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> They benefit from greatly lowered tax rates on their earned income Lowered marginal tax rates. Raising the marginal rates on the lowest earners is raising th

> They benefit from greatly lowered tax rates on their earned income Lowered marginal tax rates. Raising the marginal rates on the lowest earners is raising the effective rates on the lower middle class. That they don't get anything is essentially the purpose of your proposal. > and high growth because you don't need to 'soak' higher-earning folks, who only pay moderately progressive rates. But did you actually have to do that? Having the lowest marginal rates be in the middle is pretty expensive because it's also lowering the effective rate on everyone above them, or at best is just balancing out having the highest rates at the bottom. It seems like you're trying to increase the amount of the UBI while making sure the extra money comes from the middle rather than the top. Having approximately the top half (50% of the population) pay so that the second quartile (25% of the population) can get ~half the UBI instead of none both doesn't seem like a bad thing and doesn't seem like it would cost them that much rate-wise because it's a 2:1 population ratio and they they have a higher per capita base to apply the rate to. And having the highest rates at the bottom is pretty bad incentive-wise. > or pushes the break-even point way too high What's the problem with the break-even point being somewhere around the middle? The people only slightly below that aren't getting a large subsidy, they're just not getting literally zero. Meanwhile the amount of "well I didn't make that much money because I had half of it paid to my kid" marginal rate arbitrage you're reintroducing is large.

zozbot234 8mo ago
> Raising the marginal rates on the lowest earners is raising the effective rates on the lower middle class. Those are just clawback rates. The lower middle class don't need UBI in order to pay for the necessities of life, and most UBI proposals don't expect them to be net recipients, any more than they'd be net recipients of current welfare. > it's also lowering the effective rate on everyone above them That's balanced by the gradual progressivity of tax rates on upper-middle incomes. > while making sure the extra money comes from the middle rather than the top The low rates for the lower-middle class are actually ensuring the exact opposite of that claim. The upper incomes are the source for the bulk of income redistribution in the usual optimal system as it comes out of these analyses; they just don't face prohibitive rates. > And having the highest rates at the bottom is pretty bad incentive-wise. It's the opposite. The bottom clawback rates apply to a smaller part of the population, that can escape them simply by earning more than the UBI breakeven point. Meanwhile the high rates there help make the whole tax schedule sustainable. It may be a counterintuitive point but it's confirmed by rigorous, automated analysis. > marginal rate arbitrage you're reintroducing is large The most likely response is not necessarily arbitrage, it might just be earning enough that you start paying low marginal rates after the UBI is clawed back.
- jltsiren 8mo ago
  > The bottom clawback rates apply to a smaller part of the population, that can escape them simply by earning more than the UBI breakeven point. That's not true. One of the issues any serious UBI proposal needs to face are the increasing demands of the labor market. A couple of generations ago, there were still plenty of opportunities for people who had little to offer beyond a pair of hands and some work ethic. Today not so much. The bottom end of the labor market consists of a nontrivial number of people who are not productive enough to earn a living wage. But there are still societal benefits from having them work for living, instead of being passive welfare recipients or turning to crime. To make that happen, even a low wage should increase the net income significantly above UBI.
- AnthonyMouse 8mo ago
  > The lower middle class don't need UBI in order to pay for the necessities of life, and most UBI proposals don't expect them to be net recipients, any more than they'd be net recipients of current welfare. The premise of them receiving it isn't so they can buy corn, it's so they can save up a down payment on a house or have enough savings that if their car breaks down they're not completely screwed. They're supposed to get the money. > That's balanced by the gradual progressivity of tax rates on upper-middle incomes. That's not balancing it, it's further exacerbating it. You then have the upper middle class paying less than the full marginal rate, along with everyone above them for that part of their income range. > The low rates for the lower-middle class are actually ensuring the exact opposite of that claim. I feel like this is still confusing effective rates with marginal rates. Suppose you have a 50% marginal rate up to $30,000 in income and then a 5% marginal rate up to $60,000. Alice makes $32,000/year. In this system her effective tax rate is ~47%. By contrast, Bob makes $60,000 and has an effective tax rate of 27.5%. Moreover, between the two of them they have $92k in total income of which the government gets $31600, ~34%. Why would we want Alice to have to pay ~47% instead of ~34% so that Bob, who makes almost twice as much, can pay 27.5% instead of ~34%? Adding the UBI would lower both effective rates and result in a progressive rate curve, but why would we want to add "progressive" rates that make the system less progressive? > The upper incomes are the source for the bulk of income redistribution in the usual optimal system as it comes out of these analyses; they just don't face prohibitive rates. But why would you need prohibitive rates at all? US GDP is ~$31T with a population of ~340M. To give a $12,000 UBI to every single person would be ~$4T, i.e. 12.9% of GDP, implying that's the uniform marginal tax rate you would need to collect the money. That's assuming the tax is applied uniformly (and applies to corporations as well as individuals etc.), and maybe you want to exempt non-profits from the tax or something, but as a ballpark estimate that's the number and it's not crazy high. Especially when it's a universal transfer payment and the majority of people are just getting most or all of it back immediately. > The bottom clawback rates apply to a smaller part of the population, that can escape them simply by earning more than the UBI breakeven point. That's not how that works. If you had a 50% marginal rate up to $30,000 and you're deciding whether to take a $32,000 job or not work, you're only getting $16,900 to put in your pocket from taking that job. Being "out of the clawback range" doesn't stop the majority of the pay from still being in it. And, of course, there are jobs that don't even pay that much, or some people might want to work part time and you're essentially screwing them for not making enough money. > Meanwhile the high rates there help make the whole tax schedule sustainable. It may be a counterintuitive point but it's confirmed by rigorous, automated analysis. Why do we need automated analysis to do arithmetic? You can avoid a huge increase in the rate on lower income people with a much smaller increase in a universal rate because the former only applies to a small proportion of total income and the latter applies to all of it. > The most likely response is not necessarily arbitrage, it might just be earning enough that you start paying low marginal rates after the UBI is clawed back. As soon as you have non-uniform marginal rates, arbitrage is going to happen. We don't have to speculate here because we currently have non-uniform marginal rates and it's extremely common. Family members in a lower tax bracket get added to the payroll to soak up taxable income at the lower rate.

zozbot234 8mo ago

> Raising the marginal rates on the lowest earners is raising the effective rates on the lower middle class. Those are just clawback rates. The lower middle class don't need UBI in order to pay for the necessities of life, and most UBI proposals don't expect them to be net recipients, any more than they'd be net recipients of current welfare. > it's also lowering the effective rate on everyone above them That's balanced by the gradual progressivity of tax rates on upper-middle incomes. > while making sure the extra money comes from the middle rather than the top The low rates for the lower-middle class are actually ensuring the exact opposite of that claim. The upper incomes are the source for the bulk of income redistribution in the usual optimal system as it comes out of these analyses; they just don't face prohibitive rates. > And having the highest rates at the bottom is pretty bad incentive-wise. It's the opposite. The bottom clawback rates apply to a smaller part of the population, that can escape them simply by earning more than the UBI breakeven point. Meanwhile the high rates there help make the whole tax schedule sustainable. It may be a counterintuitive point but it's confirmed by rigorous, automated analysis. > marginal rate arbitrage you're reintroducing is large The most likely response is not necessarily arbitrage, it might just be earning enough that you start paying low marginal rates after the UBI is clawed back.

jltsiren 8mo ago
> The bottom clawback rates apply to a smaller part of the population, that can escape them simply by earning more than the UBI breakeven point. That's not true. One of the issues any serious UBI proposal needs to face are the increasing demands of the labor market. A couple of generations ago, there were still plenty of opportunities for people who had little to offer beyond a pair of hands and some work ethic. Today not so much. The bottom end of the labor market consists of a nontrivial number of people who are not productive enough to earn a living wage. But there are still societal benefits from having them work for living, instead of being passive welfare recipients or turning to crime. To make that happen, even a low wage should increase the net income significantly above UBI.
AnthonyMouse 8mo ago
> The lower middle class don't need UBI in order to pay for the necessities of life, and most UBI proposals don't expect them to be net recipients, any more than they'd be net recipients of current welfare. The premise of them receiving it isn't so they can buy corn, it's so they can save up a down payment on a house or have enough savings that if their car breaks down they're not completely screwed. They're supposed to get the money. > That's balanced by the gradual progressivity of tax rates on upper-middle incomes. That's not balancing it, it's further exacerbating it. You then have the upper middle class paying less than the full marginal rate, along with everyone above them for that part of their income range. > The low rates for the lower-middle class are actually ensuring the exact opposite of that claim. I feel like this is still confusing effective rates with marginal rates. Suppose you have a 50% marginal rate up to $30,000 in income and then a 5% marginal rate up to $60,000. Alice makes $32,000/year. In this system her effective tax rate is ~47%. By contrast, Bob makes $60,000 and has an effective tax rate of 27.5%. Moreover, between the two of them they have $92k in total income of which the government gets $31600, ~34%. Why would we want Alice to have to pay ~47% instead of ~34% so that Bob, who makes almost twice as much, can pay 27.5% instead of ~34%? Adding the UBI would lower both effective rates and result in a progressive rate curve, but why would we want to add "progressive" rates that make the system less progressive? > The upper incomes are the source for the bulk of income redistribution in the usual optimal system as it comes out of these analyses; they just don't face prohibitive rates. But why would you need prohibitive rates at all? US GDP is ~$31T with a population of ~340M. To give a $12,000 UBI to every single person would be ~$4T, i.e. 12.9% of GDP, implying that's the uniform marginal tax rate you would need to collect the money. That's assuming the tax is applied uniformly (and applies to corporations as well as individuals etc.), and maybe you want to exempt non-profits from the tax or something, but as a ballpark estimate that's the number and it's not crazy high. Especially when it's a universal transfer payment and the majority of people are just getting most or all of it back immediately. > The bottom clawback rates apply to a smaller part of the population, that can escape them simply by earning more than the UBI breakeven point. That's not how that works. If you had a 50% marginal rate up to $30,000 and you're deciding whether to take a $32,000 job or not work, you're only getting $16,900 to put in your pocket from taking that job. Being "out of the clawback range" doesn't stop the majority of the pay from still being in it. And, of course, there are jobs that don't even pay that much, or some people might want to work part time and you're essentially screwing them for not making enough money. > Meanwhile the high rates there help make the whole tax schedule sustainable. It may be a counterintuitive point but it's confirmed by rigorous, automated analysis. Why do we need automated analysis to do arithmetic? You can avoid a huge increase in the rate on lower income people with a much smaller increase in a universal rate because the former only applies to a small proportion of total income and the latter applies to all of it. > The most likely response is not necessarily arbitrage, it might just be earning enough that you start paying low marginal rates after the UBI is clawed back. As soon as you have non-uniform marginal rates, arbitrage is going to happen. We don't have to speculate here because we currently have non-uniform marginal rates and it's extremely common. Family members in a lower tax bracket get added to the payroll to soak up taxable income at the lower rate.