zero, or positive depending on whether [[lambda].sub.r,z] is negative, zero, or positive, respectively. These effects are weighted by vehicle-ownership parameters, [[theta].sub.v,z], to determine the ultimate sign and magnitude of vehicle effects on expenditure shares. Discussion of vehicle effects can be simplified by observing the following. All diagonal elements of the vehicle-ownership parameter matrix are positive, while all off-diagonal elements are negative. Apart from matching our expectations, this observation implies that own- and cross-vehicle-ownership effects will change expenditure shares in opposite directions. Thus, the sign of a characteristic's own-vehicle effects will be the same as that carried by its estimated coefficient, and opposite for cross-vehicle effects. Given this, the discussion below focuses on vehicle 1's own-characteristic effects. The own-vehicle-ownership parameter for vehicle 1 is 1.12. This is consistent with the fact that all households in the database own at least one vehicle (vehicle 1). Body type coefficients are all positive for vehicle 1. Thus, compared to Cars, other body types will increase vehicle 1's expenditure allocation, holding all other variables constant. Large Vans have the largest effect followed by Minivans, Station Wagons and Sport Utility Vehicles. The effect of vehicle age on vehicle 1 is positive for the 3-5 year age category, but negative for other categories. The positive coefficient is insignificant and small. Thus, one may conclude that vehicle 1 is used less as it gets older. Relative values of the coefficients for Vehicles 2-4 lead to the same conclusion for each vehicle. Coefficients for number of cylinders in vehicle 1 are all positive, while that for engine size, are all negative. However, those for cylinders are significant while those for engine size are not. Rear wheel drive has a negative and sign ificant coefficient, while 4-wheel drive has a positive but insignificant coefficient for vehicle 1. Expenditure allocation also favors fuel injection vehicles over diesel systems for vehicle 1. Given that transmission type is likely to be more of a driving convenience feature, the coefficient estimate for manual transmission can be expected to be zero or negative. It is negative for all vehicles. Elasticity Calculations Table 6 contains mean and standard deviations of calculated elasticities across households. Lack of symmetry in the price elasticities matrix mean that only own-price estimates can be given any consistent interpretation. Since price term coefficients are close to zero, equation 13 implies that price elasticities are dependent on the expenditure coefficients, [beta], and initial expenditure shares. (8) Accordingly, we observe that uncompensated own-price elasticities are all close to unity, with vehicles 1 and 4 being slightly inelastic, and vehicles 2 and 3 being slightly elastic. Expenditure coefficients do not enter the compensated price elasticities calculation. Consequently, compensated own-price elasticities are smaller in magnitude than uncompensated counterparts ranging from -0.36 for vehicle 1 to -0.70 for vehicle 3. Mean expenditure elasticity estimates for all vehicles, except vehicle 1, suggest that fuel use is slightly expenditure elastic. The highest estimate is only 1.05 for vehicle 2. The stand ard deviation of expenditure elasticities is less than half the mean for all vehicles. The matrix of Allen elasticities of substitution is symmetric. Therefore it provides a more consistent explanation of price-induced substitution effects than price elasticities. As seen from Table 6, all vehicle pairs are substitutes. Most of the elasticities are close to 1, but those between vehicle 4 and vehicles 1 and 3 are around 0.6. We note that the own-Allen elasticity for vehicle 4 is positive. Thus, the expenditure function violates regularity conditions for some observations in our database. CONCLUSION Building on previous efforts, a household vehicle-fuel expenditure allocation model based on the Almost Ideal Demand System of Deaton and Muellbauer (1980) has been presented. This approach fits into both the multi-budget and household production function frameworks, and incorporates a comprehensive set of household and vehicle characteristics. Parameters of the system of expenditure share equations are estimated using cross-sectional data for 7,272 United States households from the 1988, 1991 and 1994 RTECS. The model is a good fit to the data with [R.sup.2] of around 0.7 for all equations. The most significant factors in the fuel expenditure allocation process are vehicle characteristics. All vehicles are substitutes for one another, but to different degrees. Vehicle 1 is expenditure inelastic, while all other vehicles are expenditure elastic. These results provide some useful insights into household vehicle use behavior. First, use of a flexible functional form allows elasticities to vary across households allowing for more detailed analysis of price and income effects. Thus, the standard deviation of calculated elasticities, especially expenditure and compensated price, are non-negligible. Second, price elasticities are not trivial although price coefficients are close to zero (see footnote 8). This is because elasticities derived from the AIDS involve both price and expenditure coefficients that capture the effect of price changes on real expenditure. The significant differences between compensated and uncompensated price elasticities in Table 6 emphasize this point. Another evidence on this effect is Kayser (2000). In that study, a positive price term coefficient was offset by a negative price-income interaction coefficient to produce a low, but negative, price elasticity. Third, this approach allows substitution/allocation effects to be disent angled from aggregate effects in household transportation decisions. Our findings on the importance of vehicle characteristics in household vehicle usage are in accordance with those of Green et al. (1999). The latter is the only other study to incorporate characteristics other than body type and fuel economy in a vehicle utilization model. The current approach also addresses a difficulty in multi-vehicle household modeling pointed out by Greene et al. (1999) that "including the characteristics, as well as the use of every other vehicle in each vehicle's own use equation leads to an unwieldy (and possibly unestimable) system of equations." By partitioning vehicle effects into vehicle-ownership and vehicle-characteristic effects, the model parsimoniously captures 304 own- and cross- vehicle effects by 92 parameters. What are the implications of these results for policy? Although the elasticities calculated in this study are for individual vehicles (ordered by vehicle age - see footnote 6), and therefore not directly comparable to those from most previous studies, it is safe to conclude that the corresponding aggregate household elasticities are likely to vary considerably across households. This implies that reliance on aggregate elasticities that are averages over household groups for policy formulation or simulation could be misleading. Groups on either side of such averages may respond differently from policy intentions, with consequences for fairness and overall effectiveness. The importance of vehicle attributes mean that policies affecting vehicle choice may be useful in changing vehicle use behavior. Although this lends some support to CAFE standards-type policies, the results also suggest that policy designs require careful evaluation. A policy may induce a single-vehicle household to respond in a number or mix o f different ways including, disposing its vehicle, replacing and/or adding to vehicle holdings, and changing the pattern of vehicle(s) use. Policy responses in multi-vehicle households will be even more complex. The current model begins to capture some of these effects. Efficiency parameter estimates, for example, show that own-efficiency improvements in multi-vehicle households decrease expenditure allocation to that vehicle, but lead to increased allocation to other vehicles. This means that efficiency effects on total fuel use may be a net decrease or increase depending on the efficiency mix of vehicle holdings, fuel prices, and effects on real expenditures. The flexibility engendered by household substitution of vehicles is essential to measuring policy effects. The main limitations of the current exercise are related to issues of selectivity bias and violations of theoretical regularity conditions. Selectivity bias can be corrected by jointly estimating a vehicle choice model with the allocation model. Moreover, a vehicle choice model and an aggregate transportation demand model will be needed to complement the model in this study for policy analysis purposes. Violation of regularity conditions is an inherent problem of the AIDS and other flexible functional forms. This can be resolved, on the one hand, by imposing the corresponding conditions locally and examining the range of regularity around the point of interest. If the function remains regular over the practical region of interest the model would be useful for policy analysis. On the other hand, similar but more regular functional forms can be tested against the AIDS. Although the model based on our choice of vehicle ordering performs quite well as indicated by Table 3, it will be an interesting exercise to ex plore the effect of alternative orderings. In addition, alternative data types, such as panel data that traces households over time, will be needed to examine the dynamics of household vehicle use behavior. These and other extensions are reserved for future research. Table 1

01/01/2003
Priority: Saving a Few Bucks
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Priority: Saving a Few Bucks

BY Reverend Kathy Leonard

The most telling line in your reporting of the Measure 28 defeat was the quote from Russ Walker of Citizens for a Sound Economy: "It really says something about where people's priorities are" ("Voters reject tax increase," Jan. 29). Yes, it certainly does. It says that Oregonians' priorities are for saving ourselves a few bucks each week, but not for public education, higher education, public safety, our justice system, or health care for our poor. Don McIntire, president of the Taxpayer Association of Oregon, was quoted as saying, "We've had months and months of talk of calamity if Measure 28 failed. Now I want to see that calamity" ("Light and heavy hearts greet news," Jan. 29). Mr. McIntire, here it comes. I grieve for our state.

01/01/2003

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