Oh okay this makes sense.
> To make up for this, you raise the taxes a commensurate amount on the people who don't need it
Wait just a second..
This has already happened in various countries like the UK until the 1970's. In New Zealand the top income tax was 66%, and a "UBI" for everyone 60 and over, regardless of their income, was introduced. Of course those with high incomes paid up to 2/3rds of this back to the govt as income tax. In the 1980's, NZ followed the UK in slashing income taxes to the levels found in the US. The qualifying age for the "Universal Basic Income" was progressively increased to 65, with tentative plans to raise the age even further in the near future.
If the experiment there was to be extended, then the top income tax would have remained at 66% and the qualifying age for this "UBI" progressively lowered in stages down to 18 as the country could afford it. To see why the experiment was cancelled, I think we should look at why the income tax was lowered in these countries. Perhaps the rich lobbied for less taxes, and threatened to shift their businesses to Australia and other countries.
Needless to say, I'm not claiming that FirTax would work. I'm just pointing out the similarities between it and UBI. If this experiment shows evidence that UBI doesn't work, then that gives me less confidence in FairTax as well.
It's a flat tax on consumption, which is a regressive tax on income; when unspecified, progressive/flat/regressive in regard to taxation conventionally refers to relation to income.
> but it doesn't really matter since as long as the prebate value is large enough, the poor still come out ahead.
The size of the prebate (and the 23% rate) is part of the FairTax proposal (though a slighlty incoherent part, since it is defined in terms of income, not spending)—it is defined at the level that a taxpayer would pay 0 net FairTax with poverty level income (presumably, this assumes 100% spending at poverty level.)
>Internet purchases would be taxed, as would retail international purchases (such as a boat or car) that are imported to the United States (collected by the U.S. Customs and Border Protection).[53]
Who will pay for UBI? -- income tax. Raise the per capita income rate an average of £12,000, (£15,000 pounds minus the ~3,000 in savings you calculated earlier).
No net impact on the average taxpayer, little impact on the rich and massive impact on the poor.
There are about 31 million taxpayers in the UK. The basic income tax rate of 20% for income up to £42k/year generates 33% of the income tax revenue. Let's agree that these are not the rich people we want to tax. (88,7% of Britons earn less than £50k/year.)
The higher (40%) and additional (45%) tax rates generate the rest 67% or £117 billion of the £174 billion income tax revenue.
In order to raise additional £472 billion, we would have to increase the higher and additional tax rates to approximately 211%.
As you can see, taxing the "rich" cannot raise enough money to give everyone unconditional poverty line minimum income.
Source: https://www.gov.uk/government/statistics/income-tax-liabilit..., https://www.gov.uk/income-tax-rates
I definitely do not agree. BI is only viable if the average taxpayer sees no or very little net benefit from BI. So the average taxpayer would pay £15k extra in taxes if they receive £15k in BI. And £42k is above average (but not a lot, the medium income is £21k, but only a little more than half of adults are taxpayers)
More importantly, if both him & the freeloader are spending £15k on rent & food, then the freeloader has £0k of disposable income and the worker has infinitely more disposable income.
Another way of looking at it is that average taxpayer with UBI has an income of between £35k and £45k and has a marginal rate not much different from what people making £45k are paying right now. People making £45k aren't currently significantly demotivated by taxes, are they?
"the average taxpayer would pay £15k extra in taxes if they receive £15k in BI"
vs
"Another way of looking at it is that average taxpayer with UBI has an income of between £35k and £45k".
Today a taxpayer with median income £21k takes home £19k net. After your reform, he will take home the same £19k net (remember: pay £15k extra in taxes if they receive £15k in BI). Except hew will now be way below the median and making only £4k more than the now ubiquitous dude Lebowski type.
And the thing is, many people who are actively looking for work or disabled already receive more than the UBI in other benefits being cut to fund this. The true beneficiaries? Upper middle class people who've paid off their mortgage, built up savings and wish to retire a decade or two earlier and traditional housewives. The losers? The working young and single people.
[1] https://www.cbpp.org/research/romneys-charge-that-most-feder...
Wrong. The system doesn't work if you don't give people to money who don't need it: the administrative requirements of assessing who and who doesn't need it, and then policing all this, is just too high. This is the reason UBI was invented in the first place!
It's very simple: you give the same money to everyone, even if they're a billionaire. To make up for this, you raise the taxes a commensurate amount on the people who don't need it (and more for the really rich people, because the idea is wealth redistribution). So someone making $100k, for instance, obviously doesn't need a handout, so you raise their taxes that same amount so they're paying back in taxes what they're getting from the UBI, and netting zero. It's much easier to do this than to have thousands of government workers auditing everyone to make sure they aren't "cheating" by receiving money they're not qualified for, which is what we do with current welfare schemes.
>Sooner or later people will realize that what they really want is tax/benefit reform
No, tax reform doesn't do anything to reduce the administrative burden of current welfare systems. UBI does. Less money you pay out for unnecessary government office workers is more money you can end up giving to people in need, and society will be better off with those government workers finding more productive professions which might actually generate more wealth and taxable income, instead of just being a drain on taxpayers.