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Can someone explain to me why UBI is preferable to a negative income tax? I don’t get why we’ve come up with a worse version of a 40 year old idea. Are these t

• mbesto 9y ago
  Wait, aren't they essentially the same thing?
  • deleted 9y ago
    [deleted]
  • wavefunction 9y ago
    Presumably the difference is that at some income threshold you start paying taxes, whereas right below it you don't. So to me it sounds like a terrible implementation of a basic income scheme, since someone making X pays no taxes but x+n pays some fraction of n in taxes and presumably has little real incentive to work for n additional dollars when n is sufficiently small enough that x is close to x+(n - tax). And then you've got all the bureaucracy of figuring out who earned less than x and applying whatever specific payment y to bring them up to x.
    • eksu 9y ago
      You don’t have a hard and fast threashold but have it taper off on a progressive curve.
      • wavefunction 9y ago
        Sure, but my main point about it being a terrible implementation is that it's still means-tested requiring a bureaucracy that our current non UBI system features, which would be unnecessary and a cost-savings under a UBI scheme where every citizen receives $x each year.
        • bryanlarsen 9y ago
          It's quite possible that the NIT would use less bureaucracy than the UBI because UBI would have it's own separate bureaucracy and doesn't eliminate the need for the department of revenue, whereas the NIT would just use the department of revenue for both. Either way, both require little extra bureaucracy.
        • pyoung 9y ago
          One of the main arguments in favor of a negative income tax is that it would require less bureaucracy, not more. With the tax, you could just let the IRS handle it, whereas with UBI you would probably set up another agency, similar to social security, to handle it. For what it is worth, from an economic perspective, the two ideas are basically identical. In a very hypothetically scenario: If someone gets a UBI of $500 a month, and then makes $500 in income with a 20% tax, than they would net $900 for the month. With an NIT, you would design it so that they get a tax credit of $500 per month, and then every $500 in income reduces their tax credit by 20%. So that same person would get $900 of the month.
    • rory096 9y ago
      >So to me it sounds like a terrible implementation of a basic income scheme, since someone making X pays no taxes but x+n pays some fraction of n in taxes and presumably has little real incentive to work for n additional dollars when n is sufficiently small enough that x is close to x+(n - tax). This is true of any tax scheme. NIT/UBI are intended to fix the 'welfare cliff' problem of making significantly less money by earning an extra $1 at certain point of the income curve than at higher ones, by setting a fixed marginal tax rate (even if you're a net recipient of distribution) or guaranteeing a fixed amount to everyone regardless of need, respectively. There is no discontinuity in effective marginal tax rates under NIT.
  • frgtpsswrdlame 9y ago
    Yes.
  • eksu 9y ago
    No. Universal Basic Income is ‘Universal’, meaning there’s no qualification to receive it. Basically it’s flat and it goes to everyone equally, rich and poor. A negative income tax is a progressive tax system that starts off in the negatives and works itself up as you move up in brackets or (ideally) on a smooth curve or line.
    • mbesto 9y ago
      > A negative income tax is a progressive tax system that starts off in the negatives and works itself up as you move up in brackets or (ideally) on a smooth curve or line. But if UBI says you get $30k/year in gross income and then if you choose not to do UBI, then you pay taxes on your income, isn't that essentially the same thing? Because if you get $30k/year in income from UBI, it wouldn't make any sense to tax an income that comes from taxes...right?
      • WorldMaker 9y ago
        Some theories of UBI believe UBI may only work if it is taxable income. Those theories include some sort of assumption that the defining characteristic of a fiat currency is it's value to pay taxes, so the way to control (hyper-)inflation is continue to set the value of the currency in tax policy. From that perspective the taxable portion of the income becomes a "year long loan" and that loan amount is useful to set expectations (versus interest/inflation) on the value of the overall UBI.
    • balfirevic 9y ago
      Negative income tax is not necessarily progressive tax system (as that word is commonly understood), and negative income paid to you by the state is not a "bracket". It is pretty much the same thing as UBI, when you look at the numbers.
  • balfirevic 9y ago
    They are usually very similar, depending on how your you set up your tax brackets. There might be operational differences, depending on concrete proposal (dispensing cash yearly vs. monthly, etc.)
    • jpindar 9y ago
      >dispensing cash yearly vs. monthly Which is not at all similar if you're poor.
      • balfirevic 9y ago
        Of course not, but that's neither here nor there when looking at differences between negative income tax and UBI. Both can be implemented on monthly basis.
  • bryanlarsen 9y ago
    Other than the assumption with Negative Income Tax that the money has to come from an institution that taxes (aka the government), yes they're essentially the same thing. Negative Income Tax is the term preferred by the right and UBI by the left, so there is probably a lot of very significant differences between any specific proposal labelled "Negative Income Tax" and any specific proposal labelled "UBI".
• stocktech 9y ago
  I too think a negative income tax is a better method, but UBI is at least testable in some form. I think we'll see UBI tested and if successful, a negative income tax will be more politically feasible than UBI.
  • wavefunction 9y ago
    A negative income tax requires the same sort of bureaucracy from our current means-tested welfare systems, whereas a simple UBI paid to all does not.
    • balfirevic 9y ago
      It requires whatever bureaucracy you already have for managing taxes. If you are going to have taxes in your country, there should be no additional bureaucratic requirements. With UBI, it is possible to have it paid by entity other than government, but that's a different story.
      • gremlinsinc 9y ago
        That's part of the problem. Bureaucracy. If we can streamline all handouts to UBI, replace the IRS and income taxes with a flat sales tax on all money out including business expenses, groceries, investments, etc. Replace ACA with single-payer or something similar, with government bidding on drugs and forcing drug companies to lower their prices. We could save a shit ton of money. We need to run government like a lean business, and we need some framework for bills that make them more like git branches, where you can't just push everything to master (i.e. an omnibus) but you need to break everything out into smaller removable parts. No more grouping things together. Make Congress work 40 hours per week ON voting and writing new bills, make them so busy doing their job they don't have time to go out and work on getting re-elected, the people will vote on them because they do a good job and like their voting history. Government is broken and bleeds money. $8 per ounce for a cup of coffee and $15 bagels from a caterer at a DoD outing is insane. How about we just make it bring your own coffee, or use a Keurig?
      • PeterisP 9y ago
• fenwick67 9y ago
  UBI is more psychologically palatable because you get it no matter what. Negative tax creates this dissonance that if you start to earn more money you don't get as much. So then everybody tries to get around it and manipulate it so it appears they don't earn as much.
  • rory096 9y ago
    This doesn't make sense. An equivalent UBI system would have the same marginal tax rates as an NIT.
    • s0rce 9y ago
      Not everyone is logical or cares that things make sense, they decide based on how things feel or how they seem at first glance without thinking them through carefully
• com2kid 9y ago
  > Can someone explain to me why UBI is preferable to a negative income tax? How reliable is the income tax collecting and distribution service in Kenya? Is getting a check once per year more or less preferable to everyone getting a check? How well does filing for an income tax return in a country with a 78% literacy rate? A negative income tax is a nation wide program, this program takes places in a smaller geographical region, making it easier to get started, and a lower cost experiment than doing it nation wide. Lots of pluses to UBI versus a national government ran program.
• quaunaut 9y ago
  From what I've understood, it solves multiple problems that the negative income tax didn't, because it didn't apply to everyone. To clarify for those coming later: The negative income tax is the idea that beneath a certain amount of income, you actually are given money by the government. If you're over the amount, you get nothing, and in fact are taxed a portion of your income. Depending on how far beneath the amount you are, you might get more, or less. But that system leaves some people in a bad spot: * Sporadic work? Now you have to wait until after you should've gotten your money to get the money to make up for it. Without a safety net(which you almost certainly do not have), you're behind on your bills already. * The above also applies to if you hate your job. * You're disincentivized from working if the amount you can make is beneath the amount that would give you the negative income bracket. * Politically, it's a lot easier when everyone can get the benefit. Less claims about abusing the system if it gives everyone the same thing. * As an employer, giving someone just 4-6 hours a week of work isn't bad unless the employee wants something different. With a NIT it might just not be worth it to the employee.
  • eksu 9y ago
    Those are some great points - I didn’t think much about sporadic work. UBI is probably easier to implement administratively than trying to change check sizes every week. I think though politically it’s easier to stomach if you’re of a leaning that sees government giving as a good thing. I think politicaly you have a hard case saying we’re also giving sama and bill gates these checks (even if their effective rate still puts them under at the end of the year!) I would hope the incentives problem would be solved with a very gradual tax curve rather than brackets for NIT.
  • pc86 9y ago
    In the US at least all the rates are marginal. The only "disincentive to work" is completely psychological and made up. If you make more money, you get more money. There is no financial scenario where you make $1 more and lose anything close to $1 in government benefits, tax credits, etc. I was on unemployment for approximately 6 months in 2008 and every $100 I made only decreased my unemployment benefit by $15-20. Anyone who thinks they can't work because their benefits will go away has such a passing familiarity with their own actual finances UBI or NIT won't help them anyway.
• Nursie 9y ago
  It's simple to administer and it gives people more warm fuzzies when everyone gets it, and removes a bit of the stigma of state aid. IMHO, YMMV etc.
• GuB-42 9y ago
  UBI is just a special case of a negative income tax where numbers cancel out. The biggest advantage of UBI is its simplicity. You just get your UBI, done, much easier for people to understand and for the government to manage.
  • clay_to_n 9y ago
    Yup. In my guess, UBI is more overhead to run since there are literally more line items on people's tax documents (there's the UBI as well as the progressive tax that is used to pay for it). But UBI's have the perceived simplicity of "I always get this", which might help encourage more people to pay in, even though the higher earners are losing money.
    • munk-a 9y ago
      Alternatively we can use UBI to remove special income grants, if UBI is sufficient for a modest survival we might be able to drop social security and the non-medical portions of government disability payments in favor of a flat income grant. This would reduce the bureaucracy involved in these systems.
    • Turing_Machine 9y ago
      Why would there be an additional line item if everyone gets the same UBI? That amount could just be built into the tax tables, right?
  • ythn 9y ago
    > You just get your UBI, done And what about the people that waste their UBI and can't afford to pay the rent or for food? The existing social safety nets can't go away, otherwise people who are irresponsible with their UBI will be left to starve, etc.
    • gremlinsinc 9y ago
      Have one stipulation: To collect UBI you must have a physical address for the check to be mailed to. You must have a residence. This at the very least ensures that they cover their rent and would allow us to redirect money for homeless shelters back into the UBI system somehow.
• shkkmo 9y ago
  As I understand it, NIT is very similar to UBI. The differences are 1) Payout schedule. We currently have no means to calculate and provide NIT payouts on a weekly or monthly basis. Annual payments (like the Alaska PFD) have problems with splurge spending since the people who need it the most tend to have the worst money management skills. 2) The shape of the curve at the bottom. While the shape is not actually inherent to either proposal, UBI proposals tend to provide greater income gains per extra dollar earned by those at the bottom of the income distribution 3) The name "Negative Income Tax" is a bit confusing. A "negative tax" is not a term we use (we use "subsidy" or "tax credit") and so it can be easily misinterpreted as a tax on those with negative income... "Universal Basic Income" is clear and easily understood.
• PeterisP 9y ago
  A negative income tax fits the USA process where most people have an annual activity of filing their income taxes and getting a check for a difference that they're due. That's not how it works in most places around the world (USA usually is the exception rather than a reflection of common practice) - in a much more common approach, the common worker has zero personal interaction with taxes, if an income tax exits, it's withheld by the employer; and only a minority (e.g. businessmen) would have some sort of tax declaration. In such systems, implementing a negative income tax is much harder, since the current taxation mechanism doesn't provide any system for interacting with these people whatsoever, and simply paying an amount receivable upon showing their ID is comparably much simpler and cheaper to implement.