FP Explainer

Was the Seven Billionth Baby Really Born Today?

Perhaps, plus or minus 50 million babies.

The United Nations has designated Oct. 31, 2011, as the "symbolic" date at which the world's population reaches 7 billion. But rather than choose one newborn to represent the demographic milestone, as it did for the six-billion mark in 1999 by tapping a Bosnian boy whose family has since struggled to stay healthy and afloat financially, the U.N. has decided to let a thousand flowers bloom. A spokesman for U.N. Secretary-General Ban Ki-moon recently encouraged "all countries to pick a symbolic baby 7 billion."

Several countries are heeding the advice. There's Danica May Camacho of the Philippines, who was born in Manila two minutes before the stroke of symbolism (a.k.a. midnight) on Sunday and welcomed into the world with camera flashes, a scholarship for her education from local benefactors, and a cake from U.N. officials, according to the Guardian. But there are also babies from Bangladesh to Cambodia laying claim to the title. The child rights group Plan International has recognized Nargis, a girl born today in India's Uttar Pradesh state and pictured above with her mother at a village health center, as the seventh billion human in an effort to highlight female feticide and India's skewed sex ratio.

As the stories of today's celebrated newborns suggest, and as the U.N. itself has admitted, today's 7-billion hoopla is primarily a useful fiction -- a chance to focus the world's attention on rapid population growth and its myriad implications rather than a real attempt at pinpointing the precise time and place of the demographic milestone.

Forecasting population growth, after all, is an incredibly messy business. While data from the developing world is getting better, countries like Lebanon, Somalia, and Uzbekistan haven't conducted costly censuses in decades. And the data countries do provide is often controversial. As the BBC points out, China has well-organized censuses but may underreport births because of its one-child policy. Undocumented immigrants and migrant workers make things even more difficult. In a rapidly changing world, it's also difficult to estimate future fertility, mortality, and migration rates.

All this uncertainty explains why the U.S. Population Reference Bureau claims the global population surpassed 7 billion weeks ago; meanwhile, the U.S. Census Bureau and Austria-based International Institute for Applied Systems Analysis argue we won't hit that mark until this coming spring, or even as late as 2014.

So how did the U.N. land on Oct. 31, 2011? Five demographers with the U.N. Population Division spent ten months developing statistical models that estimated fertility (the average number of children born to a woman) in each country using data from censuses, surveys, and national registers that the department refreshes every five years. But, as the Population Division explains on its website, these models typically have a margin of error of 1 to 2 percent.

That means the U.N. estimate could be off this year by plus or minus 56 million, if one assumes an error of 2 percent in populous countries like China, India, and Indonesia. If one assumes a 1 percent error on a global level, the world could reach the 7-billion mark six months earlier or later than today. "No one can determine the exact date of a 7 billion world population with an error margin smaller than about 12 months because of the inevitable inaccuracies in all demographic statistics," the division notes.

In other words, if we really want to cover our bases, we may want to celebrate the 7 billion milestone again next year.

Roberto Schmidt/AFP/Getty Images

FP Explainer

Does the U.S. Tax its Billionaires Less Than Other Rich Countries?

Depends what you consider rich. (But yes.)

U.S. President Barack Obama announced his new deficit reduction plan this week, including the so-called "Buffett Rule," which would allow the Bush-era income tax cuts to expire and close corporate tax loopholes. "Warren Buffett's secretary shouldn't pay a higher tax rate than Warren Buffett. There is no justification for it," Obama said this week, echoing comments to the same effect made by the Berkshire-Hathaway CEO billionaire in recent weeks. It's difficult to say whether that statement is actually true or not, but does America coddle its richest citizens more than other countries?

By European standards, yes. Compared to the developing world, not really. The top U.S. marginal tax rate -- 35 percent -- is low by the standards of developed countries. It's about 51 percent in Britain, 47.5 percent in Germany, and 40 percent in France. Until recently, Denmark's highest tax rate was a whopping 63 percent, but that's been recently cut down to about 51 percent -- good news for billionaires like Lego tycoon Kjeld Kirk Kristiansen. Not all rich countries tax heavily however. At 29 percent, Canada's top rate is actually lower than the United States.

But what about the dynamic growing superpowers of the developing world? Things are a little easier for the Learjet set there. Brazil's top income tax rate is 27.5 percent and India's is 30.9 percent. China's is a relatively high 45 percent; however tax evasion is pervasive, so it's unlikely that most of the country's 115 billionaires actually pay that much.

But income is only part of the story. The reason why Buffett's taxes are allegedly lower than his secretary, Debbie Bosanek, is that the vast majority of his income comes from investments, which in the United States is taxed at a rate of only 15 percent. The fact that making investments is, in fact, what Buffett does for a living is irrelevant.  

Other countries are not quite so generous. In Germany, for instance, dividends are taxed at a rate of 25 percent and sometimes as high as 60 percent. Moreover, in many European countries, investment professionals have to count dividends as labor income, meaning that they are taxed at the normal income tax rate. That's a pretty big distinction for someone like Buffett, who takes home a relatively modest annual salary of $100,000 but can pocket as much as $42.6 million in dividends in a given year.  

The United States wasn't always a billionaire's paradise, though. The top income tax rate was over 90 percent throughout the 1950s and early '60s. And from 1982 to 1985, under GOP favorite President Ronald Reagan, America's richest people were taxed on 50 percent of their income -- a figure even Scandinavia could love.

These days, the most billionaire-friendly places may be the post-Communist states in Eastern Europe, which have increasingly fallen in love with flat taxes. Steve Forbes's dream is now a reality in countries including the Czech Republic, Slovakia, Georgia, Bulgaria, Estonia, and more. Hungary introduced a remarkably low 16 percent flat tax last year, but this week, the debt-addled government announced new taxes on high-income citizens, overturning the rule. Sorry, Sandor Demjan.

The United States is also an outlier in its lack of a Value Added Tax (VAT), a tax on all commercial activities involved in the production and distribution of a product, which is ultimately paid by the consumer. VAT is used throughout the EU and in many other countries, including India, Brazil, and China. Several prominent policymakers including House Democratic Leader Nancy Pelosi and White House economic advisor Paul Volcker have suggested instituting a VAT as a means of addressing the U.S. deficit, but unsurprisingly, the idea of a new tax has gained little traction in Washington.

Thanks to Reuven S. Avi-Yonah, director of the International Tax LLM Program at the University of Michigan Law School.

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