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Now there's an interesting argument! If I understand you correctly, your argument is that BI would effectively improve our net economic efficiency (in addition

by cheald 13y ago

Now there's an interesting argument! If I understand you correctly, your argument is that BI would effectively improve our net economic efficiency (in addition to individual quality-of-life for the poorest) by eliminating waste (in time, money, red tape, etc) from the slew of bureaucratic programs we currently have? That's an extremely interesting point, and one I hadn't considered. BI as a dollar-for-dollar alternative to current entitlement programs sounds very attractive. I hadn't considered the >100% tax rate on the impoverished, either. I wasn't even aware that this happens - it sounds absolutely horrific, and should be abolished posthaste if it's anything like you describe. Can you point me at some reading material on that sort of thing? As for the $40k-and-above folks, I definitely think that it could encourage exploration by people with little to lose, but I don't think it would significantly affect people with mortgages and families - quitting your job to pursue a dream that fails still means losing your house and not being able to consistently feed your kids even on $10k BI. I definitely think it would help a certain set of people, and I would love to see entrepreneurship encouraged and facilitated; my concern is that it would do so by disproportionately penalizing existing entrepreneurs, by front-loading the majority of the cost for such a system onto them, and making them bear the brunt of the penalty for it if it fails.

marcosdumay 13y ago
> I hadn't considered the >100% tax rate on the impoverished, either. I wasn't even aware that this happens - it sounds absolutely horrific, and should be abolished posthaste if it's anything like you describe. It's a > 100% marginal tax rate. Emphasis on "marginal". It happens every time the government decides to give something to the poor. A person that just crosses over the criteria used to determine who is poor has a >100% tax rate over that extra income. That means, if they work more they lose money - something called "poverty trap" because it effectively entraps people into poverty. The solution to avoiding it is to simply give the money for everybody, and create a progressive tax that gets it back from the richer people. Or, in other words, basic income.
- knome 13y ago
  I've never understood why they don't simply structure those things to supply benefit reduced by the amount you make over the benefits maximum until the benefit no longer applies. A person who receives $100 worth of benefit so long as they make make under $200 faces a harsh cut from $299 to only $200 should their income surpass it. Simply culling overage from the benefit, on the other hand, would mean they would reach a plateau in which they are adjusted to $300 from $200 to $300 worth of raised personal income, which while not be greatly encouraging, would have none of the damning nature of the strict cutoff approach.
  - scarmig 13y ago
    It's stupid, but that's because it's very difficult to write out benefits that intelligently phase out. The reason is simple math. Suppose you have a $5k/year benefit at $0 that phases out to $0k/year at $20k. The worst way to do that is obviously to have a cliff: at $20k, you suddenly get $5k/year less, effectively an infinite marginal rate. It's as extreme a trap as you can imagine. But now consider the opposite, best case scenario that's the softest landing spread out over that entire income range: a benefit that phases out linearly. So at $10k/year, you get a total of $12.5k; at $15k/year, you get a total of $16.25k/year. That means you automatically get a walloping marginal tax rate. If you wanted to limit benefit phase outs to contribute a maximum of 5% in marginal tax rates, you've got to spread it out over 20x the value of the benefit. A $5k benefit has to phase out over $100k. Also note that that's by itself: you've also got regular taxes to pay. Worse, few of these welfare benefits have been designed so intelligently, and there are a lot of them, so you constantly hit discontinuities in marginal tax rates that make it really irrational to do any additional work or try to improve yourself.
  - dasmoth 13y ago
    That still leaves a 100% marginal "tax" rate. It's better than >100%, but still seems less than ideal. Trying to fix that quickly gets you into Basic Income territory.
    - knome 13y ago
      The importance is that it turns a local maxima into a plateau and replaces a disincentive to improve your lot beyond the assistance with a mere lack of incentive as you improve beyond it. It provides assistance without a hook to keep you on it.

by cheald 13y ago

marcosdumay 13y ago

> I hadn't considered the >100% tax rate on the impoverished, either. I wasn't even aware that this happens - it sounds absolutely horrific, and should be abolished posthaste if it's anything like you describe. It's a > 100% marginal tax rate. Emphasis on "marginal". It happens every time the government decides to give something to the poor. A person that just crosses over the criteria used to determine who is poor has a >100% tax rate over that extra income. That means, if they work more they lose money - something called "poverty trap" because it effectively entraps people into poverty. The solution to avoiding it is to simply give the money for everybody, and create a progressive tax that gets it back from the richer people. Or, in other words, basic income.

knome 13y ago
I've never understood why they don't simply structure those things to supply benefit reduced by the amount you make over the benefits maximum until the benefit no longer applies. A person who receives $100 worth of benefit so long as they make make under $200 faces a harsh cut from $299 to only $200 should their income surpass it. Simply culling overage from the benefit, on the other hand, would mean they would reach a plateau in which they are adjusted to $300 from $200 to $300 worth of raised personal income, which while not be greatly encouraging, would have none of the damning nature of the strict cutoff approach.
- scarmig 13y ago
  It's stupid, but that's because it's very difficult to write out benefits that intelligently phase out. The reason is simple math. Suppose you have a $5k/year benefit at $0 that phases out to $0k/year at $20k. The worst way to do that is obviously to have a cliff: at $20k, you suddenly get $5k/year less, effectively an infinite marginal rate. It's as extreme a trap as you can imagine. But now consider the opposite, best case scenario that's the softest landing spread out over that entire income range: a benefit that phases out linearly. So at $10k/year, you get a total of $12.5k; at $15k/year, you get a total of $16.25k/year. That means you automatically get a walloping marginal tax rate. If you wanted to limit benefit phase outs to contribute a maximum of 5% in marginal tax rates, you've got to spread it out over 20x the value of the benefit. A $5k benefit has to phase out over $100k. Also note that that's by itself: you've also got regular taxes to pay. Worse, few of these welfare benefits have been designed so intelligently, and there are a lot of them, so you constantly hit discontinuities in marginal tax rates that make it really irrational to do any additional work or try to improve yourself.
- dasmoth 13y ago
  That still leaves a 100% marginal "tax" rate. It's better than >100%, but still seems less than ideal. Trying to fix that quickly gets you into Basic Income territory.
  - knome 13y ago
    The importance is that it turns a local maxima into a plateau and replaces a disincentive to improve your lot beyond the assistance with a mere lack of incentive as you improve beyond it. It provides assistance without a hook to keep you on it.