Suspicious discontinuities (2020)
danluu.com
danluu.com
People making $30K on welfare would need to make $81K at an actual job to have the same income after tax.
More info: https://en.wikipedia.org/wiki/Welfare_trap
I don't know what the former means and how these are calculated, but if you don't have children, this graph would look a lot less exciting.
That means you have to also know that you qualify for them, apply for them, prove that you qualify, oh, nope, whoops, you missed one piece of proof there—that means you have to start all over.
You have to apply for each one, prove that you qualify, jump through all the hoops, you start receiving benefits! Now it's time to apply for the next one, get the slightly different proofs together, send them all in—oh, what's that? someone gave you just enough money that you went over one of the limits? you get nothing this year!
A new year, you have to apply for each one, prove that you qualify....
Some people are absolute experts at navigating the bureaucracy to the point I expect they know the rules better than the people that work at the various government agencies. It was quite impressive to be honest.
One example off the top of my head; this lady was talking on the phone with a friend (or whoever) explaining how their benefits would be impacted if they declared the father of the children resided in the household and how it was much better to just lie and claim to be a single mother.
No judgement from me as it was quite the education on governmental programs.
As an added bonus I also learned a bunch of methods on how to steal groceries from walmart since people are surprisingly candid on these things when they're just having a conversation with some random cab driver they probably won't ever see again.
I have great respect for people who can learn to navigate government bureaucracies well enough to avoid getting caught up on all the deliberate snares and thorns—all the moreso if they can do so while also being poor, working 3 jobs, raising kids as a single parent, etc.
Yes, the latter is a very peculiar combination, because not many people with the mental skills required to navigate a bureaucracy like that stay poor (because some employers are willing to pay a lot for those skills).
Or to flip the statement: in order to fully benefit from the programs designed to help poor people, you need skills that few poor people have.
(Of course, this is all about averages and aggregates. There are certainly people who manage to be both poor and have the skills and mentality required to navigate the bureaucracy.)
My 'flipped' statement is one of the best arguments for a UBI-style simplification of means testing that I know of.
Whooo boy that's a lot of assumptions there.
Sorry, but it just doesn't hold up in practice. If you're working at McDonald's, your employer has very little interest in your ability to navigate a complex bureaucracy. Especially when the manager is the manager because he's the franchise owner's nephew.
Unfortunately, in most low-level jobs, that kind of skill—and, more importantly, the initiative required to obtain the skill—is not only not valued, it is punished.
I've seen a number of people I know who are very bright, very talented people stuck in low-end jobs for exactly those reasons. (Plus the good old standbys of "can't take time off to do job interviews, too exhausted each night to spend hours sending out applications", etc.)
The real issue was the waiting list…
Also over 1 year wait list.
Imagine there’s a law that you can only have 4 children per caregiver. Your capacity is 8. Lose one and your revenue is down 12.5%
The same applies if eg the government provides a service for a fee, or otherwise gates access to something. Eg H-1B visas to the US should arguably be auctioned off.
"Supply and demand" is not a free market claim, it is accepted by everyone.
I'm just pointing out that the NHS exchanges monetary cost with temporal cost - you're paying with your time rather than your dollars, for access. You're also paying dollars via tax, but that's unrelated to access.
A nation can accept or even demand this trade-off, and many do - but support tends to drop when it is made explicit.
Worse than someone who doesn't have to pay raise a kid isn't the same thing as worse than someone else with kids who makes $8000 more and therefore loses the $16,000 credit.
And the cliffs are only half the problem. Did you get a childcare subsidy? Only if you use approved providers, which charge more than your older niece would to watch the kids, and now the money goes to some bureaucratic corporation with lawyers and lobbyists instead of your own family, and you see your niece less often and don't talk to her dad as much and now he's less likely to offer to do you a favor when you need one or realize that you do.
You also get a housing subsidy, but only for particular housing, which isn't as close to your job or doesn't allow you to pool resources with roommates, so now you have to pay more for transportation or most of the subsidy gets eaten by higher rents etc.
The entire welfare system should be vaporized and replaced with a tax credit for the poor (i.e. a UBI).
Yep, call it a negative income tax if it goes down better than UBI, but many other things would be better than the system we have now.
A negative income tax might work out a lot better on the numbers, but it won't help the people that need it the most (the ones that can't get a job).
But hey, maybe it can work. The US has a deficit spending of $1.7 trillion in 2023, $1.4 in 2022, $2.7 in 2021. That $1.7 would cover almost half of a $12k ubi. But how long could that last?
1. The federal government doesn't have tax revenue. It issues a currency and then taxes go toward countering inflation. The notion that a currency-issuing government needs to "balance its budget" in its own currency is a political fiction. Also, policies that benefit people at the lower end of the income spectrum disproportionately actually move money around in the economy, which generally speaking is less inflationary than allowing it to accumulate in various silos like hedge funds
2. A "negative income tax" doesn't have to require employment. You can make zero dollars in income as a self-employed person, and the self-employed still track their income for taxation purposes
3. There are many unnecessary-to-malicious subsidies and inefficient welfare programs that could easily have their rationale subsumed by UBI, and doing so would save considerable cost that is mostly the overhead of all the means-testing personnel and in some cases (like SNAP) completely separate financial machinery necessary to maintain them
Even setting all that aside, you could make considerably more "tax revenue" by funding the IRS or reversing some of the nakedly corrupt corporate tax breaks that have been created over the last several decades. There always seems to be more money to subsidize artificially lowering the price of certain goods, fund incredibly inefficient private government contractors to do things that once cost considerably less for the government to do itself, fund drug research only to then allow the resulting breakthroughs to be patented by a private firm and then gouge people for treatment, or buy ludicrously expensive weapons for militarized police forces, but propose anything that actually benefits people and suddenly everyone's worried about the costs.
Not to put too fine a point on it, but all this "Well have you considered the cost?" handwringing people do when UBI comes up just drastically misunderstands how governments use money, while claiming to be "responsible" and "realistic"
See eg https://www.econlib.org/library/Columns/y2021/Sumnermodernmo...
The US government expenditure as percentage of GDP is now over one-third, as opposed to the pre-WW1 long-term average in the single digits. Keep in mind that massive infrastructure projects like the Transcontinental Railroad were able to be built in those single-digit percent times, or that US educational spending per pupil has been going up year after year for decades yet student achievement flatlined, and of recent years been trending down. Clearly, more tax revenue is neither necessary nor sufficient for the public good.
> reversing some of the nakedly corrupt corporate tax breaks
No arguments from me there.
> fund drug research only to then allow the resulting breakthroughs to be patented by a private firm and then gouge people for treatment
Fundamental research and bringing a drug to market are markedly different areas that require very different skills and incentives. An organization that is good at one is not necessarily good at the other. And this isn't confined to drug research; an architect can draw up plans for a house, but a family cannot live in a plan. Foundations need to be poured, chalk lines snapped, lumber nailed together, and plumbing and wires laid, all in the context of a competitive marketplace.
Similarly, bringing a drug to market with a patent is not a competitive marketplace, by design, and it consistently creates an outcome wherein people are charged exorbitant sums of money because of this non-competitive market. Doing a bunch of government-backed R&D and then getting a patent for it is the government picking a winner, not creating a market
Basically, it seems like the government was and remains a lot more efficient when it directly builds the capacity to provide goods and services it determines to have an interest in providing, rather than try to do this through "the market" (again, this is almost never an actual market)
In principle this is supposed to be a competitive bidding process, and then the winner is chosen by the most competitive bid rather than the government. In practice the process is corrupt and regulatory barriers are created to prevent smaller companies from submitting bids or project requirements are set such that only one company can satisfy them.
The problem here is corruption, which has nothing to do with whether the corrupting entity is a corporation. Public sector unions lobby for the same kind of labor-inefficient practices because they know that more jobs give them more members which give them more power, even (or especially) when the jobs are unnecessary or inefficient.
The advantage that existed pre-WWII is that neither large government contractors nor large public sector unions already existed in order to lobby for corrupt practices and their continued existence, so the government could just pay someone to do work and then have them to return to the private sector when the work is done. But WWII created such a large apparatus dependent on taxpayer revenue that it had enough lobbying power to sustain its continued existence, and now it needs to be disassembled before we can have nice things again.
But probably the best way to do it is under anti-corruption. You still want roads and ships to be built, but if you could get the corruption out of the bidding process then they'd be built by smaller and less consolidated companies with less individual lobbying power, and then you could address efficiency issues without having to fight a multi-billion dollar corporation or huge public sector union because that inefficiency is their profit margin/job. Another possibility would be anti-trust -- break the big government contractors up.
Yes, we should reduce corruption and break up existing entrenched players, but the core issue is in the structure of that kind of arrangement. I do also think that there's no good reason to have a "corporate veil" in the first place, but that's a broader problem
But that's just a mechanism for the corruption. The contract for the design of something and its manufacture and maintenance should each be separate bids. Even each stage of the design should be a separate contract that could go to someone else. The government says "we need a design for a ship" and they put it out to firms who submit their proposals and then the government picks one and buys it outright. Then they say "we need a design for a propulsion system for this ship" and take bids again. If you need to modify the ship's design some to facilitate it, that's fine, because none have been built yet and the necessary change gets incorporated into the design before you put out contracts to build any of it.
What you want is for each of the contracts to be as small as practicable, to maximize the number of potential bidders. None of this "single contract to design and build an entire fleet of ships and maintain them for 30 years" nonsense.
Claims that you can increase the efficiency of a system by reducing competition should be met with the same level of skepticism as claims that you can violate of the second law of thermodynamics.
But let's try one that should get their ears to perk up. Monopoly suppliers are systemic risk, which is a threat to national security.
Governments should be paid royalties for the patents (and other IP) they issue and protect.
For IP subsidized with public money, maybe auction off those rights.
The "universal" part of a UBI is serving the same purpose as the progressive rate structure in the income tax, i.e. you want an effective rate curve which is higher for the rich than the poor. Which means that you don't need both. What you use instead is a flat tax rate which serves as the de facto "phase out" for the UBI. Except that because it's all in one place, there are no cliffs, and there are no poor people paying higher de facto marginal rates than rich people, and there are no mountains of paperwork to apply for benefits.
Yes, but marginal rates are important, too.
If whatever fiscal policy you have makes overall nominal spending go up (or down), that would have an impact on inflation, so the central bank will remove money from circulation (or add money to circulation) to counteract.
Thus neutralising any multiplier, you might naively expect.
(Also keep in mind that when you don't tax some money, it also gets spend or invested etc.)
Which is exactly the point. What's the "marginal tax rate" on low and middle income people of the existing benefits phase outs?
The >100% marginal rates that create actual cliffs are so patently absurd that no one can look at them and find any way to justify it, but even when the combined tax+phase out rates are in the neighborhood of 80-90% of marginal income, that's still not what we want, is it?
Yeah the subsidies also will not cover the entire cost of housing. So you probably have to drive a lot farther than someone else who is not using welfare to pay for the same kind of housing.
A lot of welfare stuff looks like a great deal when you put an amount on it but completely falls apart when you look at how challenging it is to access and what the conditions are around continuing in the program. It gets to the degree that getting that extra $40-50k a year requires you to give up a LOT. And it's a full time job to maintain. So you have to do all of that on top of your full time job, often with agencies who have no hours after work. And god help you if you have to show up somewhere regularly to pick something up.
As a bonus nuking welfare and replacing it with UBI would help a lot of the chronically homeless because it would allow them to get assistance without needing to have a permanent physical address.
And it's still costing the taxpayer ~$45k -- more than that, because the government has its own administrative overhead on top of that.
But people still use it, because they're doing $30k in work to get $45k in benefits, it's just that they were supposed to be getting $45k in benefits. Which the taxpayer is still paying for even though the net benefit is far less.
The people asking how to pay for it haven't understood the math. If you subtract both the government's administrative overhead and the recipient's, we could provide a higher level of true benefits to people and still lower taxes on everyone else, just by splitting the efficiency gains between them.
Pennsylvania has a substantial program to pay for child care for many of its residents: https://www.dhs.pa.gov/Services/Children/Pages/Child-Care-Wo...
If you look carefully, the numbers are different. In Gary's picture, the cliff is from $29k to $69k or so; the one above is much wider.
Also direct link:
https://web.archive.org/web/20140205020059im_/http://www.aei...
(It is funny though, the picture above seems to be very much from a serious libertarian.)
In fairness, the linked image is sourced to a libertarian's blog and Gary Alexander is also a conservative who was appointed to Corbett's administration and was often criticized for extensive cuts to Pennsylvania’s welfare programs which he characterized as fighting fraud and waste until he resigned after a few scandals (https://www.washingtonexaminer.com/politics/2380594/ex-penns...) including the fact that he was still living in Rhode Island and was charging tax payers for his travel/commute expenses.
The source-- a libertarian blog-- implies that the problem is welfare itself, but I think the bigger problem is a naive approach to means testing that is entirely divorced from economic reality.
I don't care who it was. Are the claims verifiable, and are the derived claims defensible?
When 3/4 of those making less than 50k and 2/3 of those making less than 100k are living paycheck to paycheck, that extra flexibility influences quality of life quite a bit.
Quote (https://www.bankrate.com/finance/credit-cards/living-paychec...):
* Statistics vary, but between 55 percent to 63 percent of Americans are likely living paycheck to paycheck.
* Three in four Americans who earn less than $50,000 are living paycheck to paycheck, compared to roughly two in three of those making $50,000 to $100,000.I know that they say it's expensive to be poor but it'd be a very broken system if we had a $60k a year social safety net for everyone, but poor people still couldn't afford fresh healthy food, reliable transportation, or adequate housing and were still fighting to keep their heads just above water.
The childcare part — the largest and most problematic benefits cliff in the graph — appears to be specific to PA. But PA doesn't offer a monetary childcare benefit: one would have to be arguing that this is the specific dollar amount that the care is worth … which … IDK. I'd like to at least see that argument. But the vesting cliff, as depicted, doesn't line up with any of PA's cutoffs, either.
So, this graph smells of statistical lies.
1) “making $30k on welfare”. What is the dollar amount here? Literal checks? All support including food stamps?
2) someone making $81k will take home something like $50k of their income. That’s _way_ more than $30k
Because it's easier to pass a law that sets up such welfare when it has a simple threshold, or at least it was.
Last time this article came up, someone referenced a group of lawmakers in the US who were working at smoothing out these awful discontinuities, but I can't quickly rustle up the link.
Some trigger "automatically" (if you apply for X and receive it, you qualify for Y, Z) and that can have weird side effects, too.
So, frequently, you wouldnt even be able to purchase books without a loan or extending credit til 1-2 months into the semester. by that time you could be having midterms and tons of assignment with no textbooks. I would frequently have to beg other students to let me photocopy sections of their books so I could do the assignments. Or resort to pirating.
To them that’s “working as intended” I guess. no amount of complaining ever got anywhere.
They often do use sliding scales, but that’s more complex (and expensive) to administer, and (because of multiple interacting programs) ends up not actually solving much of anything. Also, because of the way things (including available funds) work, but even ignoring budgeting for the increased admin cost, a sliding scale probably would start stepping down from full benefit where a sharp cutoff is, that would probably be more like the middle of the sliding scale, so if you “barely squeaked in under the limit” on the sharp cutoff version, you’d probably get far less benefit under a sliding scale system.
Despite being a terrible student when I was younger, I found had a great time learning, and I've really enjoyed my job ever since.
I found myself in a strange position though, lots of services offered benefits to students, discounts, internships, storage / compute time etc. I was not enrolled in a traditional university (although they were administering it), and so I didn't qualify, for much of any of those kinds of offers. Most of the systems in place thought of students as a typical 4 year university student and frankly ... younger. One internship I applied to did not seem to clearly indicate they were only really interested in younger, and more traditional students until the second interview.
Some of these rules I get, they don't want someone abusing their free / discounts for other reasons and they have systems in place for dealing with traditional students.
With people changing jobs and seemingly continued potential for the need for job market retraining and related disruption and etc ... it feels like it's time to make some adjustments as far as what a "student" is and so on.
Well, you missed out on a lucrative lawsuit there if you're in the US. An interviewer telling someone they're not going to be hired because they're over 40 (or even just because they're not young enough, when they are over 40) is legally equivalent to telling them they're not going to be hired because they're black or Jewish.
Then the question was, do you want to be the guy who calls that out? Trying to get a job...
I don't think the outcome is a sure thing, in that case I wanted to do / say something but I felt like it was the applicant's call. Not an easy decision.
I respected his choice to just move on, still burns me up a little, but his call IMO.
My wife is friendly pursuing her bachelor’s and it is clear to both of us that universities are really just tolerant of non-traditional students. You won’t be treated poorly, but all of the infrastructure, tools, class progression, etc, is constructed around post-Highschool young adults.
It’s been a while since I’ve been to a community college, but I suspect they’re slightly better.
My wife was in grad school and pregnant. Some of the instructors seemed completely confused on how to handle things. Others seemed to handle it in stride.
It's like there's an expectation that "you're relatively poor, young" and some other expectations that when that's not the case the system starts to fall apart.
Try translating your idea of a sliding scale into a piece of legislation which matches your intention.
Example: something costs 20 money, if you earn 100 money or below, then it is subsidized to cost only 10, where 10 money is a subsidy. For every 2 money you gain, 1 money in subsidy is removed.
If you earn 104 money, it will now cost 12.
The x and y values vary depending on what kind of things are subsidized, but this is a fairly simple way of doing it that doesn't punish you harshly for a small difference in earnings.
https://lichess.org/stat/rating/distribution/bullet
It's easy to understand why this happens:
- Player ratings will fluctuate by small amounts as they win and lose individual games.
- People are happy to stop playing when their rating is at e.g. 1503, but if it's 1497, they'd rather play just one more game than leave it that way.
- At any given time, most accounts are not playing, so the distribution shows a bias towards values just over a 100 Elo threshold.
The other neat thing is that you can see this effect reduce as you look at longer time controls:
Blitz (less than 10 min): https://lichess.org/stat/rating/distribution/blitz
Rapid (less than 30 min): https://lichess.org/stat/rating/distribution/rapid
Which makes sense because the time and effort of gambling just one more game to get the rating back over the line is higher at the longer time controls.
FYI, that graph only includes players who were active (played a game) this week.
Basically I'm not sure why you're saying that leads to a bias toward "slightly above 100."
Ohh... unless you meant slightly above a multiple of 100. I see now. Because people stop playing when they hit a milestone, right.
I had the opposite problem for the 2022 tax year: I turned out that, with investment losses and no earned income, my adjusted income was below the poverty line, which ... means your ACA healthcare subsidy is cut off entirely!
https://www.irs.gov/affordable-care-act/individuals-and-fami...
The "logic" there (from reading discussions of the cutoff) is that, "well, if you're below the poverty line, you should be on Medicaid and not on the ACA exchanges at all, silly!" Okay, but if you have wildly varying income, and a high income from previous years, you don't know that you'll be "in poverty" this year, and won't qualify because of the past year.
I was tempted to update my taxes to claim phantom income from my imaginary cash-based business, which would then get me the subsidy, but that feels ick.
(Which, I know, being retired on crypto, I also feel ick about taking the subsidies to begin with, but that's a different issue.)
For now, there is no income level cut off for ACA premium subsidies, just a limit that says you should never spend more than 8.3% of your AGI (more or less) on health insurance (more or less).
This may change next year and/or in the future.
This wasn't setup this way because it was thought to be a good design, but as a political compromise. At the time, it was seen as important to keep the headline cost of the bill below some arbitrary threshold and for it to be revenue neutral (the wisdom of this is questionable in hindsight since the moderate Dems that supported the bill mostly got wiped out anyway and it never got any Republican support). Medicaid is cheaper for the government than ACA subsidies (at least for low income people given the way the subsidies are structured), partly because the government has a lot of negotiating power and partly because Medicaid is stingy.
This was made worse when the Supreme Court ruled that the federal government couldn't make receiving existing Medicaid funding conditional on Medicaid expansion (Medicaid is partially funded by the federal government, but the program is administered by individual states) so whether the Medicaid expansion is even available to you largely depends on whether your state is run by Democrats or Republicans (with a few notable exceptions).
Medicaid can actually be very good quality healthcare, if you're located say, near a very good research hospital in a city with a structural oversupply of medical care due to having a lot of med schools.
I'd rather have medicaid living next to a high quality (non profit) health system, than "nice" insurance living in a shithole. All the insurance in the world can't materialize doctors that aren't there
ACA subsidy eligibility may be annual, but Medicaid eligibility is based on current monthly income, and if you have a change that makes you ineligible, you lose it. You can’t just decide to “take Medicaid for a year” because you aren’t subsidy-eligible based on prior-year income.
That said, in my secondhand experience across multiple states I won't name, the medicaid office probably won't actually find out or do anything before 12 months are up.
Also, a few states are starting to officially enact "continuous eligibility" and intentionally not check your income for 12 months -- mostly for children[1] right now, but some states for adults[2] too.
[1] https://www.medicaid.gov/medicaid/enrollment-strategies/cont...
[2] https://www.commonwealthfund.org/publications/issue-briefs/2...
One qualifies for subsidies regardless of how much wealth they have? Sounds like US welfare system is a joke.
No benefits should apply 100% for anyone making under a certain amount and 0% for anyone making over. Instead there should be a range they slowly decrease, so that if you make $1 more before the benefit you still get less than $1 after. Maybe even a lot less, like only $.30. But you should never lose money.
This is obvious. It goes to show how bad beaurocracy and subtle misaligned incentives are that these hard cutoffs ever existed in the first place.
Democrats want more taxes, which inevitable come from middle class, not being able to get it from the poor or rich. Then they set laws in those programs as "means testing", where the poor get the benefits, and the middle class doesn't. The rich never needed it. The middle class tire of paying for everything and getting nothing, and vote the other side.
And, that pendulum swings back and forth.
And that's how we get this horrible ass-backward system we have. And going back to first principles and doing is right is "against the other side!".
(1) massively duplicate fixed costs for logistics
(2) ignore that a primary reason governments exist at all is to help prevent people from starving to death, despite it often being hijacked by powermongers
Just gotta say, that's a pretty extreme position to take.
(I realized I was contributing to that problem by donating to local charities.)
I'm OK with people not working if they don't want to, too, as long as those people are OK with subsistence-level living standards. I don't see why able-bodied people who are capable of working but just don't want to should live a comfortable life at the expense of the working taxpayer.
I mean, UBI never meant "Extravagant money." It has always meant something akin to "basic standards for survival."
The entire idea from what I understand is that you should be able to survive just fine, not have it pay for your 98" micro OLED :P
> the longer you stay away from gainful employment, the more marketable skills you lose.
I sorta relate to this as someone who's been coasting by at my current job for last year or so. But I'm also working to upskill myself actively. You bring a good point but I don't know what teh solution to that would be.
I've grown up amongst poverty and while I don't particularly like the term (as it tends to be deployed in aid of demagoguery), there really is a element of 'welfare culture' in effect, and having been on welfare myself (and treated like a prince because bizarrely the system was obviously classist: so Ed you're an out of work indie game dev and you're currently learning something called 'Nim'? "well that's just great then have some money". Go in there as a bricklayer and say you are looking but haven't found any work the past few weeks: here are 20 forms). I was always very impressed on the knowledge these working class labourers would have of the welfare system, because in their situation it really made a difference.
Their attidue was: (and who can blame them) fuck the govt they don't give a shit about me, the more I get / the more I can play the system, the better.
UBI from their perspective would be total victory. No more queuing no more forms or interviews, just free money for ever. But what then?
If the UBI was only sufficient for survival / dignity but not enough for luxury I think the psychological topology chances a lot and what could be previously described as 'getting one over on this enemy' now can only be described as your own failure.
That's one of the main points of UBI as a replacement for means-tested welfare [0]: eliminating the perverse incentives against maximizing outside work and for expending energy into working the system that exists with means-tested welfare that has complex eligibility rules and is rapidly cut with outside income. By making the clawback much slower and starting much higher up the income scale through the tax system, UBI, compared to the status quo, rewards gaining additional income in the labor (or other) market and learning skills other than navigating a welfare system.
There is a reason that UBI—under the name “negative income tax” because of the political valence of taxation on that corner of the political universe—was originally a right-libertarian proposal.
> I'm OK with people not working if they don't want to, too, as long as those people are OK with subsistence-level living standards
There's no plausible way a UBI provides anything substantially better than that any time in the near (likely, the lifespan of abyone now living) future, so that shouldn't be a problem.
[0] Perhaps even stronger if UBI is also seen as a (partial or full) replacement for the minimum wage, which could be justified because, unlike means-trsted welfare, it doesn't tail off with income and provides a basic support level for all—there is then no reason that employment must also serve that minimal support purpose, which makes it possible to offer employment whose marginal value to the employer is less than would minimally support an employee, but which would still be positive (and in some cases still have more long-term value to the employee because of experience that could contribute to more valuable future employment.)
It's sort of like telling yourself that you'll go back to school. Some people do, but most don't.
Right, but wouldn't that be similar? Obviously there are going to be people who are going to say "screw it, I'm going to live like this" on a basic survival-wage UBI, but I doubt a majority would want to.
I do support UBI, but I also expect that it would have complicated effects.
This is paid for by a combination of: replacing existing welfare with UBI, retrenching the bureaucrats that used to implement those complex welfare programs, and increasing the percentage of income tax paid.
There's some threshold where you might pay extra $20K on your income, but you get a flat $20K back as UBI, so you don't notice any change. This is typically somewhere in the middle class. Everyone poorer than this gets a boost to their income and/or have their existing welfare (and associated requirements!) replaced by an unconditional payment.
Everyone richer pays more tax, but not a huge amount more, since UBI mostly replaces existing welfare. It isn't an entirely new type of welfare on top of existing welfare -- this is the strawman that the right-wing likes to use in debates.
Multiple programs, offered by different jurisdictions, with overlapping populations, each with sliding scale benefits that reduce less than $1 of benefit for each $ of income, still can (and do) end up with beneficiaries losing in net with additional income. But instead of doing so at particular cliff points associated with each program, they do so continually over a wide range. You replace a series of cliffs with a slide.
https://www.economist.com/cdn-cgi/image/width=1024,quality=8... (from https://www.economist.com/britain/2023/04/11/britains-tax-ta...)
For example, I'll do some hands-on work for a former employer. Rack some network equipment, go investigate something, install some hardware...They take it from there, I can bill a couple hours and it's a nice dinner for my wife and I.
However, if I hit a certain threshold ($600?), they will send me a tax form and I'll then have to pay income tax on that money.
No, the threshold at which you have to include the income in your taxable income ($400/yr) is lower than the threshold for the person paying you to provide a 1099-MISC ($600/yr from that payer.)
The $400 is only if it's your only income, otherwise plumbers could always charge $399 a visit and never pay tax.
A related common failure mode is baking in fixed, absolute thresholds for dynamic domains sure to evolve instead of linking thresholds to dynamic metrics (such as inflation, cost of living, etc).
Welfare programs are not for the poor.
They are so the poor doesn't "eat the rich".
(For those playing at home this is a slogan tossed around with connotations of society wide rebellion - which would not be a comfortable outcome for rich people.)
A particularly troublesome example I encountered, entirely unrelated to finance, was when working on a renal ward in hospital, we had to count respiration rate and input it into the obs machine, but if you inputted over 16, it would increase their sepsis score (or "acute deterioration"), meaning there'd be additional work to be done. It was rarely the case that they were actually producing symptoms of sepsis, but because of the hard threshold, to my horror, nurses would often just enter 16 on the mark, and juniors like me were told to do the same.
I'm sure there are literally tonnes of examples of these discontinuities and the bad incentives they produce across every industry and government function. In addition to laziness and inertia, I feel a general problem is that lack of curve/distribution/continuous-thinking in our schooling, as opposed to the easier discrete thinking.
All systems are fundamentally analog in nature. If only we just taught things this way...
- doctors going part-time to keep their income below £100K, in the middle of a shortage of doctors across the health system
- employees turning down promotions because with the combined effects of income tax, student loan repayments and loss of childcare subsidy the effective marginal rate of income tax between £100K and £117K is > 100% (!)
- single high earners (core voters of the present government) effectively subsidising families of middling earners (the opposition's core voters) because the discontinuities apply to single person's income, not combined household income
The behaviour changes are simple first order effects. The second order effects on public service workforce availability and overall tax take were also highly predictable.
[0] https://www.telegraph.co.uk/multimedia/archive/03270/tax_327...
This ignores stuff like losing childcare subsidies that is likely not included on the graph.
In the us you hear stories of people decreasing their income to be in a lower tax bracket and often it is due to them not understanding that the tax brackets are for marginal tax rates.
True, but they are harsh discontinuities, sufficiently so to have the effects I described. And yes, there is a common combination of personal circumstances (high income plus student loan repayments plus child care subsidies) which means that any gross salary between £100K and £117K means less net income than being on £99,999 gross. I've not been able find a graph for that, but the maths checks out.
The result of this particular combination is to effectively impose a ceiling on many employees at £100K gross, because they would have to receive a greater than 17% pay rise to be better off than before.
This is often claimed. And the whole point of the article and much of this discussion is that no, there are often major steps / discontinuities in the overall tax rate. In the US, the many ACA discontinuities just by themselves are large and do not effectively pay attention to the bottom line. For that matter, I don't know of a single country or US state that actually "runs on effective tax rate". Which might be a solution to the problem if anyone were actually looking for a solution to the problem.
Suppose you predicably earn 150k a year. Taking 110k per year salary and putting 40k in your pension for four years results in less net income than:
* Taking 140k salary and 10k pension in year one
* Take 100k salary and 50k pension in years two, three, and four
In both cases you have taken 440k salary and put 160k in your pension. But in the first case you have paid highest tax rate of 60% tax rate on 40k and in the second case you paid the highest tax rate of 60% on only 12,570.
Since the annual pension allowance is now 60k per year, and you have a three year carry-forward to use unused pension allowance from previous years you can do this trick with quite a wide range of gross salaries. And you can use it for the 125,139 to 125,140 decreasing marginal rate, or the 59,999 to 60,000 decreasing marginal rate due loss of child benefit.
I think in practice this is indeed the role they play. If I'm "overpaying" by 20%, the appraiser will probably still "write down the predetermined number", but if I'm overpaying by 100% and taking out a mortgage to do it, there's a pretty good chance that the bank's appraiser is going to sink that deal.
An appraiser will never get in trouble if a bank forecloses on a $500k property and it sells for $450k or so, but they will get in trouble if the $500k property only sells for $200k - they'd need to explain why.
Somebody (A) at the bank does not want to give out loans that are well beyond a properties value.
Somebody (B) _else_ at the bank is actually the one giving you the loan and makes money from you getting it.
So A requires B to have an appraiser so they can't completely run away writing loans. From talking to some real estate agents, the appraiser will only fudge so much for you. An appraiser might agree that the house is worth 750k even if they actually think its 699k but if you try to get a 700k loan for a 350k house they'll write down 350k in their appraisal.
--
IIRC, the government's crack down on "junk fees" is mostly that you can't advertise a price and then inflate it later with fees. So as long as the bank states that they require an appraiser and their in-house cost is $X; it doesn't count as a junk fee. But if the bank says that the loan is going to cost say $5k in overhead and then later says it doesn't include appraisal fee then it be a junk fee.
This is kind of the point. The appraiser isn't trying to find the "true value" of the house, otherwise buyers would hire appraisers prior to even offering a bid.
The question that the bank wants answered is, "is this house sufficiently matched to loan amount such that if the borrower defaults, the house can be sold for enough money to recoup the loan?"
And if the answer is "yes", then they write down the number.
https://www.firstcoastnews.com/article/news/local/jacksonvil...
Reddit /r/nottheonion discussion: https://old.reddit.com/r/nottheonion/comments/igk83g/jackson...
Appraisers will fudge $100k on the value of a $1m house because that's their opinion as an appraiser. They won't fudge $1m on the exact same house (2x value).
That serves as a kind of cap on funny business to some extent. 10% of the value isn't going to make that much difference on the ability to pay for most borrowers so an excess $100k in the valuation doesn't really matter anyway. As long as appraisals don't get too out of line they serve their purpose.
But yeah, it's _very_ clear their appraisal, which is usually _dead on_ with the offer, is a sham. I mean, even just considering the incentive structure (Who's going to hire an appraiser who causes deals to go sideways?), it's clear that they're just a middleman taking their cut.
Then again, the finished house then appraised at $50k _over_ cost 12 months later when I converted the construction loan, so maybe the first appraiser really was nuts.
IMO, that's a really glass-half-empty way of looking at the situation.
You did good! Try to give yourself a break. People like you who didn't fall for the sleazy mortgage brokers helped limit the damage that the rest of society had to deal with. And maybe next time some society-wide con goes down, if you (or someone you love) is unlucky enough to get stung by it (because none of us are smart enough to spot the con-men 100% of the time), hopefully you (or they) will get the help that's available that time around when it is really needed.
It was also something silly like the article, where if I made like $5k less annually I would have qualified for much more than that. I was struggling at the time and really could have used it.
I mean, sure, but you were still better off to not have your house destroyed in the first place.
> 2. Within a given year, older kids are stronger, faster, etc., and perform better
I've seen a few youth ice hockey games and by god it's just unfair; there's a kid like a foot taller than the rest. I'm kind of surprised there isn't some system that buckets kids by size , it can't be fun for the small kids to get elbowed in the neck every time they bump the tall guy.
Fun fact, the ball and hoop don't care about any of that. It lets me steal it from you and it lets me put it into the hoop. The scorekeepers even add two to the scoreboard!
Tangent: I grew up around a high school basketball coach and saw that all of the adults knew exactly who was going to college in which sport, and usually by late jr. high. We'd go to games just because he said some kid on the visiting team was going pro and that's exactly what happened.
My kid is in 12U youth hockey and is a big guy, and yeah, smaller kids can often usually skate around him, but if they bump into him, they fall over, and often he'll get a "big kid penalty" which means he gets a break in the penalty box for the crime of being tall and physically near a smaller player who fell over. We had to do a bit of coaching on how to make (allowed) physical contact so it reasonable contact doesn't look like prohibited contact (mostly be sure to have hands off when kids are falling, it's real easy to look like cross checking when it was actually just incidental contact).
Some of the littler kids seem to have a lot of fun getting away with a lot more physical play than he can. Although he says he enjoys it when a small kid gets mad at him and tries to knock him over, too. So at least so far, seems like everyone is having fun.
I don't think you can really just bucket kids by size and ignore age though... there's a lot of mental development between 10U hockey and 12U hockey, and putting a big 10 year old on the 12U team is often not right because the level of play is so much different, most 10 year olds won't keep up. At the same time, a small 12 year old on the 10U team is going to have a big advantage from age.
Around here we do have two different leagues, one for 'recreational' teams and one for 'reputation' teams, and you more or less have to demonstrate a decent amount of skill to get on the rep team, and then you're playing with much better teams. All the teams are composed of a mix of big and small kids though.
Edit to add: All that said, I think bucketing kids by age makes sense and I agree that there can be advantage to being at the extremes of the cohort. Since the US school system usually has a different cutoff date (september-ish) than US youth hockey (jan 1), you might see different results where there's grade level based high school hockey and age based youth hockey... but not in Canada where the cutoff is Jan 1 for both.
The problem is that these youth sports can get very competitive, and then people will be tempted to move the bigger kids down to get an advantage.
USA Hockey rules don't permit playing down unless a doctor says it's medically necessary, but then they're not allowed to play on competitive teams. Simply being small or unskilled is specifically not an acceptable reason. [1]
IMHO: playing up is pretty easy to administer, but playing down would be very hard to administer fairly for competitive teams, so it's just flat out prohibited.
Edit for further thought: If you have enough participants, it might make sense to try running Jan 1 leagues and Jul 1 leagues and see if it makes sense to go to quarterly leagues too. Or maybe agitate to change the cutoff for Spring Hockey and see how that looks?
[1] https://www.sedistrict.org/page/show/834907-playing-up-down
A friend of mine has a son who is giant for his age. The kid is 7 but he's the size of a late middle-schooler.
One of the things that ends up being really difficult for him is that everyone around him assumes that he should be smarter and more mature than he is. They inadvertently expect him to be mentally the same age as kids the same size as him. It sucks because it makes him seem developmentally disabled or emotionally unregulated. He's not! He's a totally normal seven-year-old. Just a really tall one.
>For example, the 2013 Chicago Marathon provided pace teams for 3:00, 3:05, 3:10, 3:15, 3:20, 3:25, 3:30, 3:35, 3:40, 3:45, 3:50, 3:55, 4:00, 4:10, 4:25, 4:30, 4:40, 4:55, 5:00, 5:10, 5:25, and 5:45.T he institution of pace teams then could provide an alternative explanation for the bunching we observe at round numbers.
It would be easy to do, even. Restrict to marathons where the pace team spectrum is known to be of a specific type and see if the other spikes disappear. The author certainly has the data to do this, and isn't. That is suspicious.
Suspicious Discontinuities - https://news.ycombinator.com/item?id=28452926 - Sept 2021 (54 comments)
Suspicious Discontinuities - https://news.ycombinator.com/item?id=22378555 - Feb 2020 (297 comments)
And only individual income taxes would be directly relevant to individual ACA subsidy eligibility.
Except that in real life there is no /dev/null that you can immediately pipe in exactly $6440 to hit your target.
You have to spend your time in order to achieve this reduction in AGI.
And discontinuities being discontinuous means that the number of people who have the necessary training/experience to confidently achieve this in, say, three hours, is probably in the same ballpark as people who can successfully set up encrypted email in the same amount of time.
For everyone else, it's going to take at least a week's worth of time to plan, double check, execute, triple check, etc. (And realistically double that, or more.)
At 55K, you've already spent that savings in the value of the time you gave up to get the savings.
People often make fun of free software developers for failing to properly value their own time. But at least that's not their domain of expertise. A financial hobbyist spending $2 of their time to save $1 is professional grade irony.
Edit: clarification
At $48,560, these are mostly people who don't have a lot of money relative to their living expenses, and are doing what they need to do in order to not feel totally broke. < $50k in a lot of places was already getting hard to raise a family on, even before Covid, all the moreso if you're paying full price for ACA exchange insurance, which was then and remains now disgustingly expensive.
AIUI, the concept of depreciation exists in tax law precisely to prevent indefinitely deferring taxes via reinvestment (though it can't do anything about the portion of reinvestment going to pay salaries a la Amazon):
Here's the IRS's - https://www.irs.gov/newsroom/additional-first-year-depreciat...
What upset me was couples with combined salaries far greater than mine but individually a little less so they were just below the cutoff. Their combined cut on considerably more income was less than mine. We were living on one income, and the cuts would have been tough to absorb if not for the stimulus checks.
I saw the phrase "middle class solution to lower class problem ['MCSLCP']" applied to stuff like this years ago; that characterisation is possibly not politically correct today. It was discussing various forms of 'credit fine print' --- the ad for "Buy this recliner today, no interest, no payments for three months!!!" ... followed by five lines of fine print at the bottom of the ad (likely double the verbiage of this posting) about need to pay promptly, the upfront fees, etc etc, and the (somewhat usurious) rates and fees payable if the process wasn't followed to the letter.
What makes it 'MCSLCP' is that for a large percentage of the population that would look at this, if you have the time / savvy to assess the deal and make it work, you probably have better credit options available. [1]
It's super easy to comply with the terms if you have a personal organization system ('tickler') that works. Maintaining that system is really tough if you're a single parent/double job trying to keep the ship afloat... and also to have the funds to keep the deal working on the day that the tickler is triggered.
But the 'MCS' of the MCSLCP is, just buy it with the cash-back credit card, and pay the balance in full before the due date. Easy percentage, and you already do that as part of the monthly bill-payment chore.
For the vendor, the deal is a moneymaker since the majority of the takers will not (be able to) comply with the letter of the terms, and the fees and rates become the profit.
The public benefit aspect is that, the space to screw it up and lose the benefits is politically a feature, not a bug. The legislators can paint themselves as guardians of the public purse and the people who blew the cliff as thwarted welfare cheats.
[1] if I could 'ping' patio11 on this... I think some recent posts from 'bits about money' are in the same area as this.
Instead we end up with a situation where we have arbitrary cutoffs, a large buerocracy just checking for eligibility and often even progressive subsidies (giving more to those with higher incomes)
Currently, if you have a child, you're entitled to a cash payment called child benefit. For a first child it's worth £26 per week and then any subsequent children you'd get £15.90 per week. However, you only get this if the highest earner's income is below £50,000. Between £50k and £60k, it's on a sliding scale, so at £55k you get 50%, £57.5k you get 25%, etc.
Side effects of this are that if you have two earners both on £49999, you get the full amount, and one earner on £60000 you get nothing. It means there's a crazily high effective marginal rate on people. If you put money into your pension, it can bring you down below the threshold again, so many people (if they can afford to) will do this.
From next month, they're changing the threshold to £60-80k over which it drops off, which is a big improvement, but the marginal tax rate effect is still there.
I know more than one person who intentionally keep low, part-time hours for this. One had a good, work ethic when on the job. Just didn’t want to lose those benefits.
Policy makers should definitely weight this into any decisions about reforms.
I vaguely recall reading that the technique was used in the second world war to catch black marketers; if the distribution of weights of rationed items had a discontinuity near the weight limit, it was evidence that the seller was keeping the heavier portions back for private sales.
[0] https://houstonstatisticians.wordpress.com/2013/01/11/poinca...
While some of us could qualify while on early startup salaries, I don't know how I'd feel about subsidies as a techbro, and I know I wouldn't feel good about having to move from a nice building (big time investment, moving monetary cost, and quite possibly moving to a crappier building) because the startup was doing OK.
I was disappointed, but not surprised. As a middle-class techbro, this is a very lite version of a much bigger problem that has affected many low-income people. News has long had stories about low-income people who are trapped with subsidies they need (housing, food, support for children, etc.). They make a lousy wage, and can't afford to get much of a better wage, because the societal safety net on which they depend would be ripped out from under them before they could afford it to.
Subsidized apartment buildings in the US don't make you move out if your income goes up: they just take away your subsidy, i.e., your rent goes up to what HUD calls the apartment's "contract rent". Then HUD (statistically speaking) directs the money they used to use to subsidize your rent to building more subsidized housing. HUD wants successful people living in HUD-subsidized buildings, at least the ones with children in them, to serve as role models.
Avoiding benefit cliffs requires more than understanding the issue of discontinuities, it requires the reduction of identity politics which neither party is on board with. Parties themselves are labels. They cater to the human desire to simplify and form tribes around those labels.
Source: my data for the city of Berkeley https://observablehq.com/@jwb/berkeley-rent-board-data#cell-...
I think the rent one is much more driven by "some landlords like round numbers for posting ads/doing their finances".
And unless increases are limited by some law, they will usually only raise it by even amounts.
Rent-controlled Berkeley apartments are allowed to increase rent by some fixed percentage, so maybe you can see this in your data? But I don't think the math would work out so cleanly.
In expectation, they're likely not really funneling that much money to options traders. Indeed - if the option pays out, they likely will not have to worry about medicare/healthcare for quite some time.
Do check if that would work for you before wasting money on useless put options.
See Lichess: https://lichess.org/stat/rating/distribution/blitz
Couldn't find this in Chess.com stats, but maybe they do some smoothing in their plot.
Because, he thought, refs are human.
You can if a significant part of your income is capital gains.
They even sometimes change mind and make experiment with other function.
Many experts think, this is because in these countries, laws made entities tax agents (every entity pay all taxes for all hired people), so people just don't bother how many taxes they pay, and how much time spent to calculate all these things and to fill all papers.
From other comments I learn that some laws indeed do not work like this. Really?! That's awful.
If you think losing a $20k subsidy is demotivating, imagine inheriting $25 million.
So instead of knuckling down and working hard to contribute their fair share, they are incentivized to just loaf. No telling the costs to society from these freeloaders.
- Trust fund babies will not qualify for much government assistance
It is a net good for the economy and the individual if a person who is capable of making ~$50k does so within the workforce, rather than avoid improving their own life in order to qualify for assistance.
This is not a moralization of the use of government assistance, it is a criticism of the incentive structures within those assistance programs.
I agree. If you've just inherited $25 million, it would still be better for you and for society for you to get a job--even a job paying $50k a year if that is all you could get.
But...are you going to be incentivized to do so?
If you care about somebody not wanting to make $50k because they'd lose a $10k subsidy, how much MORE should you care about a $25 million subsidy disincentivizing somebody to improve themselves and contribute to society as a productive citizen.
> Trust fund babies are far more rare than people making ~$50k
That just means that imposing enough inheritance tax to incentivize them to work wouldn't effect enough people to have a negative effect on the economy. And lets not forget, the person being taxed is dead. They will feel absolutely no ill effects from the tax. Its all upside.
Not Trolling here. I advocate a 100% inheritance tax, the proceeds of which should be dedicated to education, nutrition, and housing for the next generation, to achieve the following goal: Equal ability should be given equal opportunity to succeed.
And just giving free money to one kid and nothing to another is the absolute diametrical opposite of that.
What sort of nonsense half-measure is this? I propose a 100% tax on parent-child resource transfers starting from the moment of birth!
Although, you might just cut out the middleman, seize the children, and raise them in a state-run "Nurturing Center."
Fun stories do not necessarily make for fun real life experiences I imagine.
I don't know a parent who hasn't fantasized about this. I hadn't considered the inheritance angle; my kid's young yet.
- There is still a question of scale: the trust-fund-baby population is several orders of magnitude smaller than the makes-50k population
> I advocate a 100% inheritance tax
Well then I don't think there is much common ground between us :) A 100% inheritance tax severely dis-incentivizes savings and investment, cutting off capital to the businesses that have created so much value over the last century.
Sure, but how much value have we lost because talented kids didn't get the education they needed? How much are we being harmed right now because a mediocre, but wealthy person is holding an office which could be better done by somebody who was excluded through no fault of their own//
Anyway you're wasting your time because these people are lawmakers.
Anybody who would leave a country which gave them so much--just so they could take EVEN MORE from it--is somebody I don't want voting in my elections anyways.
Good Riddance. Either grab an oar and start rowing with the rest of us, or get off the boat.
> Anyway you're wasting your time
No doubt I am. But when people come on here and complain about somebody making $40k a year getting a subsidy for their health care, it's fair to hold them to their own standard. You are against handouts, I get it. Well what about that handout you got from your parents when they kicked off, on set up that trust fund?
You want people to be incentivized to contribute to society, I get it. Well, if giving somebody $10k to subsidize their health care is a bad incentive, what about giving somebody $25 million?
If it's bad for people to just be arbitrarily handed free money, so be it. Let everybody start from exactly the same starting line, and let them go as fast and as far as their talents can take them. But they don't get to just give free money to people, even their kids, because apparently, that's bad.
https://news.ycombinator.com/item?id=39765718
People and organizations that understand what's important to keeping the American Empire strong and gas prices low and offer to deliver.
They aren't going anywhere. They pay for the laws.
Good luck thinking the Clinton's and MTG's would choose you over mere millionaires especially when you don't vote and don't contribute to elections. When last did you contribute money for a table at a fundraiser so someone can speak for you?
You give me the "Genocide Joe I'd rather have Trump vibe"
I and we aren't going anywhere. It's cheaper to get you out to that fake Utopia you think exists in Europe.
They have stricter immigration rules than the US and you don't qualify? Hmm. How about New Zealand and Australia? I really wonder
The US already spends more on health per capita even excluding the costs of drugs. It's not because some random put money into Bitcoin in 2006 and is now a a near billionaire. Or because they won the lottery. There's an entire system eating away at the money and even Amazon couldn't fight it. You'll have better luck getting rid of the TSA
Call me and hear my very African accent
Two observations: 1. Why from 2004? Things were much worse in Russia before 2004. 2. The numbers of this election seem to agree with approval rating polls conducted by western agencies.
The 1990s were worse economically in Russia, but Yeltsin was a relatively liberal politician and possibly didn't want to falsify elections.
Guys that are not “our guys” never win a legitimate election. Remember how integrity of elections were questioned when a guy that is not our guy won an election in 2016?
He got to power by organizing a folk uprising against an attempted coup by KGB generals Kryuchkov et al., who were hardliners and quite skilled people as well; they caught Gorbachev and held him hostage.
https://en.wikipedia.org/wiki/1991_Soviet_coup_attempt
That coup could very well succeed and that would mean death for Yeltsin, possibly after a torture session in Lubyanka. He certainly demonstrated personal courage there.
What followed was "too free Russia". As in, lawless. It had certain advantages. For the first time in Russian history ever, multiple independent media sprang from the ground and journalists would criticize and attack powerful figures in a way that they no longer can; we're used to it, but open media criticism of powerful people is actually not that typical in the world. But at the same time, crooks stole everything and the regular Russian suffered. As a nasty consequence, democracy and freedom became one with poverty and corruption in minds of many Russians.
Yeltsin only contested one election, in 1996. His opponent Zyuganov was a classical communist. The result was 54.40% for Yeltsin and 40.73% for Zyuganov. Was this election clean? How can I know? But it wasn't a travesty with 90 per cent for The Leader and paper figures for "opponents"; Zyuganov was a real politician with a competing party and a very different program, and he got 40 per cent of the vote, and nobody fell out of the window etc.
Everything is relative, and I believe that for the standards of Russia, Yeltsin was by far the most liberal leader in its history.
It didn’t matter that Yeltsin was the most liberal of all. He did not roll over and play dead for NATO expansion and balkanisation projects. So he became a pariah overnight and was painted as an alcoholic and corrupt.