Re:Four Reasons a Guaranteed Income Won't Work
by scarmig on Friday December 06, 2013 @10:34PM
(#6865356)
It creates a steep marginal tax rate.
Imagine that there's a basic income of $12,000/year. It's means tested so that people making $36,000/year don't receive any funding.
If you go with a simple flat implementation of this, it amounts to a 33% tax rate on the first $36,000 of income. And that's at best--if you go with something that causes basic income to phase out only between $24,000 and $36,000, you go from $24,000 regular + $12,000 basic income to $36,000 regular and $0 basic--a 100% marginal rate.
You can make it phase out over larger and larger income ranges--say, make it phase out at a flat rate between $0 and $100k--but at that point you get very little of the cost benefits of means testing.
Imagine that there's a basic income of $12,000/year. It's means tested so that people making $36,000/year don't receive any funding.
If you go with a simple flat implementation of this, it amounts to a 33% tax rate on the first $36,000 of income. And that's at best--if you go with something that causes basic income to phase out only between $24,000 and $36,000, you go from $24,000 regular + $12,000 basic income to $36,000 regular and $0 basic--a 100% marginal rate.
You can make it phase out over larger and larger income ranges--say, make it phase out at a flat rate between $0 and $100k--but at that point you get very little of the cost benefits of means testing.