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> 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 chan

> 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
    > 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? You can specify how much withholding you want. There are just penalties if you end up owing too much in the end, because otherwise people would specify none all the time and we'd be back to tax debtors prisons when they didn't have the money at the end of the year. So you can say on March 1st that you want the $1000 now. Then on March 3rd when you find a new job, you immediately go back and specify a different withholding amount which claws it back so you don't have to pay the penalty for not withholding enough now that you're making more money again. > And reporting daily is a huge amount of overhead for someone. Not if you're only reporting changes in your withholding amount. Then there is only something to file when your job status changes. You lose your job, you file a status change, money is immediately transferred into your account. You get a new job, you file again. At any other time there is nothing you have to do. > The logic is exactly the same if you report every second or only once per year. Other than the immense practical difference between having to wait for money for one year and having to wait for money for one second. And even that doesn't exist because filing doesn't have to happen after the fact at all. If it's February 15th and your employer says you're laid off in two weeks, you can change your filing status before March 1st and get the money at exactly the same time.

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
  > 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? You can specify how much withholding you want. There are just penalties if you end up owing too much in the end, because otherwise people would specify none all the time and we'd be back to tax debtors prisons when they didn't have the money at the end of the year. So you can say on March 1st that you want the $1000 now. Then on March 3rd when you find a new job, you immediately go back and specify a different withholding amount which claws it back so you don't have to pay the penalty for not withholding enough now that you're making more money again. > And reporting daily is a huge amount of overhead for someone. Not if you're only reporting changes in your withholding amount. Then there is only something to file when your job status changes. You lose your job, you file a status change, money is immediately transferred into your account. You get a new job, you file again. At any other time there is nothing you have to do. > The logic is exactly the same if you report every second or only once per year. Other than the immense practical difference between having to wait for money for one year and having to wait for money for one second. And even that doesn't exist because filing doesn't have to happen after the fact at all. If it's February 15th and your employer says you're laid off in two weeks, you can change your filing status before March 1st and get the money at exactly the same time.