That's a more gradual phase-out, but it still is an effective marginal tax rate of 50%+ – a level that wealthy earners would complain about to no end.
In light of this study, it seems to me that a cash-support system that wants to encourage work should have a starting region with a negative effective phase-out rate: "for every $1 you make up to $X, you get $0.25 more from UBI/Welfare." That would encourage labour-market attachment even if tenuous, and it would also have a side benefit of making the worker want to report the income, possibly uncovering under-the-table payment schemes.
Nobody tell this guy about the Earned Income Tax Credit. Let him think he discovered it.
I know about the EITC, but the ETIC net of benefit clawbacks still presents a high marginal rate. Then the EITC itself gets clawed back at its own threshold, imposing a small region of high marginal rates. (The EITC itself is also rather paltry for filers without children.)
Additionally, the US tax system is ill-structured to really implement this. If you're trying to operate on the "under-the-table cash payments for day labour" margin, a system that depends on filing one's taxes to receive a refund later is not exactly hassle-free.
Excel1040 is great for this - https://sites.google.com/view/incometaxspreadsheet/home
Yeah, my wording could have been better. The suggestion that I've seen for UBI is $12k/year (which is clearly not enough to live on in today's economy), with the $2:$1 reduction being only for the UBI, and then standard taxes starting after that.
This system was actually proposed a looong time ago (like 1970s, I think). Just by giving everyone a massive tax credit to start with.
The main problem with this is that the tax system is set up to prevent you from under-reporting your income. Over-reporting it is essentially trivial, e.g. two people who are in the relevant income range exchange favors (do each others' laundry etc.), or claim to have, and then actually report the transactions as income and get the credit.
But there's something else you can do here which is really neat. Stop using a complicated progressive rate structure, and instead eliminate the phase out entirely. Now instead of low income people having a nominal 0% tax rate but an effective 50% benefits phase out rate and high income people having a nominal 30% tax rate, you just use a flat 35% tax rate which implicitly has the benefits phase out built into the tax system. Which means you don't need any of this income reporting or annual tax returns or anything of the kind, the employer/seller just withholds the fixed tax rate and you're done, and everybody unconditionally gets the UBI to provide the effect of a progressive rate structure.
If you want it to be more progressive you raise the flat tax rate and use the money to increase the UBI. If you want a less progressive system with lower taxes you do the opposite. Making it needlessly more complicated gains you nothing and costs you efficiency.
In a system that taxes at 5% up to $50,000 and 30% thereafter, the state gets a total of $18,500 from Alice and Bob.
In a system that taxes at 5% up to $50,000 and 40% thereafter, the state gets $23,500 from Alice and Bob.
In a system that taxes everyone uniformly at 25%, the state gets $30,000 from Alice and Bob. This is not a smaller number and 5/6ths of it is from Alice. In fact, you can use that money to give them each a $12,000 UBI, leaving Bob with an effective tax rate of -35%, delete all of the transfer programs that obsoletes and still have some left over for transit and uniforms.
True, but this is less of a problem if the credit rate is comparable to the payroll tax rate. In that case, a worker who over-reports their income will create an obvious payroll-tax debt in the hands of the notional employer.
> Stop using a complicated progressive rate structure, and instead eliminate the phase out entirely.
From a welfare-cliff perspective, that's a fine idea. However, per the article here, the unconditional cash transfer seemed to lead to reduced labour income. That's an obviously worrisome sign, suggesting that integrated welfare system might need an even stronger pro-wage bias.
But that's just an accounting sham to claim you're taxing them less than you are and you no longer actually have a negative marginal tax rate.
> However, per the article here, the unconditional cash transfer seemed to lead to reduced labour income. That's an obviously worrisome sign
Well that's mainly because they worked 1.3 fewer hours a week and were less desperate to take a low-quality job.
You might also notice that the effect you're referring to isn't net of the payments, and is also probably invalidated by the period the study was done -- it started during COVID. Between the first and last year of the study, the household income for the control group increased by $20,000 -- on a $30,000 base! The experiment group increased by almost as much before the payments and were ahead by more than $6000/year including them.
In any event, you don't have to use a different rate structure to do what you suggest, you get the same effect without the complexity by increasing the flat tax rate and adding the money to the UBI.
That's..that's not UBI, at all. UBI is universal. If there are any means tests whatsoever, that's not UBI.
The only way the numbers would ever balance would be for most income earners to end up being taxed >100% of their UBI payment.
The sum total of the wealth of all the billionaires in the US in 2021 was ~$4.1 Trillion [0]. That's about the same as the government budget in a normal year pre-pandemic, or about 2/3 of the government budget post-pandemic.
Assuming a $1000/month and a population of ~350 million, you're looking at $4.2 Trillion per year. You could almost fund it for the first year by taxing all of the wealth of the billionaires at 100%.
But what are you going to do the second year? That's total wealth, not yearly income.
[0] https://www.forbes.com/sites/tommybeer/2021/01/26/report-ame...
I never understood the UBI argument. 30 seconds of napkin math would show you how insane the proposal is, even at the rate of $1000/month. If you want to increase welfare for those below the median income, fine, let's have that discussion. Don't play games with the word 'universal'
No one serious is suggesting "everyone gets $1000/month and literally nothing else changes".
The welfare plans that might be subject to being replaced only amount to a few percent of the federal budget. The bulk of the budget is those plans above, which would result in less benefits if replaced. You're not paying for this by finding lost coins in the couch cushions.
Medicaid and Medicare being wholly replaced by a truly universal plan unrelated to UBI is probably a prerequisite for a UBI for a bunch of reasons. Social security would probably be unaffected, at least initially, and SSI/disability would likely either be reduced or gradually phased out, depending on the amounts.
I know the other various benefits aren't huge in the budget, but they add significant bureaucratic burden to both the state and the individual. Eliminating that would be a big benefit of UBI.
This has been discussed for decades. The US healthcare system is one of the biggest impediments to other forms of governmental change.
Printing money to make the shortfall is how US public sector budgeting has worked for decades.
The advantage of doing it this way is that it makes it clear what's going on. Right now we nominally impose low marginal tax rates on the poor but their effective marginal tax rates are high because of benefits phase outs, so their effective marginal tax rates are higher than the wealthy. With a UBI you replace the benefits with cash payments and eliminate the phase outs, but also flatten the tax rates so the poor are paying the same effective marginal rates as the rich, instead of higher ones.
The result would be that the poor pay slightly lower effective marginal rates and the rich pay slightly higher ones (although you don't even inherently have to do that; it depends entirely on the tax rate and the amount of the UBI), but the overall system is much simpler. And the consequence that the poor are paying higher effective marginal rates than the rich, which was presumably never intended, goes away.
That said, if we want to talk taxes, I think a progressive tax system is nearly always wrong, immoral, and unfair, so you probably would disagree with any adjustments I'd suggest. :)
The fair way would be if sentences had to pattern match "I think [scheme] is a good idea and we will pay for it by [specific tax proposal].". Seems unlikely in practice though.
Every seller has a buyer. Who would be buying these liquidated stocks?
What would the estimated new equilibrium be? What would be the effects of this equilibrium compared to the current state? Can we estimate the pros and cons?
Conversely, holding the belief that stock prices are crucial to our betterment, wouldn't that imply that we would be better off if stock prices were higher due to more wealthy people owning stock and fewer non-wealthy people owning stocks? At face value that doesn't sound right, so I must be getting something wrong.
The driving factor there isn't who owns it, but how rapidly it's being sold. The exact same situation would occur if the stock was already owned by everyone equally, and they were all forced to sell due to a wealth tax on everyone - the price would crater.
And that's right, its not meant to pay for people who can pay their way themselves, just like in most income redistribution schemes the rich would be taxed at several (thousand?) multiples of the value they receive back.
In the current regime, the rich gain far more benefits from taxes (they pay little, and get to offload much of their cost of society to the rest of us) than in a UBI approach. That's the point.
2. Yes, no matter what, the richest people are going to receive so little benefit relative to their wealth/income that they won't support it. The same is true for most public services, actually. The ultra-wealthy receive little-to-no direct benefit from Social Security, Medicare, food stamps, public transportation, public schools (big one), public universities, or even public police and firefighters (they can afford their own). But somehow they haven't (yet) managed to rid themselves of these horrible violations of their privilege.
The same is true here. If you make $0, you get $12K UBI. If you make $24K, you get $0 UBI. Is that universal?
And again, Guaranteed Income is just another form of "benefits earmarked for the politically powerless."
The system could be as simple as "UBI, also income tax is 50%, end of description".
In the second scenario, when do I get/spend my UBI money?
That's valid, but when someone's roughly describing a plan I'll give them the benefit of the doubt and worry about whether it can be framed the correct way rather than whether they framed it right.
> In the second scenario, when do I get/spend my UBI money?
I don't know, every two weeks? So it's the difference between a $460 UBI check and a $400 paycheck, versus a $60 UBI check and an $800 paycheck.
This idea is called a negative income tax.
In the system that was described it would take two units of income to decrease one unit of benefits, allowing total income to increase with an increase in levels of work income, while not having a hard cutoff for benefits. This is an approximation of what would occur in a negative income tax system and it would not result in a net decrease in earnings considering it takes twice the earnings units to lower one unit of benefits.
Just subsidize the minimum wage. It's dead simple. Raise the minimum wage by $x but have that extra $x be paid from taxes, not the employer. Big businesses will scream "But inflation! But wage-price spiral!". Their screams are to be ignored.
The "investment" (assuming that's what you mean by the math) can be as high or as low as any other proposal, there's nothing special about it. You can adjust the $/hr that you subsidize and the size of the group that is eligible to fit the proposed investment.
This resulted in people that were trying to start a business not get paid for their work (I believe one of the anecdata was a photographer) because doing so would mean they couldn't support themselves.
Personally, I'm a big fan of the "for every $2 you make, you get $1 less from UBI/Welfare" concept. This seems a very easy way to wean people off of welfare. That money is already tracked by the IRS (unless you're getting paid under the table).