I keep seeing this repeated in discussions about BI, but I honestly have no idea how it would be possible. I get that everyone receives the same size check, no matter what their income, but who pays for the BI program?

I assume it is funded through taxes and that people that earn more income will pay higher taxes. So once you take BI received - taxes paid, people that earn more outside income get less from the BI program than those that don't. And we are back in the same situation where a welfare program creates disincentives for work.

This is easily solved by making the personal standard deduction higher than the UBI.

So your first $10k (from BI) would be tax free. If you don't work, you don't pay any taxes.

Let's say you have a part-time job which pays $20k a year and the lowest marginal tax rate is 30%. You'd then pay $6k in taxes on that $20k.

Thus, your overall income would be $24k, much more than you got from just BI. This works if your only work is a single $100 lawn mowing job. BI, when coupled with an adequate standard deduction, eliminates disincentives to work.

Let's start with just calling the personal standard deduction 'income tax'. Then, I guess your tax system needs to be progressive, because just having everybody paying $6k tax wouldn't even be enough to pay for non-BI costs such as schools, infrastructure etc. So the highest incomes would probably see their BI disappear to the tax office.

Such a system looks a lot like the systems which are currently used in the Netherlands and Scandinavia. True, there are some differences: BI is called 'unemployment benefit' for those who don't work. And for those with a low income, there is no BI, but instead there are subsidies on housing, health insurance etc.

I don't think you understand my comment.

The personal standard deduction is not "income tax"—it's the opposite of a tax. It's the amount of your income which is not taxed.

This system wouldn't even necessarily require progressive taxation (though I would favor it). A flat tax rate of even 40% could be more than enough to provide for BI and everything else (and everyone would receive their BI tax-free).

It's very different from unemployment insurance because unemployment disappears once you start working. So there's no incentive to take on jobs which pay less than unemployment, or even to take on jobs which pay less than (unemployment + opportunity cost of working).

It might be helpful to do some research on how taxes (particularly deductions and marginal rates) actually work.

> So once you take BI received - taxes paid, people that earn more outside income get less from the BI program than those that don't. And we are back in the same situation where a welfare program creates disincentives for work.

If you fund a UBI program by, say, eliminating preferential rates for capital income, and adding supplemental brackets above the current maximum brackets, and tie the level of the UBI to (because the former actually simplifies reporting in a way which prevents doing this exactly rather than by estimates) an estimate of the revenue resulting from those changes, there's no actual disincentive to work compared to the status quo ante due to the UBI except for very high income workers(this isn't no additional disincentive compared to those in other welfare programs from the UBI, its no disincentive at all.)

There's a disincentive compared to the status quo ante to generating income from long-term capital gains, but the practical effect of that is probably only in the upper end of the distribution (in the lower and middle ranges, the relative comparative disincentive to earning that form of income is probably more than offset by the having more surplus income to invest.)

Yes, it creates a disincentive to work. The hope is that it creates much less disincentive to work relative to a means tested program. I don't think the structural economic advantages are enough of a reason to implement a BI (you have to start looking at fairness issues).

Typical proposed implementations just increase taxes at higher income levels. So there is a taper starting somewhere above the basic income where people that are working are benefiting less than people who aren't working, and there is some income level where the basic income is effectively a pure cost. But all those people have a higher effective income than they would have from the BI.

And it likely would represent a massive increase in spending for most countries, even if it was more efficient than welfare programs. Especially if you make payments outside the tax code, which ends up with a lot of spending that is just accounting.

Umm... No, that's the situation where taxes create a disincentive to work. Try solving that without having taxes be a flat fee.

Fine, but if BI is not funded through taxes, then how is it funded?

He didn't say _no_ taxes. He said _no flat_ taxes. Think progressive taxes instead: https://en.wikipedia.org/wiki/Progressive_tax

That isn't even strictly necessary. There is a difference between a "flat tax" (e.g. everyone pays 20%) and a "flat fee" (e.g. everyone pays $10,000). A UBI funded by a flat tax is completely unproblematic. People who make $80,000 pay $16,000 and this makes up the difference for the people who make $20,000 and pay $4,000 when they each get a $10,000 UBI.

$2-3 Trillion dollars in new taxes in the US.

So I gave an example of a liberal unemployment system which didn't work because it became too expensive. And your reply is that it doesn't apply to BI, because BI not only pays to people who don't work, but also to those who do work.

Doesn't this mean that BI will be even more expensive?

"Expensive" is terrible when talking about programs like this. This is not military spending - it isn't money just sucked out of the economy to effectively be dumped off a cliff with no economic return on investment (yes, military spending has a tiny rate of ROI, that doesn't change how absurdly inefficient an R&D program it is compared to, say, NASA). In a zero-overhead UBI system where you used existing databases to model who to send money to, every dollar in goes immediately back out to another taxpayer to spend.

There is absolutely no associated "cost" of the program, and there is demonstrable evidence that the poorer you are, the more efficient your dollar is at stimulating growth, because you are much more likely to have real goods demand rather than capital growth demand like the rich, where inevitably the money for a UBI comes from.

Everything a government does has some rate of ROI on it, determining how much it impacts the economy and how well the dollars are spent. Infrastructure and education are known force multipliers where every dollar spent produces many times more economic growth in return, making almost any infrastructure or education worth it until you get particularly exploitative. Likewise, having a good healthcare system compared to the American one would produce significant returns in quality of life, and economic factors like time working and it would cost less to use more preventative medicine to mitigate problems before they are life threatening catastrophes that cost the state millions.

In the same vein of thinking, healthcare is certainly a net positive investment. You spend a ton on it, but the alternative is people getting sick and dying and lost potential productivity from that outweighs the money you spend preventing it. In the same way, if UBI prevents social unrest, crime, violence, despondence, and death, then it also likely offsets the money going in and then some as well, despite possible overhead, since unlike healthcare / infrastructure / etc money going in does not take years to get a return on - the people who get it predominantly will turn around and spend it immediately on goods and services to keep your consumerism strong.

I'm not an economist but I'm wondering what do you think would happen to technology research and science and such if the rich were taxed this way? Would the economy shift more towards what the poor buy, rather than shift to what the rich spend their money on? Or does it all grow together or equalize in some way?

Of course it would shift - the financial incentives to start business come from uncountable factors, but one of the most significant has to be simply "where the money is".

UBI, by its design, creates incredible demand for a standard of living equal to it. Even if your margins are razor thin, the market is still very desirable because the revenue is some of the most reliable money there is (government money) and it is insanely consistent (people will need housing at the minimum level).

Which should terrify you. Any shift in real market demand for necessities post-UBI just represents how many people were impoverished without it, who did not have their base needs fulfilled and how much human rather than fiscal demand for needs was going unmet. The kind of progressive taxes necessary to redistribute so much money on so regular a basis would of course be significant for the higher earners, which would of course significantly curtail their economic influence, because while innovation is not zero sum, the annual allocation of finite resources is distributed in accordance with capital allocation to it - and that of course includes the spending habits of the poor.

It is a simple reality of markets that the more money you have the louder your demands are heard. So if you take from the rich and give to the poor, their relative voices change, but everyone grows together insofar as progress is always being made somewhere.

Yes. And it's paid for with higher progressive taxes. As taxes go up workers are increasingly incentivized to get paid under the table.

We have progressive taxes today, and the only people working under the table are predominantly the poorest, who cannot afford taxes and have less to lose. The richer you are, the more you have at risk getting caught for tax evasion, and the less likely you are to do it, until you get so rich and the amount lost in evasion so lucrative you can offset the risk by buying politicians, courts, and police while also writing the laws and having significant fail-safes protecting your money laundering.

But that would happen anyway. If you are taxing the ultra-rich period, at almost any % of income, there are strong incentives when the taxable total is in the millions or billions to evade taxes.

There are already lots of people willing to work under the table at low end positions, to avoid having taxes taken out of their pay. There's plenty of incentive. Seems like the way to curb this is to target employers rather than employees. That's why it's generally harder to find an under the table job than a legal one, because it isn't worth the risk to the employer to pay you off the books.

It still happens, but I doubt a BI would significantly impact this one way or the other. Right now, people in the bottom percentiles of pay get most or all of their taxes refunded, but still like to have under the table jobs to maximize what they take home every payday, and under BI, they would still likely remain unaffected by tax increases. The middle class would likely be affected, but they tend to work jobs that aren't as easy to do for unreported cash, and have more to lose from an audit if they get caught, so its still safer to work legally. The richest would naturally get the highest absolute burden, but they are likely already doing all they can to avoid taxes, since they can have a lot of effort put into it relative to the potential gains, so I don't see a huge migration to illegal undeclared income there, either.