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Comment by wavefunction | Hacker News Reader

Presumably the difference is that at some income threshold you start paying taxes, whereas right below it you don't.

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.

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>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).

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.

You don’t have a hard and fast threashold but have it taper off on a progressive curve.

Sure, but my main point about it being a terrible implementation is that it's still means-tested requiring a bureaucracy that our current non UBI system features, which would be unnecessary and a cost-savings under a UBI scheme where every citizen receives $x each year.

It's quite possible that the NIT would use less bureaucracy than the UBI because UBI would have it's own separate bureaucracy and doesn't eliminate the need for the department of revenue, whereas the NIT would just use the department of revenue for both.

Either way, both require little extra bureaucracy.

One of the main arguments in favor of a negative income tax is that it would require less bureaucracy, not more. With the tax, you could just let the IRS handle it, whereas with UBI you would probably set up another agency, similar to social security, to handle it.

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.

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