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> There is no "don't receive benefits" anywhere. Everybody gets $12,000/year in both cases. Does a negative income tax not tell that high earners pay money to

> There is no "don't receive benefits" anywhere. Everybody gets $12,000/year in both cases. Does a negative income tax not tell that high earners pay money to the state, while low earners receive money from the state? If everyone receives money from the state, even if high earners have to pay it back at tax time, that does not meet the definition of negative income tax as I know it. That is UBI. A more concrete example would be useful.

AnthonyMouse 6y ago
You don't pay income tax at tax time, it gets withheld from your paycheck on an ongoing basis. Suppose you make $20,000/month, i.e. $240,000/year if you made that the whole year. In January through March you make $20,000/month. Under a UBI you receive $1000 but then pay $6000 in taxes, a net payment to the government of $5000/month. Under a negative income tax you pay 5% on the first $4000 ($200) and 30% on the remaining $16,000 ($4800), and expect to receive no credit because it fully phased out, so a net payment to the government of $5000/month. It's the same. In April through December you make nothing. Then you get the $1000 UBI/credit and there is no tax. To receive the net money from the tax credit before the end of the year you would have to be able to claim it without a job, and to set your withholding amount to a negative number that month because you have no income. Which is theoretically possible (it would be what happens to anyone making <$48,000/year), and either way you still get the same total amount at the end of the year when you file your taxes and reconcile.
- randomdata 6y ago
  > You don't pay income tax at tax time, it gets withheld from your paycheck on an ongoing basis. You're shrinking the window down from a year, but does it change anything other than you might be able to get by for a couple of weeks easier than an entire year if your income dries up? Assuming monthly payments, and a loss of income on March 1st, I'm still under the impression that UBI will give you $1,000 to spend as of March 1st, while a negative income tax will make you wait until April 1st, no? But also, in my world there are no paychecks or ongoing regular income and income isn't reported until the end of the year. How does that fit the model?
  - AnthonyMouse 6y ago
    One way to do income tax would be that if you get paid $60,000 then your employer gives you $60,000 and at the end of the year you have to cut a check to the IRS for e.g. $18,000. The problem with this is that if you give people $60,000 then a lot of them spend all $60,000 and come tax time they don't have the tax money and you need to start having tax debtors prisons or something. The analogous thing for a UBI would be that you get all the money on one day of the year, whether it's January 1st or December 31st or July 4th, and then some people spend all the money immediately and starve to death six months later. What we do instead is withholding. Your employer is to pay you $60,000/year, i.e. $5000/month, but instead of actually giving you $5000/month, they give you $3500/month and give the rest directly to the IRS. Then you don't owe anything at the end of the year and a lot of people actually get some back because they took out more than they needed to. The reconciliation period for this is in the law somewhere but in principle it can be whatever you want. It could be instantaneous. As soon as you get your paycheck, the employer cuts one to the IRS at the same time. With a negative income tax, some people would have a negative withholding amount. So the IRS would cut a check to the employer and then the employer would include that money in your paycheck. So what happens if there is no employer? Well, then you're the employer. You're a sole proprietor making $0. So you fill out the paperwork with the IRS to reconcile your withholding, which would be in a negative amount, and they send you a check (or direct deposit the money in your bank account). There is no reason in principle that they couldn't do this as soon as you fill out the paperwork, i.e. on March 1st the instant you lose your other job and become a sole proprietor with no income.
    - randomdata 6y ago
      > There is no reason in principle that they couldn't do this as soon as you fill out the paperwork, i.e. on March 1st the instant you lose your other job and become a sole proprietor with no income. But you won't really know if March is going to be income-less until it is over. On March 1st I may still be hopeful that tomorrow will be a better day. Soon it is the 31st and I realize I didn't make anything. You're still dependent on hindsight, no? Whereas UBI fronts the money and then if March 15th provided me a major windfall, I can give it back. We can shrink the period even further. Let's say a day. If you cannot find a source of income on March 1st, you can submit the paperwork at the end of the day. But you're still looking to the past, whereas UBI would give you the money first and then adjust accordingly in the future. In the real world there is always going to be some kind of lag to the time to filing the paper work. There isn't a constant stream of conscious delivered to the tax man. And reporting daily is a huge amount of overhead for someone. I cannot imagine in practice that it would be practical to provide such reporting more often than a weekly/bi-weekly schedule at the very most. The length of period doesn't actually matter here, though. The logic is exactly the same if you report every second or only once per year. I'm afraid I'm still not seeing how a negative income tax can ever provide you the money before you know what your income is (the past). In contrast, UBI assumes you will have no income and then is clawed back if that assumption is false (the future). That is not just framing, there is a practical difference in the real world as far as I can see in your examples.

AnthonyMouse 6y ago

You don't pay income tax at tax time, it gets withheld from your paycheck on an ongoing basis. Suppose you make $20,000/month, i.e. $240,000/year if you made that the whole year. In January through March you make $20,000/month. Under a UBI you receive $1000 but then pay $6000 in taxes, a net payment to the government of $5000/month. Under a negative income tax you pay 5% on the first $4000 ($200) and 30% on the remaining $16,000 ($4800), and expect to receive no credit because it fully phased out, so a net payment to the government of $5000/month. It's the same. In April through December you make nothing. Then you get the $1000 UBI/credit and there is no tax. To receive the net money from the tax credit before the end of the year you would have to be able to claim it without a job, and to set your withholding amount to a negative number that month because you have no income. Which is theoretically possible (it would be what happens to anyone making <$48,000/year), and either way you still get the same total amount at the end of the year when you file your taxes and reconcile.

randomdata 6y ago
> You don't pay income tax at tax time, it gets withheld from your paycheck on an ongoing basis. You're shrinking the window down from a year, but does it change anything other than you might be able to get by for a couple of weeks easier than an entire year if your income dries up? Assuming monthly payments, and a loss of income on March 1st, I'm still under the impression that UBI will give you $1,000 to spend as of March 1st, while a negative income tax will make you wait until April 1st, no? But also, in my world there are no paychecks or ongoing regular income and income isn't reported until the end of the year. How does that fit the model?
- AnthonyMouse 6y ago
  One way to do income tax would be that if you get paid $60,000 then your employer gives you $60,000 and at the end of the year you have to cut a check to the IRS for e.g. $18,000. The problem with this is that if you give people $60,000 then a lot of them spend all $60,000 and come tax time they don't have the tax money and you need to start having tax debtors prisons or something. The analogous thing for a UBI would be that you get all the money on one day of the year, whether it's January 1st or December 31st or July 4th, and then some people spend all the money immediately and starve to death six months later. What we do instead is withholding. Your employer is to pay you $60,000/year, i.e. $5000/month, but instead of actually giving you $5000/month, they give you $3500/month and give the rest directly to the IRS. Then you don't owe anything at the end of the year and a lot of people actually get some back because they took out more than they needed to. The reconciliation period for this is in the law somewhere but in principle it can be whatever you want. It could be instantaneous. As soon as you get your paycheck, the employer cuts one to the IRS at the same time. With a negative income tax, some people would have a negative withholding amount. So the IRS would cut a check to the employer and then the employer would include that money in your paycheck. So what happens if there is no employer? Well, then you're the employer. You're a sole proprietor making $0. So you fill out the paperwork with the IRS to reconcile your withholding, which would be in a negative amount, and they send you a check (or direct deposit the money in your bank account). There is no reason in principle that they couldn't do this as soon as you fill out the paperwork, i.e. on March 1st the instant you lose your other job and become a sole proprietor with no income.
  - randomdata 6y ago
    > There is no reason in principle that they couldn't do this as soon as you fill out the paperwork, i.e. on March 1st the instant you lose your other job and become a sole proprietor with no income. But you won't really know if March is going to be income-less until it is over. On March 1st I may still be hopeful that tomorrow will be a better day. Soon it is the 31st and I realize I didn't make anything. You're still dependent on hindsight, no? Whereas UBI fronts the money and then if March 15th provided me a major windfall, I can give it back. We can shrink the period even further. Let's say a day. If you cannot find a source of income on March 1st, you can submit the paperwork at the end of the day. But you're still looking to the past, whereas UBI would give you the money first and then adjust accordingly in the future. In the real world there is always going to be some kind of lag to the time to filing the paper work. There isn't a constant stream of conscious delivered to the tax man. And reporting daily is a huge amount of overhead for someone. I cannot imagine in practice that it would be practical to provide such reporting more often than a weekly/bi-weekly schedule at the very most. The length of period doesn't actually matter here, though. The logic is exactly the same if you report every second or only once per year. I'm afraid I'm still not seeing how a negative income tax can ever provide you the money before you know what your income is (the past). In contrast, UBI assumes you will have no income and then is clawed back if that assumption is false (the future). That is not just framing, there is a practical difference in the real world as far as I can see in your examples.