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The best way to achieve that is a negative income tax. If you earn below a certain income you get a payment (not just no tax). That makes it reasonably easy to
by theluketaylor 5y ago
The best way to achieve that is a negative income tax. If you earn below a certain income you get a payment (not just no tax). That makes it reasonably easy to avoid the "welfare cliff" as you create smaller brackets and slowly move from negative to positive tax rates, likely with a reasonably large band where you neither owe taxes or get a payment. It would need to be combined with government calculating monthly or quarterly payments to avoid feast at tax time and famine the rest of the year.
It would need to come with a strong education on tax brackets and a good online calculator for people to figure out their true income. Way too many people don't understand progressive taxation and think moving up a bracket means they pay a higher rate on all their income, not just the portion that falls into the higher bracket.
- dragonwriter 5y ago> That makes it reasonably easy to avoid the "welfare cliff" as you create smaller brackets and slowly move from negative to positive tax rates NIT, in the idealized form (which is exactly a UBI + income tax system) always has positive marginal rates (its semi-realization in the US EITC does have negative marginal rates over some ranges, which brings back—or exacerbates, since EITC coexists with other welfare programs which also have cliffs—the welfare cliff effect.)