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Doesn’t this work out roughly the same? Say your credit covers the first $100,000 of income. Congress still has an incentive to shift money away from people mak

Doesn’t this work out roughly the same? Say your credit covers the first $100,000 of income. Congress still has an incentive to shift money away from people making less from that amount, since it won’t add tax revenue unless it pushes them over the threshold.

AnthonyMouse 6y ago
Suppose everybody gets a $12,000 credit (i.e. a UBI) and then everybody pays a universal 30% marginal rate. If you make $20,000, your effective tax rate is -30% -- it's negative, you got more than you paid. If you make $60,000, your effective tax rate is 10%. If you make a million dollars, your effective tax rate is 28.8%. This is what you want, progressive effective rates. But anybody who makes a dollar, the government gets 30%. If growth of small businesses transfers a trillion dollars from billionaires to the working class, there is no reduction in government revenue. If growth of small businesses adds a trillion dollars of new value the economy, Congress "profits" just as much as adding a trillion dollars solely to Microsoft, so they wouldn't have the incentive to prefer the latter. Worth pointing out that we don't actually have low marginal rates on the poor as a result of benefits phase outs -- the lowest marginal rates in practice are paid by the middle class. And then we unsurprisingly get federal policies that destroy the middle class to the benefit of billionaires and international corporations.
- dan-robertson 6y ago
  Your argument that income is diverted to the rich to increase tax revenues doesn’t work if you think income is transferred to international corporations and billionaires as these groups tend to not pay much tax. I guess you could make some argument about income tax paid by the employees of those international corporations but many large companies don’t have particularly well-paid staff. I think you’re conflating two different issues
  - AnthonyMouse 6y ago
    The argument is against having higher marginal rates on billionaires than we do on anyone else. Whether we do or not currently doesn't affect the equation when you're talking about changing the existing policy to something else. But also, billionaires and international corporations do pay marginal rates higher than the middle class. Their effective rates are lower because they shield most of their income, but what they have is still above the threshold for paying the higher marginal rates. So, for example, a US billionaire makes $5B/year, only $1B of which is reported as taxable income in the US, cutting their effective rate by a factor of five. But nearly the whole billion dollars is at the high marginal rate. A piece of legislation that would cause their domestic business dealings to gain a hundred million dollars, so that they would make $5.1B/year and $1.1B in the US, would yield the US treasury more than the same total gain going to the middle class, because their marginal rate is higher even if their effective rate is lower. (And this is actually how it works because the shielded income is characteristically from foreign business dealings whereas domestic policy affects domestic business dealings.)
jefftk 6y ago
> Say your credit covers the first $100,000 of income. Congress still has an incentive to shift money away from people making less from that amount, since it won’t add tax revenue unless it pushes them over the threshold. The proposal is for a fully refundable tax credit. If you make a sufficiently small amount of money the government pays you.

AnthonyMouse 6y ago

Suppose everybody gets a $12,000 credit (i.e. a UBI) and then everybody pays a universal 30% marginal rate. If you make $20,000, your effective tax rate is -30% -- it's negative, you got more than you paid. If you make $60,000, your effective tax rate is 10%. If you make a million dollars, your effective tax rate is 28.8%. This is what you want, progressive effective rates. But anybody who makes a dollar, the government gets 30%. If growth of small businesses transfers a trillion dollars from billionaires to the working class, there is no reduction in government revenue. If growth of small businesses adds a trillion dollars of new value the economy, Congress "profits" just as much as adding a trillion dollars solely to Microsoft, so they wouldn't have the incentive to prefer the latter. Worth pointing out that we don't actually have low marginal rates on the poor as a result of benefits phase outs -- the lowest marginal rates in practice are paid by the middle class. And then we unsurprisingly get federal policies that destroy the middle class to the benefit of billionaires and international corporations.

dan-robertson 6y ago
Your argument that income is diverted to the rich to increase tax revenues doesn’t work if you think income is transferred to international corporations and billionaires as these groups tend to not pay much tax. I guess you could make some argument about income tax paid by the employees of those international corporations but many large companies don’t have particularly well-paid staff. I think you’re conflating two different issues
- AnthonyMouse 6y ago
  The argument is against having higher marginal rates on billionaires than we do on anyone else. Whether we do or not currently doesn't affect the equation when you're talking about changing the existing policy to something else. But also, billionaires and international corporations do pay marginal rates higher than the middle class. Their effective rates are lower because they shield most of their income, but what they have is still above the threshold for paying the higher marginal rates. So, for example, a US billionaire makes $5B/year, only $1B of which is reported as taxable income in the US, cutting their effective rate by a factor of five. But nearly the whole billion dollars is at the high marginal rate. A piece of legislation that would cause their domestic business dealings to gain a hundred million dollars, so that they would make $5.1B/year and $1.1B in the US, would yield the US treasury more than the same total gain going to the middle class, because their marginal rate is higher even if their effective rate is lower. (And this is actually how it works because the shielded income is characteristically from foreign business dealings whereas domestic policy affects domestic business dealings.)

jefftk 6y ago

> Say your credit covers the first $100,000 of income. Congress still has an incentive to shift money away from people making less from that amount, since it won’t add tax revenue unless it pushes them over the threshold. The proposal is for a fully refundable tax credit. If you make a sufficiently small amount of money the government pays you.