4 ms·

I'm not necessarily opposed to means-testing; for example, progressive income tax rates can be seen as a form of means-testing, and I think they're a good thing

I'm not necessarily opposed to means-testing; for example, progressive income tax rates can be seen as a form of means-testing, and I think they're a good thing. What I care about is that the function from income earned to income (including subsidy) received be monotonic. Again, the income tax system (at least in the US) is carefully designed to have this property: when you make enough more money to move into a higher tax bracket, that higher rate is applied only to the amount of your income in excess of the lower bound at which that bracket applies. So the total amount of tax never jumps discontinuously, even though the marginal rate increases. Even though you keep less of your next dollar of earnings the more you make, there's never a point at which earning the next dollar will leave you with less money after tax. The same should be true even if you're receiving a subsidy. That's all I'm saying.

AnthonyMouse 10y ago
The combination of a fixed-amount UBI and a fixed-rate tax does exactly what people want. The marginal tax rate is completely unwavering for everyone and the effective tax rate ((tax paid - UBI)/income)) follows a nice continuous progressive curve. > Even though you keep less of your next dollar of earnings the more you make, there's never a point at which earning the next dollar will leave you with less money after tax. The problem is that's not the only thing you want. You also don't want marginal rates of 75%+ for low and middle income people. It's not only that taking a $20K/year job shouldn't cost you $21K/year in benefits, it's that it shouldn't cost you $15K/year in benefits while you now incur more transportation and childcare expenses.
- hibikir 10y ago
  A fixed amount UBI and a fixed rate tax doesn't do exactly what people want, because it is a huge tax break at the top, and a huge tax increase in the middle if we want to be revenue neutral: The shape of the curve is very different from the current one, and there would be huge winners and losers. Nothing short of a 50% fixed rate will not be a huge tax break for us in the 1%. I don't know about you, but I don't think that the problem in the US system is that a family with two senior developers pays too many taxes. Therefore, on top of a UBI, the only thing that doesn't screw the middle class over is to maintain a progressive tax rate.
  - AnthonyMouse 10y ago
    You have the math wrong. > Nothing short of a 50% fixed rate will not be a huge tax break for us in the 1%. The current highest bracket in the US is 39.6%, which doesn't come into play until you've made more than $400K. The vast majority of "middle class" people pay 28% marginal rates or less -- anyone up to $190K for single or $231K for married filing jointly. A household making $200K currently pays an effective tax rate of ~22% -- and that's $200K after all the deductions. To meet the same effective tax rate with a flat tax against a $12K/year UBI would require a flat tax rate of 28%. Moreover, to be in "the 1%" you need household income in excess of $400K. And most of the actual 1% pay the long-term capital gains rate, currently up to 20%, whereas with a 28% flat tax they would be paying 25 to 28%.
briandear 10y ago
That's still a disincentive: my effectively hourly rate decreases the more hours I work. Not sure how that's fair. A flat tax is the only fair tax. You make more, you pay more, but you aren't taking an effective pay cut per hour based on simply working more.
- taeric 10y ago
  Most flat taxes do not land in the "you make more, you pay more" scheme. Instead, they are in the "you spend more, you pay more." Which, doesn't sound bad, necessarily. However, there are two problems that I see. I suspect there are more. First is that what you spend is only related to what you make. Specifically, it is relatively easy to find ways to not spend money if you have extra. What this means is that, at an absolute level of what you make, a flat tax actually gives a very easy way for high income people to have a lower tax rate. Turning it into "the more you make, the more you can proportionally keep." Which is sorta antithetical to the idea of the flat tax. The second problem is essentially the cold start problem. Society is expensive to keep going. There is not much of a way around that. So, the rate will have to be relatively high to get the necessary funds. And this will hit those with low incomes harder than the ones with high. I don't think either of these are necessarily road blocks to the idea. But, I do think it will necessarily get complicated.
  - nocman 10y ago
    'Most flat taxes do not land in the "you make more, you pay more" scheme': I think you are missing the point. If it is truly a flat tax, the number of dollars you are taxed goes up (in a directly proportional way to the number of dollars you make). So you DO pay more the more you make. It isn't even a logically arguable point. "a flat tax actually gives a very easy way for high income people to have a lower tax rate.": -- again that's a completely illogical statement. If it is truly a flat tax *EVERYONE* has the same rate -- that's the very definition of a flat tax.
    - taeric 10y ago
      The entire first point is on the assumption that you are pushing the flat sales tax that is very common. Is anyone pushing for a flat income tax? If so, apologies. It is still easier for the wealthy to dodge. But not as easy. (Main way I can think of is that at that level you can often live off the company. I don't think this happens enough to care about. Could be wrong.) This still doesn't address the cold start problem. If a region needs X dollars and that requires Y rate, how do you ensure that doesn't drown out the poor? And again, I'm not pushing these problems as show stoppers. Just things that contribute to a complicated solution.
coredog64 10y ago
There are some corner cases in the US system. AMT is a big one, but there are more than a few deductions that get phased out based on income.

AnthonyMouse 10y ago

The combination of a fixed-amount UBI and a fixed-rate tax does exactly what people want. The marginal tax rate is completely unwavering for everyone and the effective tax rate ((tax paid - UBI)/income)) follows a nice continuous progressive curve. > Even though you keep less of your next dollar of earnings the more you make, there's never a point at which earning the next dollar will leave you with less money after tax. The problem is that's not the only thing you want. You also don't want marginal rates of 75%+ for low and middle income people. It's not only that taking a $20K/year job shouldn't cost you $21K/year in benefits, it's that it shouldn't cost you $15K/year in benefits while you now incur more transportation and childcare expenses.

hibikir 10y ago
A fixed amount UBI and a fixed rate tax doesn't do exactly what people want, because it is a huge tax break at the top, and a huge tax increase in the middle if we want to be revenue neutral: The shape of the curve is very different from the current one, and there would be huge winners and losers. Nothing short of a 50% fixed rate will not be a huge tax break for us in the 1%. I don't know about you, but I don't think that the problem in the US system is that a family with two senior developers pays too many taxes. Therefore, on top of a UBI, the only thing that doesn't screw the middle class over is to maintain a progressive tax rate.
- AnthonyMouse 10y ago
  You have the math wrong. > Nothing short of a 50% fixed rate will not be a huge tax break for us in the 1%. The current highest bracket in the US is 39.6%, which doesn't come into play until you've made more than $400K. The vast majority of "middle class" people pay 28% marginal rates or less -- anyone up to $190K for single or $231K for married filing jointly. A household making $200K currently pays an effective tax rate of ~22% -- and that's $200K after all the deductions. To meet the same effective tax rate with a flat tax against a $12K/year UBI would require a flat tax rate of 28%. Moreover, to be in "the 1%" you need household income in excess of $400K. And most of the actual 1% pay the long-term capital gains rate, currently up to 20%, whereas with a 28% flat tax they would be paying 25 to 28%.

briandear 10y ago

That's still a disincentive: my effectively hourly rate decreases the more hours I work. Not sure how that's fair. A flat tax is the only fair tax. You make more, you pay more, but you aren't taking an effective pay cut per hour based on simply working more.

taeric 10y ago
Most flat taxes do not land in the "you make more, you pay more" scheme. Instead, they are in the "you spend more, you pay more." Which, doesn't sound bad, necessarily. However, there are two problems that I see. I suspect there are more. First is that what you spend is only related to what you make. Specifically, it is relatively easy to find ways to not spend money if you have extra. What this means is that, at an absolute level of what you make, a flat tax actually gives a very easy way for high income people to have a lower tax rate. Turning it into "the more you make, the more you can proportionally keep." Which is sorta antithetical to the idea of the flat tax. The second problem is essentially the cold start problem. Society is expensive to keep going. There is not much of a way around that. So, the rate will have to be relatively high to get the necessary funds. And this will hit those with low incomes harder than the ones with high. I don't think either of these are necessarily road blocks to the idea. But, I do think it will necessarily get complicated.
- nocman 10y ago
  'Most flat taxes do not land in the "you make more, you pay more" scheme': I think you are missing the point. If it is truly a flat tax, the number of dollars you are taxed goes up (in a directly proportional way to the number of dollars you make). So you DO pay more the more you make. It isn't even a logically arguable point. "a flat tax actually gives a very easy way for high income people to have a lower tax rate.": -- again that's a completely illogical statement. If it is truly a flat tax *EVERYONE* has the same rate -- that's the very definition of a flat tax.
  - taeric 10y ago
    The entire first point is on the assumption that you are pushing the flat sales tax that is very common. Is anyone pushing for a flat income tax? If so, apologies. It is still easier for the wealthy to dodge. But not as easy. (Main way I can think of is that at that level you can often live off the company. I don't think this happens enough to care about. Could be wrong.) This still doesn't address the cold start problem. If a region needs X dollars and that requires Y rate, how do you ensure that doesn't drown out the poor? And again, I'm not pushing these problems as show stoppers. Just things that contribute to a complicated solution.

coredog64 10y ago

There are some corner cases in the US system. AMT is a big one, but there are more than a few deductions that get phased out based on income.