Hacker News Reader

Comment by ozy | Hacker News Reader

My vote goes to redistribution of wealth, by means of a progressive tax that starts negative.

It is the human thing to do. But it also aligns with economics and politics.

Redistribution: because more money at the bottom, means a larger overall market, and I think a more stable economy.

Progressive tax: any paying work will always improve your situation. (So people stay motivated to work.)

Taxing wealth creation (and to a lesser extend, wealth) makes sense. It needs a society with law and order and property rights. That needs to be payed for. But of course not so much as to discourage wealth creation.

Most societies already redistribute wealth. Minimum wage, social programs, health programs, pensions, some form of subsidies. UBI is a more disciplined way of doing this. And just like these programs, you can tune that knob from low to high.

View on HN

The negative income tax is not a progressive idea. It was originally proposed by Milton Friedman as a way to dismantle the social safety net and get rid of the minimum wage, food stamps, social programs, pensions, and all those other programs previous generations have fought and died for. What do people get in exchange? Well, a bunch of money, but nowhere near enough to buy all the services they just lost from the free market.

A single mother with 2 children needs more money to make ends meet than a single student in their 20s. Subsidies take that into account, the negative income tax does not. People with a physical or mental handicap need assistance. The negative income tax has abolished the programs that help you, so good luck. Pensions? Same. If you've not invested wisely during your working years you'll have to eat dogfood when you're old, because social security is gone.

The problem with the negative income tax is that there's no way to make the math work, because you can't raise the minimum amount every citizen gets high enough so that every citizen can live a dignified life with that amount of money. Not even when you tax the highest earners at 90% does the math work. The special aid programs we have today exist for a reason: they specifically help vulnerable groups in society, who would otherwise be in desperate straits.

Make no mistake: the proponents of the negative income tax want to shrink the government to the size where it can be drowned in a bath tub. It's a far right idea that, if executed, would have horrific consequences for the poor. I urge people on the left of the political spectrum to stop and do some napkin math on how the negative income tax would end up redistributing wealth.

"Subsidies take that into account, the negative income tax does not."

In my country there are both subsidies, and tax breaks for such situations. Is anything I said implying we abolish that? I would suggest it translates to more negative tax for such situations.

"It's a far right idea that, if executed, would have horrific consequences for the poor."

It is wealth redistribution. Which is not a far right idea. Any kind of wealth redistribution is good for those who have little. (Unless you redistribute it only to the rich, but that is not commonly understood with the term.)

But you imply it does not? Would you mind doing that "napkin" math and show us what you mean?

Radical wealth redistribution from the needy to the rich is a far right idea, and that's what the negative income tax will boil down to in practice.

It's very simple. Not all people need the same amount of resources to live. A healthy college student needs very little, a sickly elderly person needs a lot. The complex social support system in place today attempts to redistribute the tax money allocated for social services in the most fair way possible. The negative income tax either replicates this complexity (but then what's the point) or the negative income tax seeks to abolish the social support system in order to redistribute money to the rich.

Now as a proponent of the negative income tax it should be on you to show how it could work, not on me. But whatever, I can do some numbers. Since you mentioned you wanted to get rid of social security the negative income tax has to be at least that (or the elderly will have to eat dog food like they did before FDR), and social security is about $30,000 in 2017. There are 240 million adults in the US, 240 million * 30k = 7.2 trillion. That's the same as all local, state, and federal government spending put together. Whoops! So clearly, there is not enough money to give every adult citizen the equivalent of social security. So what are we going to do now? Means test the negative income tax so the elderly get more and young healthy people get less? Means test it so disabled people get more? So that single parents get more? Is the negative income tax just going to replicate the entire social support system it has just senselessly abolished?

If you want to think clearly about the negative income tax think about which demographics end up paying more and which demographics end up getting more. If the goal is just to redistribute wealth from the rich to the needy, you can easily accomplish that by adjusting the income tax brackets. So clearly negative income tax proponents don't want that. Is the goal to increase efficiency? No, because social security has less than 1% in administrative overhead, and negative income tax supporters still want to get rid of it. So clearly that's not the goal either. Is perhaps the real goal to demolish the entire social safety net while giving tax cuts to the rich? Why yes, it is!

"Radical wealth redistribution from the needy to the rich is a far right idea, and that's what the negative income tax will boil down to in practice."

The term wealth redistribution is generally understood as wealth going from the rich to the poor and is a "left" idea[1]. And even it it is not, I cannot think of a (sane) negative income tax system that can be described as wealth going from the poor to the rich.

But you seem worried that a student is different from an elderly, and to give both negative income, the elderly will be worse off than in a system like today? All I can say is that nothing in what was described so far implies that. If you have special needs, you might be eligible to more negative income tax.

"there is not enough money to give every adult citizen the equivalent of social security"

Sure there is, because a 125[2] of the 240 have a job, those who earn little, might still get some money from tax, those who make medium pay a some tax, those who make a lot, pay a lot of tax. But it will imply more tax on the rich, both income and wealth. (Though nothing ridiculous.)

[1] https://en.wikipedia.org/wiki/Redistribution_of_income_and_w... first line "Redistribution of income and redistribution of wealth are a concept of socialism"

[2] https://www.statista.com/statistics/192361/unadjusted-monthl...

Why I am in favor (of UBI or NIT)? I cannot be described as a right wing, nor as rich. And any reduced administrative overhead would be nice, but not a goal per se.

But giving more money to those without a job, or low income jobs, has a few advantages:

1. economically speaking, money to those who have little represents more wealth, and will be spend in the market

2. a shrinking economy, means even more pressure on low incomes jobs, and less who have an income at all, that shrinks the market, and shrinks the economy, NIT can work like a buffer

3. low income people have no power on the labor market, a NIT or UBI gives them more power, with room to switch jobs, or go back and study

And a last one, but this depends a bit per country/state, people are usually eligible for benefits or not. Some of those tests are income earned, or money in the bank. So when people are almost eligible, but have too much money saved, they buy an expensive car and become eligible. Or you refuse a job, because the pay is not that much more then their benefits, but suddenly they have to work 40 hours a week and commute, etc.

Especially a NIT makes sure that these things are always a line, never yes/no. Made some money? You get to keep that, and most of your NIT benefits.

> cannot think of a (sane) negative income tax system that can be described as wealth going from the poor to the rich.

Neither can I, but that's because I think all plans are either (a) mathematically impossible or (b) intended to distribute wealth upwards by dismantling the social welfare state as we know it.

> Sure there is, because a 125[2] of the 240 have a job, those who earn little, might still get some money from tax, those who make medium pay a some tax, those who make a lot, pay a lot of tax. But it will imply more tax on the rich, both income and wealth. (Though nothing ridiculous.)

50% of full time workers in the US earn less than 30,000 a year, so their income would get supplemented to 30k, and they would not make any net tax contribution anymore.

There are 94 million US adults not in the labor force at all (40%), so they too are not contributing to the tax pool.

So out of the 60% remaining US workers 50% earn more than 30,000 a year, so that means 30% of US adults will have to carry the full tax burden, which will be many trillions of dollars larger than today.

NIT would be 7.2 trillion, non-welfare gov't spending is 5 trillion, so government spending would total 12.2 out of 17 trillion GDP = 71% of GDP. So for this to work taxes would have to go up massively (which I support, incidentally, but most people will balk at this).

Perhaps because 30k (your number) is a bit much, as the GDP/C of USA is only 53k.

As I said, wealth redistribution is knob, currently set to around 5% (my guess) in the USA. I think 20% should be the aim over time, which translates to ~15k income in some form of UBI, and +15% tax for the rich.

That would mean a 30k income for an average 4 person household.

"Even with the highest tax bracket at 100% I don't see how it could work."

That is entirely lack of imagination on your side ... just add up all the money the top 10% makes. And it must work mathematically, because 30k is lower than average income at 51k.

forgive me if I misunderstand, but isn't negative income tax only negative until you hit a certain amount of income (let's say the federal poverty level) and then start getting taxed normally via the brackets?

That's correct.

>Not all people need the same amount of resources to live. A healthy college student needs very little, a sickly elderly person needs a lot.

Hmm, where have I heard that before?

"From each according to his ability, to each according to his needs"

"Progressive tax" is not a comment on the political origins of the idea. It is a technical term for any tax which has a higher effective tax rate for richer people (the opposite being a regressive tax).

I think this argument holds some water in developed countries, but India has a serious problem with graft and a Ubi would ensure that the money actually gets to people and doesn't get stolen by government officials.

The economics are also not always destined to fail, they depend a lot on local conditions, such as how much it costs to survive.

UBI may be a huge boon to India's largest rural population without significant cost.

>My vote goes to redistribution of wealth, by means of a progressive tax that starts negative.

Just to note, Negative Income Tax is mathematically equivalent to UBI, in that given any NIT scheme you can produce a UBI scheme that results in the same income function.

However, I think the framing can make lot of difference here, in terms of expectations, and likely implementation.

"...and likely implementation."

It's true that you can make UBIs and NITs equivalent, but I think it's important to emphasize the implementation part: they are very unlikely to be implemented the same way. This is because, for them to be equivalent, you need the drop-off rate as incomes increase for an NIT to be equal to the increase in taxes on income earners below 2x the UBI level.

In other words, an NIT is likely to come with a high marginal "tax" (aka loss of NIT) rate for low earners, while a UBI is likely to keep marginal tax rates for low earners low.

Yeah. And additionally, how people get access to the money may also be different. With UBI, most likely people register once and then receive the income without incident indefinitely, and only need to work out taxation if they're employed. Whereas NIT likely requires people to continually submit tax returns stating their lack of income (which is potentially more stigmatising).

> Whereas NIT likely requires people to continually submit tax returns stating their lack of income (which is potentially more stigmatising).

It also means a lot of people simply won't get the benefits. In the U.S., a lot of people who are eligible for welfare programs never take advantage of them because of the administrative hurtles (to take one example, "Only about 1 in 6 people who are eligible for child care subsidies actually get it"[1]). I'm starting to think more and more that this is by design.

Even if you're one of the people that gets the benefits you're eligible for, it's still a burden (imagine having to do your taxes several times a year), and you are subject to the whims of policy makers that want to beat up on you for political credits. So you had some states requiring that welfare recipients get drug testing. If you had a similar requirement for Social Security, people would be livid and through the politicians out on the street. But when this kind of stuff is done to the poor, a lot of people have the attitude that the impoverished deserve to be treated badly.

[1] www.npr.org/2016/08/21/490822086/the-financial-trials-of-child-care-for-working-families

I'd say it's more likely due to lack of design than thoughtful malicious design.

If a person make errors some times, and then never bothers to fix any error (because of incentives), but keeps making other actions, some of them being errors that will never be fixed...

Or if a person makes errors in two directions, but then only bothers fixing the ones in a single direction. I'd say that person is malicious.

The government isn't a person. If you were hired to "fix" the problem described how well do you think you would do?

A negative tax subsidises employers so that they don't have to pay so much. If everyone got the money whether they worked or not then the low wage employer would need to improve the incentive to go and work for them. It would also reduce the amount of administrative work required.

I think it's an interesting question as to what effect NIT/UBI would have on the labour market.

On the one hand, it's a labour subsidy, so employers theoretically don't need to pay as much to offer a decent quality of life as an incentive. But on other hand, people no longer need a job to survive, which reduces the incentive to work.

I think the end result here might be a notable improvement in job quality. When you're not struggling to survive, it's much easier to weigh job quality in your decisions, and take less money in exchange for a more pleasant job. In particular, I think a lot of service jobs, could be more enjoyable if companies actually had to care about work environment.

A NIT or UBI are basically equivalent. But is easier to see why we give to those who are lesser off. E.g. why give UBI to a millionaire?

One of the points is to give power back to those who on the labor market are almost powerless. Both forms would do that. What would the impact be? Likely price for labor goes up.

Describing only one of the options as a subsidy is not likely correct.

Reply on news.ycombinator.com