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Comment by zozbot234 | Hacker News Reader

UBI is indirectly means-tested; if you make too much money, you end up giving back as much or more in taxes and/or partial UBI clawbacks than what you would get via UBI. This actually ends up working better and being cheaper than most alternatives (including the "guaranteed minimum"), because it's comparatively easy to structure a comprehensive tax system so that it minimizes distortions on people's behavior, and hard to design a means-testing policy to the same effect. The latter is especially true given the patchwork of social-insurance programs that currently exists. Giving cash can replace many of these programs, and making the policy a 'universal' one reduces administrative costs.

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The universality doesn't just reduce admin costs, it also eliminates the "maybe I shouldn't get this really crap job because then I won't get to collect my unemployment" and similar mindsets that can be a result of means-testing.

It's actually a big bureaucratic problem to give people several thousand dollars and then demand most of it back later. Most people don't notice income taxes since it comes out of their paycheque. It would genuinely be tough problem to educate people to not spend their basic income, or to design a system where it's clawed back through paycheques.

> It would genuinely be tough problem to educate people to not spend their basic income, or to design a system where it's clawed back through paycheques.

We can use the system that we already have, that is, income tax. It has worked fine for quite a while.

Yeah note the line after that. This is a new wrinkle to the norm.

Not saying these issues can't be addressed, just pushing back against the notion that UBI is simple to implement.

> or to design a system where it's clawed back through paycheques.

It would be no different than e.g. the existing payroll tax, or income tax withholding. You'd just notice it as a reduction in your paycheck. And if your income is high enough, the UBI can simply be a tax credit.

I agree, payroll tax could just take the ubi into account and take more depending on ur expected income

That's why it's often formulated as a negative income tax

Wouldn’t a negative income tax mean that the credit gets progressively larger as you earn more money? This would not be the desired effect.

I think the desired effect is simply a refundable tax credit, and then you can adjust the existing progressive tax rates as needed.

Interesting questions, but I think GP used the shortened form of "negative income tax bracket".

No. A negative income tax is a well established principle. It can be implemented as a bracket, but it can also be implemented as a tax credit or in a fully progressive tax system.

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

So basically it's called a "negative income tax", but it's not actually implemented by multiplying income by a negative percentage.

In the model proposed by Milton Friedman, you start with an exemption amount, and a specific proportion of any unused exemption is refundable.

The first dollars you earn reduce your exemption, but at least they aren't taxed, until earnings equals the exemption amount, at which point you are getting no subsidy and your next earned dollar starts being taxed at the lowest rate.

The effective tax rate on those early dollars would be equal to the subsidy rate. For example, an exemption amount of $20k and a subsidy rate of 40% would mean earning nothing would grant you a $8k credit ($20k * 40%). Earn $10k and you would get a $4k credit ((20 - 10) * 40%). Earn $20k and you would get no credit and pay no taxes. But effectively your tax rate on the first $20k earned is 40% -- because you earned $20k and only netted $12k in additional income.

If instead you just give everyone $X, and just have the first dollar earned get taxed at whatever the lowest rate is, you don't have the same problem with regressive rates.

Yes, I understand that. It is indeed far more common to hear the term negative income tax than with "bracket" at the end. I was giving an extra detail to distinguish the term from the truncated jargon the above poster appeared to misunderstand. (It is NOT a "negative income tax rate" but effectively a bracket that owes a negative tax liability thanks to the tax credit/UBI/call it mana if you want to.

No, it's an income tax which grows progressively with income plus a general refundable tax credit. So the overall tax liability goes negative for low incomes, and since the credit is "refundable" that involves actually getting money from the government. The general idea is sound, there's some difficulties involving ease of administration, e.g. paying the grant weekly or monthly rather than yearly.

The idea of replacing existing social programs with cash handouts reminds me of Bitcoin's earlier days. Proponents were thinking of what it would be like if they were poor, and not what life is like for poor people.

It is not the case that you can reasonably just give large groups of people with histories of poor financial literacy cash as a replacement for food, shelter, or other necessities. Many people will make bad choices if just given money. That's why many of these programs were built this way: to ensure people can't spend all their cash and be unable to afford baby formula or rent.

Many experiments have been done that involve giving UBI-like grants (and even large, one-time-only cash grants) to people in extreme poverty. The money gets spent in sensible ways, by and large. Investing in one's shelter (e.g. replacing a leaky roof), paying for children's education or buying assets for a profitable business venture are extremely common choices. Regardless of their "financial literacy" (people in extreme poverty are hardly used to dealing with financials!) people seem to grok that they're getting something quite valuable, and are not inclined to waste what they get.

I haven't yet seen a UBI experiment that replaced someone's pre-existing means for food, shelter, or other necessities. But maybe I missed it.

I don't think anyone doubts that often people will spend additional money they are given productively.

Why shouldn't cash be the benchmark when it comes to aiding poor folks? If giving food or shelter really is more helpful than just giving the equivalent cost in cold hard cash, that will be quite interesting. But let's see the proof of that.

They don't have the financial literacy skills to manage it properly.

I'm not trying to be unreasonably judgemental, and I don't mean things like bond rates or yield curves. Things like making sure you have enough dollars at the end of the month to make a rent payment. Making sure the check gets written so it actually happens. Keeping track of automated withdrawals and ensuring the number stays above zero with the timing of all of them.

This is not trivial at all for a huge chunk of the population that is served by social welfare programs. You can't just expect it to work out giving them cash instead.

I believe this has been debunked by previous UBI studies, Give Directly, etc..

The vast majority of poor people do just fine with money when given to them. The 1-2% who are addicted to substances or mentally ill will always need additional services, but why throw out the huge efficiency gains in just direct cash transfers to all because of the worry that 1-2% might waste it? The efficiency gains of a UBI vs. most means-tested programs is likely more on the order of 20-50%.

A similar argument is “would we give a UBI to billionaires too?! What a waste!” Yes, what a waste of 0.0000003% of the UBI!

> I believe this has been debunked by previous UBI studies, Give Directly, etc..

One shortcoming of the UBI studies I've heard about is that (naturally) they focus on settings that I don't have much confidence would necessarily translate to other settings like the current US. I can easily imagine the efficiency of UBI changing over time, let alone across locations, due to a plethora of factors. This isn't really a criticism of the studies (they're probably doing the best they can, and achieving good results on those is obviously a prerequisite), but rather of how much we can extrapolate from them and how much weight we can put in positive results currently. No matter how perfect their results, I'd totally expect people to be reasonably skeptical of their extrapolability (if that's a word) in the beginning.

that's a deeply cynical and paternalistic mindset

The Canadian Manitoba Mincome experiment is probably as close as has been done for that.

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

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