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Comment by Eridrus | Hacker News Reader

While I'm a bit enamoured of UBI myself, a thought came to me while reading this:

If we are going to be dismantling the welfare system at the same time we implement UBI, we will have absolutely no margin for error; if UBI turns out to be the wrong policy, then rebuilding the welfare system will be very difficult after having fired all the people who make it function.

Living in Oakland, I also think his point about housing is particularly salient. The ideal of basic income is that employers should hold less power over employees, but that won't be the case if you need the wage to afford rent.

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A big bang approach would be very disruptive. I think it would be better to start at a modest level, and increase it after people get used to the idea and can see some of the effects.

There's no minimum to get started. Something like $100 a month might be hardly noticeable to most people, but it will make a difference to anyone living on the edge.

Also consider that having a guaranteed income makes it that much more feasible to either move somewhere with a low cost of living (since it doesn't depend on a job), or alternatively, afford to move somewhere a bit more expensive. Hard to say how it would shake out.

Personally I'm all for taxing the shit out of rich people (higher rates, treating capital gains as income, high inheritance taxes, abolishing loopholes that let companies stash profits overseas where they're not effectively reinvested, etc), but I feel like the argument around UBI is more likely to involve cuts, because if we gave every person in the US $100/month, it would cost the US $385 billion dollars, which is 10% of the entire federal tax budget.

The tax does have to come from somewhere, preferably something we actually want to discourage like a carbon tax. (Since we're dreaming anyway.)

On the other hand, the average person breaks even by design.

Well, for some definition of average, anyway.

The income distribution is not normal, thus even if the tax is completely proportional, more than half the people would get more than they pay.

There would obviously have to be a change in the tax rate to balance things out.

If we had a $10k/year UBI then a person make $100k/year would pay less than $5k taxes net if the tax code didn't change. I think if we a a 25-30% flat tax the numbers would make more sense.

Taxing the rich is good for us whatever happens, mostly because it will collapse the sky-high cost of property (and consequently rents).

I'd argue that rents are high because too many people want to live near each other. Property that people want is a scarce resource so something has to stop people getting it - if not price then what? A waiting list? A lottery? If you set up your lifestyle so you're not dependent on being a short taxi ride from 100,000 other people, then you don't have to pay high rents at all. If you are dependent on that, then you must be doing something fantastically productive so you can afford to pay high rent.

> because too many people want to live near each other

Your market analysis is incomplete. For example, http://www.theguardian.com/business/2014/feb/01/rich-oversea... says "only 27% of new homes in central London went to UK buyers, while more than half were sold to residents of Singapore, Hong Kong, China, Malaysia and Russia." These are not people who live there, but want to invest in the London real estate market. By taking housing out of the market, they also increase the market rates through artificial scarcity.

> if not price then what

Different taxation for residents vs. non-residents. Rich people tend to have large places, so taxation based on square footage per resident. Set up building requirements that give preference to low-cost housing. There are many ways to tweak the economic landscape.

> If you set up your lifestyle ..

You make it sound so easy. Why not just set up your life to earn another $100K/year?

> you must be doing something fantastically productive

Why does that follow? If I inherited my $1 billion, I'm certainly able to afford a quaint $10 million penthouse in San Francisco even if just leave the money in an index fund. If I am a dictator who funneled money out of the country into my personal foreign bank account, leaving the country in poverty, would you say I was productive? Or if someone discovers oil on my land, and I exchange the drilling rights in exchange for 1% of the extracted revenue, making me rich enough to, say, move to Beverley Hills, was I really doing something fantastically productive?

As long as people are living in them, what does it matter where the owner lives? I'd agree with you if they're leaving them empty, waiting to sell again, and perhaps some investors are. But otherwise it's a way to allocate houses to people who want them the most (as shown by how much they're willing to pay).

I agree that allowing low cost, high density housing would be great in many cities. But the people living there don't generally agree, and they have more power. If we're stuck with a finite supply of property, then market prices are a reasonable way of allocating that to people.

As I mentioned, without high rents, how else would houses be allocated to residents? More people will want them than can get them. Would you prefer a waiting list? Or only allow ownership transfer by inheritance - excluding newcomers entirely?

In London specifically, a significant percentage of foreign investors are absolutely leaving the houses empty. http://www.theguardian.com/uk-news/2015/jan/25/its-like-a-gh...

See http://www.economist.com/blogs/freeexchange/2015/04/land-val... for how to combat that (and raise a ton of revenue without market distortion).

>As long as people are living in them, what does it matter where the owner lives?

I am personally not a fan of paying 40% of my income as taxes to Russian oligarchs.

When property taxes are lower than the value of the land (and in London they are virtually nil), you effectively have a privatized land tax.

The proceeds of those taxes tend to fund kleptocratic billionaires.

You seem to have read parent as saying "if you can afford to live in the city, it follows that you are doing something fantastically productive". I initially read it as saying "if it is important that you be so close to so many others, it follows that you are doing something productive, and it follows from there that you can afford rent." I wonder now which was meant.

"I exchange the drilling rights in exchange for 1% of the extracted revenue, making me rich enough to, say, move to Beverley Hills, was I really doing something fantastically productive?"

To be fair, Jed did discover the oil himself, so he could be said to have contributed productively to the economy. We'd have to subtract the contribution the missed rabbit would have made though.

You can tax owning properties you don't live in then or buying them in the first place.

>I'd argue that rents are high because too many people want to live near each other.

So your theory is that people have gotten more and more desperate over the last 35 years to live near each other?

What?

>Property that people want is a scarce resource

Is exactly why the ultra wealthy have been buying it all with their tax free profits and using it as a savings account. Guess what happens to prices when that 'demand' increases?

The obvious solution to high rents is to build taller buildings, but people don't seem to want that either.

Why do you think house prices and rents are very correlated?

People buy houses as an investment which can very quickly raise the price while rents depend on housing demand which depends on different factors.

I did this analysis for where I live (Pune, India) where the house prices are ridiculous and, after adjusting for inflation, found that house prices have doubled in 10 years while rents have stayed flat.

https://1.bp.blogspot.com/-urzOpwgCvBk/VCsZEjOfwwI/AAAAAAAAR...

Huh? You'd have to have a tax rate of 90%+ to reduce the cost of housing. If you make a million per year, paying another 20% isn't really going to drastically affect your choice of housing.

That isn't the point. The ultra wealthy are using all that extra cash to buy expensive apartments and housing and leaving them empty or renting them out.

This 'demand' for property raises the price of it.

Since rents track property prices, rents go up too.

As soon as the ultra wealthy have a fat tax bill due all that property comes on the market again. Together. Crash time. Sane prices once again.

Between the 1940s and 1960s the US had 90%+ marginal tax rate for the highest income bracket, so it's not an impossible or untenable situation.

In today's dollars, that marginal tax rate would surely start somewhere above one million.

Negative income tax is a very slick mechanism for implementing a basic income. The administrative infrastructure is already in place, and it's very easy to tweak the tax code so that only poor people are net beneficiaries - you just nudge the standard deduction or the rate.

$385bn is a big scary number. Transferring $100/person/mo from the top 10% to the bottom 10% of earners via taxation is perfectly straightforward.

https://en.wikipedia.org/wiki/Negative_income_tax

Yeah, that's one thing that seem strange to me. In the US you have all these highly profitable tech companies that stash their profits overseas, but at the same time complain how they can't find enough talent. While the middle class are now supposed to get UBI because they don't have enough education to stay in the workforce. How about instead you close the loopholes, reform taxes and direct the money towards education.

On the other hand maybe Google could buy their own school in the Cayman Islands...

Please explain how Apple a company that made a computer in china, and then sells that same compute run china, and keeps the profits from selling the computer in China is "stashing its profits overseas".

This argument presumes that all money made worldwide should be taxed in the USA.

No country does that.

Exactly. The people arguing to "close tax loopholes" don't understand that it's not loopholes being used by companies who haven't yet repatriated large sums of money. It's a product of sovereignty. Those companies need to be incentivized to patriate their money, but the current tax regime simply makes keeping money abroad the financially responsible decision.

Well, I literally (literally) slept trough this discussion, but for the record please tell me how the "check the box" rule is not a loophole. It was a mistake from trying to make the tax rules simpler which wasn't supposed to happen and they've tried to repeal it multiple times without success.

http://www.reuters.com/article/2013/05/31/us-usa-tax-checkth...

Hmm, that's an interesting article. Although I'm familiar with the commonplace tactic of oversees shifting of profits, I never knew that the legal principle described in the article as "check the box" was widely considered to be a tax loophole.

Worth researching the concept of "Controlled Foreign Corporation".

If I live in Missouri [1], have a manufacturer make a computer in China, sell it China, and run everything through my Chinese company ... the IRS would still tax me as if the profits came through the USA because the foreign company is deemed "controlled" through the USA. So Apple, due to their size and structure (many more shareholders) can create subsidiaries and shelter revenue to avoid tax in a way that I cannot.

[1] I'm not 100% au fait with US Tax Law in this regard. Being an Australian and UK Citizen I know those jurisdictions more intimately, but understand the US is similar. This is separate to the USA's "citizen-based" (rather than residency or territory based) tax system, which chases income/tax for citizens around the world. The FEIE alleviates some of this, but Eritrea is the only other country that "does that".

This isn't really what happens though, they avoid paying taxes in China too by running everything through their Irish subsidiary.

And then it gets parked there while they demand a tax holiday so that they can distribute these profits to their shareholders.

The value of Apple's products is in the design and other intellectual property development, which is created in the US by American workers.

>at the same time complain how they can't find enough talent.

They won't ever stop complaining about that.

More talent > more competition in the labor market > lower wages > a lower wage bill > higher profits

Since the biggest cost for all tech companies is their wage bill, they'll lobby for anything that puts downward pressure on salaries.

> the more high tech companys, the more work is done by the tech > unemployment rises > labour costs undercut robots > less high tech companys.

Its a plant, it will fix itself by promoting self-obsoletian.

IT doesn't change your point, but it would cost $319 billion, not $385. There are 319 million people in the US.

There are 12 months in our non-metric years.

100 x 12 = 1200

319m x 1200 = 382b

So it was still wrong, but ~380b is still roughly the right number.

No. Per year not per month. 319x10^6 x $100 x 12 months = $382x10^9.

and 12 months in a year.

>A big bang approach would be very disruptive. I think it would be better to start at a modest level,

Starting it at a 'modest' level would end up subsidizing employers who could use it to ratchet down wages. Only if you could leave your job entirely would it have the effect of raising wages.

We already subsidize employers of low-wage and part-time workers; Wal*Mart is infamous for encouraging its workers to apply for food stamps, for example.

This outcome is even implicit in the common observation that UBI could obviate the minimum wage, making it legal to employ low-skilled workers and improving their dignity by erasing the difference between those on the dole and those who work for a living.

I'd rather see a job guarantee via a public works program like we had in the 1930s.

It's not like those robots who supposedly stole our jobs are actually fixing creaking US infrastructure. It's just falling apart.

Why don't employers cut wages now already?

You become more mobile with basic income though. I don't live in the midwest, because the job market there is pretty poor; as a bachelor, I could have stayed on the couch of a friend's house while looking for jobs, but with a family of 6, that's less of a possibility.

If my family got enough in UBI to support us in Indiana, then we could move there and I could take my time finding a job. UBI doesn't eliminate inequality, but it can open up more options.

My bigger concern with UBI is that we may eliminate the parts of the welfare system that treats addicts, and a lot of sick people will get sicker under it.

The part of our welfare system that treats medical problems is already pretty awful at doing so. UBI sort of came onto the scene as a way of dealing with both public healthcare and loss of jobs to automation.

In theory, UBI can pay for cheap treatments, and insurance (private or public) would pay for the rest.

The potential impact on education and healthcare was the only concerning element of this criticism that caught my attention.

What if we make the welfare office also be the UBI office? Can we extend the welfare system to everyone, and just start calling it UBI?

Why do we need an "office" for UBI? It should just be deposited in people's bank accounts (we already collect bank account data with taxes) without the need to go to the welfare office.

Because not everyone has to file taxes. Because maybe you want to change banks some time between tax returns. Primarily because some people are talking about a system that could plausibly be implemented given the state of the US today and not how a system might work given an otherwise perfect world where, for instance, everyone in the US has been given access to a bank account.

The change would be to make everyone file taxes pro forma, and some people would just end up `paying' a negative amount of taxes.

One system to assess people's income, not two (tax + welfare).

That's irrelevant to most of my points, but if for some reason the UBI or remaining welfare system does depend on income in any way, that also deals very badly with changes during the year. "I'm sorry, our records show that 10 months ago you had a solid income so sod off with your fear of starving in the streets this week". If it doesn't, then coupling tax returns to UBI is unnecessary.

Your taxes used to be: f(income)

In the new system they would be: f'(income) - basic income

No need to wait until the end of the year. That's just when people customarily compare actuals to projections. Before that you get your withholding of tax, and eg monthly payout of the basic income.

Does the Alaska Permanent Fund have offices for disbursing funds?

It has this: http://pfd.alaska.gov/ You have to apply to get their dividends. That will also be the case for the UBI as you will have to establish your identity, residence, and give them your bank account info somehow.

Some people don't have bank accounts.

The UK requires all welfare recipients to have a bank account and to enable this legislation was passed requiring retail banks to provide basic, non-discriminatory current accounts.

They don't pay interest and don't have an overdraft but are available to everyone.

And right now some of those people get benefits or wages via a dedicated debt card, which is effectively a withdraw-only bank account.

You need an office because fraud.

You could start by implementing basic income as a direct replacement for minimum wage, so only people who are working would be eligible. Then you could slowly absorb other social services like welfare/etc. I'm not sure if that would be feasible or beneficial at all though.

That's what the earned income tax credit does.

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