4 ms·
I would want UBI combined with a marginal tax rate that is much more constant as a function of income. Current welfare systems, if you plot the effective margi
by rocqua 5y ago
I would want UBI combined with a marginal tax rate that is much more constant as a function of income.
Current welfare systems, if you plot the effective marginal tax rate as a function of gross income (i.e. if you earn one more dollar, what percentage of that dollar does your net income increase including all government systems), have by far the highest marginal rates for the lower incomes. With the marginal tax-rate actually generally decreasing as your income increases. Notably in some broken systems (like the Dutch one) there can be cases where your marginal tax rate is above 100%.
Note that the tax burden ratio [(gross income - net income) / gross income] as well as the actual tax burden [gross income - net income] still increases with as gross income increases. If you graph the tax burden as a function of gross income, then the marginal tax rate is essentially the slope of this plot.
Importantly, it is the marginal tax-rate that affects a rational actor looking to weigh whether it is worth it work harder to earn more money. Hence very high marginal tax rates are very discouraging to working more / harder / trying to become more productive.