I don’t get why we’ve come up with a worse version of a 40 year old idea. Are these two ships passing in the night or were there some perceived problems with Negative Income Tax that UBI is supposed to solve.
To clarify for those coming later: The negative income tax is the idea that beneath a certain amount of income, you actually are given money by the government. If you're over the amount, you get nothing, and in fact are taxed a portion of your income. Depending on how far beneath the amount you are, you might get more, or less.
But that system leaves some people in a bad spot:
* Sporadic work? Now you have to wait until after you should've gotten your money to get the money to make up for it. Without a safety net(which you almost certainly do not have), you're behind on your bills already.
* The above also applies to if you hate your job.
* You're disincentivized from working if the amount you can make is beneath the amount that would give you the negative income bracket.
* Politically, it's a lot easier when everyone can get the benefit. Less claims about abusing the system if it gives everyone the same thing.
* As an employer, giving someone just 4-6 hours a week of work isn't bad unless the employee wants something different. With a NIT it might just not be worth it to the employee.
I think though politically it’s easier to stomach if you’re of a leaning that sees government giving as a good thing.
I think politicaly you have a hard case saying we’re also giving sama and bill gates these checks (even if their effective rate still puts them under at the end of the year!)
I would hope the incentives problem would be solved with a very gradual tax curve rather than brackets for NIT.
I was on unemployment for approximately 6 months in 2008 and every $100 I made only decreased my unemployment benefit by $15-20. Anyone who thinks they can't work because their benefits will go away has such a passing familiarity with their own actual finances UBI or NIT won't help them anyway.
Well there's at least one, though you're generally right that welfare cliffs have been all but eliminated in the US.
That said, here in Charlottesville our healthcare.gov market fell apart for 2018 and the one remaining insurer's second-cheapest silver plan is a tad over $10,000 per year. Under 400% of the federal poverty level, the ACA guarantees a subsidy of the difference between the second-cheapest silver plan premium and a certain percentage of your income (sliding scale, but no higher than 9.56%). That means if you're at 400% of the poverty line, $48,240 for a single-person household in 2018, your premiums are capped at $4,612 and thus you receive a subsidy for $5,468. At 401% of the poverty line, you get nothing.
Thus, effective marginal tax rates are >100% between $48,240 and $53,709 — it does not make sense to earn any more than the lowest end of that range. A bit of an extreme case that won't hold in more functional markets, but... personally frustrating.
/rant
That's what I'm referencing.
Negative tax creates this dissonance that if you start to earn more money you don't get as much. So then everybody tries to get around it and manipulate it so it appears they don't earn as much.
How reliable is the income tax collecting and distribution service in Kenya?
Is getting a check once per year more or less preferable to everyone getting a check?
How well does filing for an income tax return in a country with a 78% literacy rate?
A negative income tax is a nation wide program, this program takes places in a smaller geographical region, making it easier to get started, and a lower cost experiment than doing it nation wide.
Lots of pluses to UBI versus a national government ran program.
The biggest advantage of UBI is its simplicity. You just get your UBI, done, much easier for people to understand and for the government to manage.
But UBI's have the perceived simplicity of "I always get this", which might help encourage more people to pay in, even though the higher earners are losing money.
And what about the people that waste their UBI and can't afford to pay the rent or for food? The existing social safety nets can't go away, otherwise people who are irresponsible with their UBI will be left to starve, etc.
What do you do with people that waste their welfare benefits and can't afford to pay their subsidized (but non-zero) rent, or who sell their food stamps and can't afford food? The present programs, despite their high overhead of administration, don't solve this problem either.
> The existing social safety nets can't go away, otherwise people who are irresponsible with their UBI will be left to starve, etc.
Except that existing social safety net programs do not actually address this problem effectively. (Food banks and homeless shelters provide some mitigation and would certainly still be needed, but those aren't the kinds of programs UBI is usually promoted as replacing.)
That's not how it works in most places around the world (USA usually is the exception rather than a reflection of common practice) - in a much more common approach, the common worker has zero personal interaction with taxes, if an income tax exits, it's withheld by the employer; and only a minority (e.g. businessmen) would have some sort of tax declaration. In such systems, implementing a negative income tax is much harder, since the current taxation mechanism doesn't provide any system for interacting with these people whatsoever, and simply paying an amount receivable upon showing their ID is comparably much simpler and cheaper to implement.
The differences are
1) Payout schedule. We currently have no means to calculate and provide NIT payouts on a weekly or monthly basis. Annual payments (like the Alaska PFD) have problems with splurge spending since the people who need it the most tend to have the worst money management skills.
2) The shape of the curve at the bottom. While the shape is not actually inherent to either proposal, UBI proposals tend to provide greater income gains per extra dollar earned by those at the bottom of the income distribution
3) The name "Negative Income Tax" is a bit confusing. A "negative tax" is not a term we use (we use "subsidy" or "tax credit") and so it can be easily misinterpreted as a tax on those with negative income... "Universal Basic Income" is clear and easily understood.
With UBI, it is possible to have it paid by entity other than government, but that's a different story.
Replace ACA with single-payer or something similar, with government bidding on drugs and forcing drug companies to lower their prices.
We could save a shit ton of money. We need to run government like a lean business, and we need some framework for bills that make them more like git branches, where you can't just push everything to master (i.e. an omnibus) but you need to break everything out into smaller removable parts. No more grouping things together.
Make Congress work 40 hours per week ON voting and writing new bills, make them so busy doing their job they don't have time to go out and work on getting re-elected, the people will vote on them because they do a good job and like their voting history.
Government is broken and bleeds money. $8 per ounce for a cup of coffee and $15 bagels from a caterer at a DoD outing is insane. How about we just make it bring your own coffee, or use a Keurig?
It also requires processing taxes much more frequently - an annual negative income tax payment isn't going to work, you'd need to split that to 2-4 weeks at most, so you'd need to process 12-24 "requests for negative income tax" every year for each person based on whatever income they had in the previous period; that obviously also can't be done without additional bureaucratic requirements.
Well in that case before I die I will appear sufficiently senile/disabled to allow someone else to collect UBI on my behalf and tell my next of kin to dump me in a hole without telling anyone. I have plenty of time to iron out the details.
See the problem.
You'll still need a bureaucracy. It might be smaller depending on the implementation details of UBI. I expect the amount of welfare fraud to remain constant. Given X opportunity, Y risk and Z reward there's always some subset of the population that will have no problem stealing from the government.
IMHO, YMMV etc.
So to me it sounds like a terrible implementation of a basic income scheme, since someone making X pays no taxes but x+n pays some fraction of n in taxes and presumably has little real incentive to work for n additional dollars when n is sufficiently small enough that x is close to x+(n - tax).
And then you've got all the bureaucracy of figuring out who earned less than x and applying whatever specific payment y to bring them up to x.
Either way, both require little extra bureaucracy.
For what it is worth, from an economic perspective, the two ideas are basically identical. In a very hypothetically scenario: If someone gets a UBI of $500 a month, and then makes $500 in income with a 20% tax, than they would net $900 for the month. With an NIT, you would design it so that they get a tax credit of $500 per month, and then every $500 in income reduces their tax credit by 20%. So that same person would get $900 of the month.
This is true of any tax scheme. NIT/UBI are intended to fix the 'welfare cliff' problem of making significantly less money by earning an extra $1 at certain point of the income curve than at higher ones, by setting a fixed marginal tax rate (even if you're a net recipient of distribution) or guaranteeing a fixed amount to everyone regardless of need, respectively. There is no discontinuity in effective marginal tax rates under NIT.
Universal Basic Income is ‘Universal’, meaning there’s no qualification to receive it. Basically it’s flat and it goes to everyone equally, rich and poor.
A negative income tax is a progressive tax system that starts off in the negatives and works itself up as you move up in brackets or (ideally) on a smooth curve or line.
It is pretty much the same thing as UBI, when you look at the numbers.
But if UBI says you get $30k/year in gross income and then if you choose not to do UBI, then you pay taxes on your income, isn't that essentially the same thing? Because if you get $30k/year in income from UBI, it wouldn't make any sense to tax an income that comes from taxes...right?
Which is not at all similar if you're poor.
Negative Income Tax is the term preferred by the right and UBI by the left, so there is probably a lot of very significant differences between any specific proposal labelled "Negative Income Tax" and any specific proposal labelled "UBI".