Comment by legitster | Hacker News Reader

Comment by legitster | Hacker News Reader

Pre-covid I had come around on UBI. But I have since soured on it again now that we had a reminder that inflation is real.

In my mind, it doesn't seem like taxing the rich is a functional payment method for the same reason trickle-down economics don't work. Years of tax cuts did nothing to move the needle on consumer demands - if you give every millionaire $1000 they don't suddenly buy more milk.

In comparison, when every American was written a big stimulus check, we did see consumer prices respond across the board. By about as much as the entire cost of the stimulus! People did go out and buy more milk! I tend now to believe that consumer prices are set by the amount of cash the median American has.

I am worried that something like a $1000 UBI would basically raise all consumer prices by $1000. And we would still have to pay for it.

I would much rather return to a pursuit of a Negative Income Tax which has nearly all the same benefits but would be much cheaper and have fewer unintended repercussions.

The universality of UBI seems to be a carrot to sell the policy based upon the (flawed, as demonstrated in the article) assumption that universal benefits are politically safer.

If your goal is to reduce inequality, means-tested programs are much more effective precisely because they don't cause demand-pull inflation. The recipients and amounts are few and small enough that supply flexibility is able to absorb the increased demand.

If everyone gets a benefit it will cause inflation and then you're back where you started.

> The universality of UBI seems to be a carrot to sell the policy based upon the (flawed, as demonstrated in the article) assumption that universal benefits are politically safer.

It is not.

It is, instead, that separately means-testing individual programs is at best wasteful duplicative bureaucracy, and often has really dumb effects even in the cases where the individual programs in isolation don’t have cliffs or other perverse incentives when the means-testing of separate programs is considered together (such as totally to > $1 in lost benefits for each $1 in additional income.)

Progressive taxation is, inherently, universal means-testing which, because its all in one spot, can more easily avoid either slipping a bad incentive through in an underobserved program or creating a non-obvious bad incentive in the aggregate of programs.

That’s why the U is in UBI.

I can appreciate the sentiment, but it seems like if you have the resources and political power to institute a universal program, you could even more easily just fix means-testing.

Also, not all "means-testing" is made alike. They are not all equally bureaucratic. You could easily do a negative income tax that is basically automatic.

> Also, not all "means-testing" is made alike. They are not all equally bureaucratic. You could easily do a negative income tax that is basically automatic.

“Negative income tax” is literally just another (older, in fact) name for UBI.

They're similar but not the same.

In UBI everyone gets the same amount of money. NIT would work basically like how paycheck withholdings work for income tax, just that they can go negative and the government can pay you based on income and exemptions. The only trick is that you would need the equivalent of a W-2 for anyone in America eligible for the program.

NIT is equivalent to the combination of UBI + progressive (usually) or flat (in some NIT schemes) income tax. Since no one proposing UBI in places with a basically progressive income tax proposes abolishing the income tax or making it something other tjhan progressive or flat, NIT is identical to actual real-world UBI proposals.

I suppose in some cartoonish parody of MMT dreamed up by conservatives to scare children you could a UBI with no tax system that wasn’t functionally identical to a NIT, but that’s not what anyone is proposing.

> The only trick is that you would need the equivalent of a W-2 for anyone in America eligible for the program.

You need W-2s for the same set of people you need them for already (those with the kind of income reported on a W-2.)

Okay, I get what you are saying. The distinction I was trying to make was that a program that gives people cash every month and then asks some of them to pay it back to the government at the end of the year would be devastating to most consumers (this is how some UBIs have been framed).

But I think we are on the same page. If you file a W-2, you are probably going to withhold income. At which point they are functionally the same.

UBI has to be done with a tax policy, basically, you give everyone $10k (as the article nominates as a figure), but you'd tax that back off a lot of people. Ideally you tax it back based on wealth rather than income.

I understand that. Again, this is seperate from the funding issue.

You give everyone in America $10k dollars. At the end of the year you take that money back from 3/4 of them in taxes. But for 11/12 months, all that money is in grocery stores driving up prices.

You could be in a situation where you increase the baseline cost of living $10k in America (very regressively) and increase the tax burden.

> But for 11/12 months, all that money is in grocery stores driving up prices.

That just clearly isn't how it would work.

If I'm at the break-even point on taxes then the government will be sending me $833/mo checks to my bank account while my work will be withholding $833/mo extra from my paycheck. That has no real effect on my spending habits and won't drive any inflation.

Even if it was an annual lump sum with no additional withholding, where does the money to pay the taxes at the end of the year come from? You'd take next years UBI to pay off last years taxes and from then on it is net zero extra spending.

Does America not have some form of Pay As You Go system where the taxes are collected continually based on the estimation of your earnings and then corrected at the end of FY?

If only it was the UBI and not the Fed increasing the money supply by 45% in 2 years that caused the inflation.

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