5 ms·

> Personally, I'm a big fan of the "for every $2 you make, you get $1 less from UBI/Welfare" concept. This seems a very easy way to wean people off of welfare.

> Personally, I'm a big fan of the "for every $2 you make, you get $1 less from UBI/Welfare" concept. This seems a very easy way to wean people off of welfare. That money is already tracked by the IRS (unless you're getting paid under the table). That's a more gradual phase-out, but it still is an effective marginal tax rate of 50%+ – a level that wealthy earners would complain about to no end. In light of this study, it seems to me that a cash-support system that wants to encourage work should have a starting region with a negative effective phase-out rate: "for every $1 you make up to $X, you get $0.25 more from UBI/Welfare." That would encourage labour-market attachment even if tenuous, and it would also have a side benefit of making the worker want to report the income, possibly uncovering under-the-table payment schemes.

jewayne 2y ago
> In light of this study, it seems to me that a cash-support system that wants to encourage work should have a starting region with a negative effective phase-out rate: "for every $1 you make up to $X, you get $0.25 more from UBI/Welfare." That would encourage labour-market attachment even if tenuous, and it would also have a side benefit of making the worker want to report the income, possibly uncovering under-the-table payment schemes. Nobody tell this guy about the Earned Income Tax Credit. Let him think he discovered it.
- Majromax 2y ago
  > Nobody tell this guy about the Earned Income Tax Credit. Let him think he discovered it. I know about the EITC, but the ETIC net of benefit clawbacks still presents a high marginal rate. Then the EITC itself gets clawed back at its own threshold, imposing a small region of high marginal rates. (The EITC itself is also rather paltry for filers without children.) Additionally, the US tax system is ill-structured to really implement this. If you're trying to operate on the "under-the-table cash payments for day labour" margin, a system that depends on filing one's taxes to receive a refund later is not exactly hassle-free.
  - bombcar 2y ago
    The EITC isn't as complicated as the child tax credit; that one is not refundable so you end up trying to calculate a way to get enough tax to get it fully. Excel1040 is great for this - https://sites.google.com/view/incometaxspreadsheet/home https://sites.google.com/view/incometaxspreadsheet/home
ixwt 2y ago
> That's a more gradual phase-out, but it still is an effective marginal tax rate of 50%+ – a level that wealthy earners would complain about to no end. Yeah, my wording could have been better. The suggestion that I've seen for UBI is $12k/year (which is clearly not enough to live on in today's economy), with the $2:$1 reduction being only for the UBI, and then standard taxes starting after that. This system was actually proposed a looong time ago (like 1970s, I think). Just by giving everyone a massive tax credit to start with.
AnthonyMouse 2y ago
> a negative effective phase-out rate: "for every $1 you make up to $X, you get $0.25 more from UBI/Welfare." The main problem with this is that the tax system is set up to prevent you from under-reporting your income. Over-reporting it is essentially trivial, e.g. two people who are in the relevant income range exchange favors (do each others' laundry etc.), or claim to have, and then actually report the transactions as income and get the credit. But there's something else you can do here which is really neat. Stop using a complicated progressive rate structure, and instead eliminate the phase out entirely. Now instead of low income people having a nominal 0% tax rate but an effective 50% benefits phase out rate and high income people having a nominal 30% tax rate, you just use a flat 35% tax rate which implicitly has the benefits phase out built into the tax system. Which means you don't need any of this income reporting or annual tax returns or anything of the kind, the employer/seller just withholds the fixed tax rate and you're done, and everybody unconditionally gets the UBI to provide the effect of a progressive rate structure.
- pineaux 2y ago
  Doesn't a flat tax rate lower the income that a state has?
  - speed_spread 2y ago
    Yeah, and it makes it even easier for the rich to become richer, which is why they're the ones advocating for it.
    - BytesAndGears 2y ago
      You could keep it flat up to a high threshold, like top ~5% of salary, then transition to marginal tax
      - AnthonyMouse 2y ago
        You don't need it, it's already built in. The flat tax rate needed to serve as the implicit benefits phase out is already in the range as what you'd use in the high tax brackets in a progressive tax system with separate benefits phase outs. If you want it to be more progressive you raise the flat tax rate and use the money to increase the UBI. If you want a less progressive system with lower taxes you do the opposite. Making it needlessly more complicated gains you nothing and costs you efficiency.

jewayne 2y ago

> In light of this study, it seems to me that a cash-support system that wants to encourage work should have a starting region with a negative effective phase-out rate: "for every $1 you make up to $X, you get $0.25 more from UBI/Welfare." That would encourage labour-market attachment even if tenuous, and it would also have a side benefit of making the worker want to report the income, possibly uncovering under-the-table payment schemes. Nobody tell this guy about the Earned Income Tax Credit. Let him think he discovered it.

Majromax 2y ago
> Nobody tell this guy about the Earned Income Tax Credit. Let him think he discovered it. I know about the EITC, but the ETIC net of benefit clawbacks still presents a high marginal rate. Then the EITC itself gets clawed back at its own threshold, imposing a small region of high marginal rates. (The EITC itself is also rather paltry for filers without children.) Additionally, the US tax system is ill-structured to really implement this. If you're trying to operate on the "under-the-table cash payments for day labour" margin, a system that depends on filing one's taxes to receive a refund later is not exactly hassle-free.
- bombcar 2y ago
  The EITC isn't as complicated as the child tax credit; that one is not refundable so you end up trying to calculate a way to get enough tax to get it fully. Excel1040 is great for this - https://sites.google.com/view/incometaxspreadsheet/home https://sites.google.com/view/incometaxspreadsheet/home

ixwt 2y ago

> That's a more gradual phase-out, but it still is an effective marginal tax rate of 50%+ – a level that wealthy earners would complain about to no end. Yeah, my wording could have been better. The suggestion that I've seen for UBI is $12k/year (which is clearly not enough to live on in today's economy), with the $2:$1 reduction being only for the UBI, and then standard taxes starting after that. This system was actually proposed a looong time ago (like 1970s, I think). Just by giving everyone a massive tax credit to start with.

AnthonyMouse 2y ago

> a negative effective phase-out rate: "for every $1 you make up to $X, you get $0.25 more from UBI/Welfare." The main problem with this is that the tax system is set up to prevent you from under-reporting your income. Over-reporting it is essentially trivial, e.g. two people who are in the relevant income range exchange favors (do each others' laundry etc.), or claim to have, and then actually report the transactions as income and get the credit. But there's something else you can do here which is really neat. Stop using a complicated progressive rate structure, and instead eliminate the phase out entirely. Now instead of low income people having a nominal 0% tax rate but an effective 50% benefits phase out rate and high income people having a nominal 30% tax rate, you just use a flat 35% tax rate which implicitly has the benefits phase out built into the tax system. Which means you don't need any of this income reporting or annual tax returns or anything of the kind, the employer/seller just withholds the fixed tax rate and you're done, and everybody unconditionally gets the UBI to provide the effect of a progressive rate structure.

pineaux 2y ago
Doesn't a flat tax rate lower the income that a state has?
- speed_spread 2y ago
  Yeah, and it makes it even easier for the rich to become richer, which is why they're the ones advocating for it.
  - BytesAndGears 2y ago
    You could keep it flat up to a high threshold, like top ~5% of salary, then transition to marginal tax
    - AnthonyMouse 2y ago
      You don't need it, it's already built in. The flat tax rate needed to serve as the implicit benefits phase out is already in the range as what you'd use in the high tax brackets in a progressive tax system with separate benefits phase outs. If you want it to be more progressive you raise the flat tax rate and use the money to increase the UBI. If you want a less progressive system with lower taxes you do the opposite. Making it needlessly more complicated gains you nothing and costs you efficiency.