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Comment by jimt1234 | Hacker News Reader

Back in my college speech class, a woman gave a presentation basically supporting the "welfare today is a disincentive to work" myth, with emphasis on "today" (or current), while totally destroying the notion that welfare recipients don't "want" to work. She was a stay-at-home mom with 2 kids, her husband commit suicide after serving in Iraq and then being pushed out of the military (this was the 90s when the US military was actively drawing down). She basically said that the current welfare system (in the 90s, in California) didn't allow a way to slowly move off welfare. She said she had many offers for part-time work, and work that didn't earn a lot of money, but both had potential for her to eventually be promoted to full-time or to make more money than welfare paid her. But she said there was no way to do this: welfare was either all or nothing. But most of all, she dispelled the myth that she was some sort of leech that didn't want to work. She wanted to work, but the welfare system didn't allow it.

Your comment didn't necessarily imply it, but a lot of the discourse these days tries to imply (or directly claims) that recipients are the problem, they're a bunch of lazy bums that don't want to contribute. That's just not true.

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You are looking for the term "effective marginal tax rate." https://en.wikipedia.org/wiki/Effective_marginal_tax_rate

To give a sense how much benefits code and tax code have in common, see this worksheet for SNAP eligibility, which resembles a second tax return: https://www.fns.usda.gov/snap/recipient/eligibility. You get to do something similar, again(!), for Medicaid.

The American benefits code is a patchwork of conflicting sensibilities of the electorate: the smallest possible tax, paternalism and suspicion against the poor, plus a few policy analysis trying to obtain the maximum poverty reduction within those constraints. The result is a thicket of means tested programs with extremely steep phase-outs and a lot of paperwork. The all-in EMTR for an American with income between 0-40K a year is chaotic beyond reason as a result as they roll up the income spectrum.

This person who gave the presentation is indeed in one of the worst cases for the code: a single parent with multiple children.

Under that concept, well, if actually taking the social security (Grundsicherung) in Germany as a given, even assuming low CoL situations (it's worse in higher-CoL situations), the effective average tax rate past like about 160 EUR/month of income will rise to a peak at around 1500 EUR/month income and then continuously decrease to the super wealthy limit tax just under 50%.

At least you technically never have less money from more work (but only if you consider bureaucracy free; there is severe bureaucracy especially for those that fluctuate in and out of coverage).

> At least you technically never have less money from more work (but only if you consider bureaucracy free; there is severe bureaucracy especially for those that fluctuate in and out of coverage).

When the effective marginal tax rate is high, this is often as close as makes no difference, because you not only have the cost of bureaucracy but also the cost of working. You're paying an effective marginal tax rate of 80% so nominally you get to keep 20% of your income and have the incentive to work, but working requires you to commute, so you have to buy transit tickets or maintain a vehicle.

And because you're now spending your day working, you can't use that time to prepare food or maintain your household, so you may have to pay someone else to do some of those things -- but their entire compensation has to come out of the 20% of your pay you actually get to spend, so this can easily eat the entire thing and make you better off to not take the job.

Maybe it could be reframed as "incremental hourly income". Partial derivative of disposable income w.r.t hours worked (including time overheads)

> severe bureaucracy

been there, done that. it's not severe, it's not even 2 hours per month and maybe waiting for 2 or three letters from xyz.

2 hours of non-engaging bureaucratic work for 1300 € per month. Thats 650 €/h ...

oh, and I'm aware that it might be engaging for some, but they either fall into the category that better learns to organize and administer themselves now rather than later or into the category that will always need a social worker, who will the find the bureaucracy easy as well and the organization is paid by his employer

The problem is that I'm not talking about getting +1300 EUR/month situations, but about +300 EUR/month situations. And suddenly you have to explain your finances to the bureaucracy and... you still have to earn +1000 EUR/month in addition to the bureaucracy needed so you get to keep at least some of it (without committing social security fraud, ofc).

It's not that bad if it's steady; but if it's fluctuating you easily spend a couple hours each month. And for at least some people, that type of work is far worse than their occupation of choice.

There was a podcast or video about this exact same issue in... Sweden? Some anecdata from people receiving welfare, but couldn't start a job or a business because if they received any money, they get nothing from welfare and wouldn't be able to support themselves.

This resulted in people that were trying to start a business not get paid for their work (I believe one of the anecdata was a photographer) because doing so would mean they couldn't support themselves.

Personally, I'm a big fan of the "for every $2 you make, you get $1 less from UBI/Welfare" concept. This seems a very easy way to wean people off of welfare. That money is already tracked by the IRS (unless you're getting paid under the table).

> Personally, I'm a big fan of the "for every $2 you make, you get $1 less from UBI/Welfare" concept. This seems a very easy way to wean people off of welfare. That money is already tracked by the IRS (unless you're getting paid under the table).

That's a more gradual phase-out, but it still is an effective marginal tax rate of 50%+ – a level that wealthy earners would complain about to no end.

In light of this study, it seems to me that a cash-support system that wants to encourage work should have a starting region with a negative effective phase-out rate: "for every $1 you make up to $X, you get $0.25 more from UBI/Welfare." That would encourage labour-market attachment even if tenuous, and it would also have a side benefit of making the worker want to report the income, possibly uncovering under-the-table payment schemes.

> In light of this study, it seems to me that a cash-support system that wants to encourage work should have a starting region with a negative effective phase-out rate: "for every $1 you make up to $X, you get $0.25 more from UBI/Welfare." That would encourage labour-market attachment even if tenuous, and it would also have a side benefit of making the worker want to report the income, possibly uncovering under-the-table payment schemes.

Nobody tell this guy about the Earned Income Tax Credit. Let him think he discovered it.

> Nobody tell this guy about the Earned Income Tax Credit. Let him think he discovered it.

I know about the EITC, but the ETIC net of benefit clawbacks still presents a high marginal rate. Then the EITC itself gets clawed back at its own threshold, imposing a small region of high marginal rates. (The EITC itself is also rather paltry for filers without children.)

Additionally, the US tax system is ill-structured to really implement this. If you're trying to operate on the "under-the-table cash payments for day labour" margin, a system that depends on filing one's taxes to receive a refund later is not exactly hassle-free.

The EITC isn't as complicated as the child tax credit; that one is not refundable so you end up trying to calculate a way to get enough tax to get it fully.

Excel1040 is great for this - https://sites.google.com/view/incometaxspreadsheet/home

> That's a more gradual phase-out, but it still is an effective marginal tax rate of 50%+ – a level that wealthy earners would complain about to no end.

Yeah, my wording could have been better. The suggestion that I've seen for UBI is $12k/year (which is clearly not enough to live on in today's economy), with the $2:$1 reduction being only for the UBI, and then standard taxes starting after that.

This system was actually proposed a looong time ago (like 1970s, I think). Just by giving everyone a massive tax credit to start with.

> a negative effective phase-out rate: "for every $1 you make up to $X, you get $0.25 more from UBI/Welfare."

The main problem with this is that the tax system is set up to prevent you from under-reporting your income. Over-reporting it is essentially trivial, e.g. two people who are in the relevant income range exchange favors (do each others' laundry etc.), or claim to have, and then actually report the transactions as income and get the credit.

But there's something else you can do here which is really neat. Stop using a complicated progressive rate structure, and instead eliminate the phase out entirely. Now instead of low income people having a nominal 0% tax rate but an effective 50% benefits phase out rate and high income people having a nominal 30% tax rate, you just use a flat 35% tax rate which implicitly has the benefits phase out built into the tax system. Which means you don't need any of this income reporting or annual tax returns or anything of the kind, the employer/seller just withholds the fixed tax rate and you're done, and everybody unconditionally gets the UBI to provide the effect of a progressive rate structure.

Doesn't a flat tax rate lower the income that a state has?

Yeah, and it makes it even easier for the rich to become richer, which is why they're the ones advocating for it.

You could keep it flat up to a high threshold, like top ~5% of salary, then transition to marginal tax

You don't need it, it's already built in. The flat tax rate needed to serve as the implicit benefits phase out is already in the range as what you'd use in the high tax brackets in a progressive tax system with separate benefits phase outs.

If you want it to be more progressive you raise the flat tax rate and use the money to increase the UBI. If you want a less progressive system with lower taxes you do the opposite. Making it needlessly more complicated gains you nothing and costs you efficiency.

Suppose Alice makes $100,000 and Bob makes $20,000.

In a system that taxes at 5% up to $50,000 and 30% thereafter, the state gets a total of $18,500 from Alice and Bob.

In a system that taxes at 5% up to $50,000 and 40% thereafter, the state gets $23,500 from Alice and Bob.

In a system that taxes everyone uniformly at 25%, the state gets $30,000 from Alice and Bob. This is not a smaller number and 5/6ths of it is from Alice. In fact, you can use that money to give them each a $12,000 UBI, leaving Bob with an effective tax rate of -35%, delete all of the transfer programs that obsoletes and still have some left over for transit and uniforms.

> Over-reporting it is essentially trivial, e.g. two people who are in the relevant income range exchange favors (do each others' laundry etc.), or claim to have, and then actually report the transactions as income and get the credit.

True, but this is less of a problem if the credit rate is comparable to the payroll tax rate. In that case, a worker who over-reports their income will create an obvious payroll-tax debt in the hands of the notional employer.

> Stop using a complicated progressive rate structure, and instead eliminate the phase out entirely.

From a welfare-cliff perspective, that's a fine idea. However, per the article here, the unconditional cash transfer seemed to lead to reduced labour income. That's an obviously worrisome sign, suggesting that integrated welfare system might need an even stronger pro-wage bias.

> True, but this is less of a problem if the credit rate is comparable to the payroll tax rate. In that case, a worker who over-reports their income will create an obvious payroll-tax debt in the hands of the notional employer.

But that's just an accounting sham to claim you're taxing them less than you are and you no longer actually have a negative marginal tax rate.

> However, per the article here, the unconditional cash transfer seemed to lead to reduced labour income. That's an obviously worrisome sign

Well that's mainly because they worked 1.3 fewer hours a week and were less desperate to take a low-quality job.

You might also notice that the effect you're referring to isn't net of the payments, and is also probably invalidated by the period the study was done -- it started during COVID. Between the first and last year of the study, the household income for the control group increased by $20,000 -- on a $30,000 base! The experiment group increased by almost as much before the payments and were ahead by more than $6000/year including them.

In any event, you don't have to use a different rate structure to do what you suggest, you get the same effect without the complexity by increasing the flat tax rate and adding the money to the UBI.

> Personally, I'm a big fan of the "for every $2 you make, you get $1 less from UBI/Welfare"

That's..that's not UBI, at all. UBI is universal. If there are any means tests whatsoever, that's not UBI.

UBI would never be truly 'universal'. If someone takes money from me and then gives some of it back, I don't consider that a free gift.

The only way the numbers would ever balance would be for most income earners to end up being taxed >100% of their UBI payment.

or for the ridiculously wealthy to be taxed at a very high rate. which is why they reject the notion of UBI so fervently.

The numbers don't line up for that.

The sum total of the wealth of all the billionaires in the US in 2021 was ~$4.1 Trillion [0]. That's about the same as the government budget in a normal year pre-pandemic, or about 2/3 of the government budget post-pandemic.

Assuming a $1000/month and a population of ~350 million, you're looking at $4.2 Trillion per year. You could almost fund it for the first year by taxing all of the wealth of the billionaires at 100%.

But what are you going to do the second year? That's total wealth, not yearly income.

[0] https://www.forbes.com/sites/tommybeer/2021/01/26/report-ame...

just curious, but why is there always an implicit assumption in this debate that we only tax the wealth of billionaires? is the money of a half billionaire somehow less green than a full billionaire?

Keep going until you're taxing everyone that makes over $80K/year or so, and you pretty much have it being balanced.

I never understood the UBI argument. 30 seconds of napkin math would show you how insane the proposal is, even at the rate of $1000/month. If you want to increase welfare for those below the median income, fine, let's have that discussion. Don't play games with the word 'universal'

Generally the people who want UBI "as promised, no compromises" also don't see why we can't just print money to make the shortfall

> why we can't just print money to make the shortfall

Printing money to make the shortfall is how US public sector budgeting has worked for decades.

You'd adjust marginal rates so the poor would (net) benefit, the middle class would about break even, and the rich would pay more. Napkin math on that isn't that bad, especially if you chop a bunch of other welfare payments (and the associated expensive means-testing and administration).

No one serious is suggesting "everyone gets $1000/month and literally nothing else changes".

Which welfare plans are you cutting? Social Security? Nope, because the average payout is 50% higher than $1000/m. Same with SSI/disability. You certainly couldn't replace any of the medical plans (Medicaid/Medicare) with anywhere near that amount.

The welfare plans that might be subject to being replaced only amount to a few percent of the federal budget. The bulk of the budget is those plans above, which would result in less benefits if replaced. You're not paying for this by finding lost coins in the couch cushions.

Yeah, as I said in my comment, the primary way to pay for it is to adjust marginal rates so that it's (mostly) a transfer from rich to poor. If you're rich, you'll get a $1k UBI and also pay $2k more in taxes (or $4k, or whatever). Probably for those at the median income it would be roughly neutral - but with the benefit that if you ever lose your job, or want to leave an abusive marriage, or want to try starting a business, you still have that $1k coming in.

Medicaid and Medicare being wholly replaced by a truly universal plan unrelated to UBI is probably a prerequisite for a UBI for a bunch of reasons. Social security would probably be unaffected, at least initially, and SSI/disability would likely either be reduced or gradually phased out, depending on the amounts.

I know the other various benefits aren't huge in the budget, but they add significant bureaucratic burden to both the state and the individual. Eliminating that would be a big benefit of UBI.

> Medicaid and Medicare being wholly replaced by a truly universal plan unrelated to UBI is probably a prerequisite for a UBI.

This has been discussed for decades. The US healthcare system is one of the biggest impediments to other forms of governmental change.

The premise of it being universal is that it doesn't have an explicit phase out and instead it's implicit in the tax system. Obviously someone making six figures is not going to be a net recipient, but they would still have the money deposited into their account. The amount would just be smaller than the amount they're paying in taxes.

The advantage of doing it this way is that it makes it clear what's going on. Right now we nominally impose low marginal tax rates on the poor but their effective marginal tax rates are high because of benefits phase outs, so their effective marginal tax rates are higher than the wealthy. With a UBI you replace the benefits with cash payments and eliminate the phase outs, but also flatten the tax rates so the poor are paying the same effective marginal rates as the rich, instead of higher ones.

The result would be that the poor pay slightly lower effective marginal rates and the rich pay slightly higher ones (although you don't even inherently have to do that; it depends entirely on the tax rate and the amount of the UBI), but the overall system is much simpler. And the consequence that the poor are paying higher effective marginal rates than the rich, which was presumably never intended, goes away.

Right! It also lets you eliminate the means testing part of the system that makes people jump through humiliating hoops to show that they’re poor enough to need a handout, punishes people who are working too much by taking away their benefits, etc.

And you don't have to pay for all the government workers that exist solely to manage and observe the hoop jumping!

I don't think that's the case. Instead, it's just that the "let's tax the rich people more!!" idea is ill-founded to begin with, and the easiest way to show that is to point out that if instead of just taking some percentage more, you took everything they have, it still wouldn't solve the problem, not by a longshot.

Choosing some arbitrarily small segment of the population and saying "See, they don't have enough money to fund this program" is not the steelman you seem to think it is. Instead, try discussing something serious, like a plausible adjustment to the progressive tax system.

Nah, if someone puts forth an argument that is fundamentally flawed, it's neither wrong to point it out nor on me to do their thinking for them.

That said, if we want to talk taxes, I think a progressive tax system is nearly always wrong, immoral, and unfair, so you probably would disagree with any adjustments I'd suggest. :)

For new and expensive schemes it is often a challenge to figure out who will be paying for it. The proponents typically don't want to say for the obvious reason - the people paying for a universal service will probably be worse off than if they weren't so it isn't helpful to identify them (they'll just add to the resistance). But that means it is awkward to attack an idea on cost because detractors don't propose the scheme and are often dealing with people unwilling to suggest realistic costs or tax schemes. People with technically excellent arguments have to be a bit oblique in pointing out that someone has to pay and it'd speed the debate along for someone to figure out who. For a UBI, we might suspect it isn't going to be billionaires.

The fair way would be if sentences had to pattern match "I think [scheme] is a good idea and we will pay for it by [specific tax proposal].". Seems unlikely in practice though.

Where does all that money go after the first year? It sounds like it vanishes?

The stocks would actually crash if converted to money. The net effect wouldn't be more cash to spend, but a stake in the economy. You would probably have to invent some more democratic formats of corporate governance.

Stocks are converted to money with every trade. Every buy has a matching sell. That's something that happens trillions of times a day and stocks aren't crashing because of it. I'm not sure I'm following.

I think the hypothetical here is if you tried to fund UBI via a billionaire-wealth-tax, it would involve liquidating basically all stock they hold. If you sell that much stock, the price will go down. (It's the opposite side of the coin compared to why you can't do a hostile takeover at market cap by just buying stock - the price goes way up as you buy up all available shares).

There's several second and nth-order effects that seem crucial to our understanding.

Every seller has a buyer. Who would be buying these liquidated stocks?

What would the estimated new equilibrium be? What would be the effects of this equilibrium compared to the current state? Can we estimate the pros and cons?

Conversely, holding the belief that stock prices are crucial to our betterment, wouldn't that imply that we would be better off if stock prices were higher due to more wealthy people owning stock and fewer non-wealthy people owning stocks? At face value that doesn't sound right, so I must be getting something wrong.

It is a free gift, because you keep receiving it even if you dont make money next year.

And that's right, its not meant to pay for people who can pay their way themselves, just like in most income redistribution schemes the rich would be taxed at several (thousand?) multiples of the value they receive back.

In the current regime, the rich gain far more benefits from taxes (they pay little, and get to offload much of their cost of society to the rest of us) than in a UBI approach. That's the point.

1. Why are assuming that UBI would be paid for by individual income taxes?

2. Yes, no matter what, the richest people are going to receive so little benefit relative to their wealth/income that they won't support it. The same is true for most public services, actually. The ultra-wealthy receive little-to-no direct benefit from Social Security, Medicare, food stamps, public transportation, public schools (big one), public universities, or even public police and firefighters (they can afford their own). But somehow they haven't (yet) managed to rid themselves of these horrible violations of their privilege.

I disagree. Universal just implies everyone gets it. If the system includes a gradual fall off, it's still universally applied to everyone, no?

Everyone making less than 138% of the federal poverty level (FPL) qualifies for free healthcare. I dont think most people would say that the USA has universal healthcare.

The same is true here. If you make $0, you get $12K UBI. If you make $24K, you get $0 UBI. Is that universal?

Assuming there's no other income tax on the first $24K you make, it's a bit aggressive but it's still a valid form of UBI and an improvement on the status quo.

You're confusing Universal Income with Guaranteed Income.

And again, Guaranteed Income is just another form of "benefits earmarked for the politically powerless."

This particular method is mathematically equivalent to both of them. There's no actual difference between "You get full UBI and you pay income tax on other income" and "You get X cents less UBI per dollar of other income".

The system could be as simple as "UBI, also income tax is 50%, end of description".

The question isn't about mathematics, it's about psychology and politics.

In the second scenario, when do I get/spend my UBI money?

> The question isn't about mathematics, it's about psychology and politics.

That's valid, but when someone's roughly describing a plan I'll give them the benefit of the doubt and worry about whether it can be framed the correct way rather than whether they framed it right.

> In the second scenario, when do I get/spend my UBI money?

I don't know, every two weeks? So it's the difference between a $460 UBI check and a $400 paycheck, versus a $60 UBI check and an $800 paycheck.

It doesn't matter what the individual words mean, the term UBI refers to income without any means testing. That's just how it's defined.

It's not about means-testing, it's about setting income tax rates/brackets sanely so that it gets taxed back in an appropriate way and not in a way that prevents people from picking up work, etc.

The reason UBI exists as an idea is that means-tested programs are inherently politically vulnerable. Another name for means-tested benefits would be "benefits ear-marked for the politically powerless".

Wikipedia has a nice graph showing how UBI and NIT are effectively the same thing

https://en.m.wikipedia.org/wiki/Universal_basic_income

It's the same only if the income tax is linear, which is almost never the case ? Most places have progressive income tax rates.

For a given progressive income tax rate with UBI, you can make an equivalent progressive tax rate with NIT.

>Personally, I'm a big fan of the "for every $2 you make, you get $1 less from UBI/Welfare" concept.

This idea is called a negative income tax.

you're not describing a negative income tax

I wasn't describing anything. A negative income tax is approximately what the guy I replied to was describing. It obviously wasn't a perfect description, but I didn't think my label of the description in his comment would be taken so literally. If you'd care to describe why you believe this isn't an approximation of the outcome of a negative income tax, then feel free to explain.

A negative income tax increases your total benefits as you earn more (up to a point), the system that was being described is one where total benefits are decreased as you earn more.

Benefits do not increase with income in a negative income tax system. I'm not sure where you got that idea from. The point of a negative income tax system is to allow total income, from the combination of work and benefits, to increase as work income increases, preventing the incentive to not work due to benefits exceeding or only matching potential work income due to a hard income cutoff for qualifying for a non-dynamic amount of benefits. In this way, as work income increases in a negative income tax system, the benefits will incrementally decrease, until the individual meets the level where they become a net payer, not receiver, but those that are net payers will not have a total income less than any of those that are net receivers.

In the system that was described it would take two units of income to decrease one unit of benefits, allowing total income to increase with an increase in levels of work income, while not having a hard cutoff for benefits. This is an approximation of what would occur in a negative income tax system and it would not result in a net decrease in earnings considering it takes twice the earnings units to lower one unit of benefits.

because in the scheme described the effective tax on your income is positive (the more you earn, the more is transferred away) as opposed to negative (the more you earn the more is transferred to you).

What you are describing might intuitively sound like what a negative income tax should mean, had you never heard of a negative income tax before, but that is not what a negative income tax is. A negative income tax, which is a name for a type of benefit system, does not mean that people are literally negatively taxed, regardless of their income.

eitc is a prototypical negative income tax and gives you more money for each dollar of added income up to a point. so… exactly what i’m describing?

This is exactly the misconception the other person I replied to had.

Just subsidize the minimum wage. It's dead simple. Raise the minimum wage by $x but have that extra $x be paid from taxes, not the employer. Big businesses will scream "But inflation! But wage-price spiral!". Their screams are to be ignored.

I'd like to see any reasonable math behind this idea.

Depends on what you're comparing it to. This thread is about unconditional cash. Giving everyone $1000 a month, unconditionally, is clearly many times more expensive than subsidizing the minimum wage by $1 an hour - it's rather difficult to work 1000 hours when a month has ~730 hours!

The "investment" (assuming that's what you mean by the math) can be as high or as low as any other proposal, there's nothing special about it. You can adjust the $/hr that you subsidize and the size of the group that is eligible to fit the proposed investment.

This is alternatively referred to as the welfare cliff [1]

Here[2] is an extreme case study from Chicago where you would have to jump from an income of 20k/year to 80K/year to make up for the loss of benefits.

https://www.budget.senate.gov/newsroom/budget-background/the...

edit[2] https://fee.org/wp-content/uploads/articles/welfare_cliff.pn...

What is the link to the Chicago study?

oops, Added

To me, this is the single biggest problem with welfare.

The woman wants to work, yet cannot because she can’t guarantee how fast she will move past the “no welfare and very little money” transition until she gets promoted to full time work.

Her only recourse is to stay on welfare. Now the real issue comes to her children. If she managed to really instill in them the need to never be on welfare themselves, great, they’ll join the workforce. But what if she didn’t? Maybe only tried a bit, but the years of being on welfare made her lose touch with the working world. Children now only see welfare and thus generational poverty starts.

This isn’t a problem really with welfare, but a problem with implementing welfare in the dumbest way possible.

In general, no policy, like none at all, should be designed to suddenly come into effect when you hit a constant. All functions should be smooth.

Try that argument on a bean-counter, i.e. like everyone holding an elected or decisive office these days. The will think you are crazy, from Mars, an interloper, freerider, or, worse, a communist. At any rate, they will not understanhd you, but, whether they understand you or not they will ignore or silence you. THERE MUST BE LIMITS AFTER ALL!!1!

My elected representatives seem to understand this pretty well. The problem is that people keep electing other people who view anyone not working as leeches. Often the difference between keeping those elected officials and electing someone that represents you is a few hundred or a few thousand people deciding that their vote does matter after all and going and casting it. It's about the population of a rural village or small town. I don't know how we're going to get back to our golden age, but I know that we need to find the motivation somehow.

> All functions should be smooth.

I like to believe--or at least fantasize--that bipartisan alliances can be built around a shared commitment to Good Equations in Public Policy, even if they disagree on what those policies are.

"Look Bob, I think your tax cut proposal is pure pork and regulatory capture, but that one one goddamn sexy curve."

When you really peel back the layers, you'll find that voters' instincts are that any means-tested program should come with a hefty punishment for using it. While they aren't exactly against helping, they definitely think the priorities are 1) Spending as little taxpayer dollars as possible, 2) Punishing any recipient of help enough to be a warning to others, and then, distantly, 3) Helping.

This is not exactly voters. What really happens is more like this: There is some call for helping people, voters want it, but voters (possibly some of the same voters, possibly different ones) also want lower taxes.

So the plan that passes is the one that claims to help people (appeasing the first group) while also costing the minimum amount of money (appeasing the second group). The proposal with evolutionary fitness in politics is then to create a system that helps people on paper but actually limits eligibility for the system to a minimum number of people or otherwise makes use of it more arduous to deter usage so it costs less. Extra points for making it so complicated that people don't realize what's really happening so they don't object if it doesn't really do what they wanted.

But there is also a level of incompetence/inefficiency here, because the complex and overlapping systems that pass as a result often have high overhead that waste tax dollars, or create bad incentives because nobody thought them through and those incentives create deadweight economic losses adverse to the interests of even the people who want to minimize taxes. As the obvious example, if you create a system with welfare cliffs and then people have the incentive to stay on welfare instead of taking a job, you now have more government expense and lower tax revenue than a system that doesn't do this.

At which point there is a Pareto-optimal improvement on the table if you can get the bill passed.

That's how you breed shadow employment. People on welfare who can work often will find jobs that pay some, or all of the salary, under the table. The attitude this instills in children is that of having to work hard, while scheming against the taxman, to improve your life. Some people then do that way past the point they need to, and end up at risk of being caught for tax evasion.

I also shudder to think what types of employers would be complicit with such a scenario.

You're right to fear employers who want to avoid claiming employees so that they don't have to comply with, for example, safety laws. But shadow work also includes situations with "casual" business relationships, like a couple who hires a nanny to watch their kids 40 hours a week. Both parties may feel that complying with tax and labor laws is too much of a burden.

> Both parties may feel that complying with tax and labor laws is too much of a burden.

That's - a way - to phrase:

- facilitate an effective 7.5% pay cut (employer paid Social Security / Medicare / Medicaid tax)

- avoid being properly compensated for overtime (assuming non exempt salary),

- and make claiming unemployment, disability benefits more difficult

When you refer to both, can you emphasize a specific burden the employee is subject to other than reduce tax benefits on disability / social security?

You may have been downvoted because you seem be ignoring the point gp post. By working under the table, the nanny or gardener or handyman can (often fraudulently) qualify for government healthcare and welfare programs as well as other low income assistance. In my opinion those programs are of a greater benefit than the ones you listed.

Not only that, it doesn't specify the compensation.

Suppose the employer avoids paying Medicare tax and unemployment insurance, but gives some of this money to the employee, who also avoids paying Medicare tax. This is, of course, illegal, but it isn't inherently the case that the employee is getting the worse of it outside of the risk of being prosecuted for tax evasion.

Unemployment insurance in particular generally screws anyone who maintains stable employment because the net beneficiaries are the people who collect benefits every other year, not the people who pay premiums their whole lives and only collect benefits once if at all. The latter would come out ahead to receive even half the premiums as money they could save and collect interest on and then have in reserve in the event they become unemployed. (In general mandatory insurance of this kind is a net economic loss and a source of benefits fraud that only gets passed by alleging it gets paid for by employers rather than employees, but who pays for something on paper and who is affected by the economic effects of the cost are different things.)

> facilitate an effective 7.5% pay cut (employer paid Social Security / Medicare / Medicaid tax)

The employer skipping out on taxes is not a "pay cut".

And the employee also gets to skip out on taxes.

The employee, under current laws, does not get to skip out on taxes; they have to pay the self employment tax rate of 15%; We're talking about 40 hour weeks, that kind of regular pay doesn't go un noticed by revenue offices.

Yes, the employee must file and pay taxes, even if they've reported their employer to the IRS for mis-classification.

Then they're not a shadow worker at that point. The comment was about shadow workers.

>Some people then do that way past the point they need to, and end up at risk of being caught for tax evasion.

Only because we tax people's income. Instead, tax only the income of corporations and other shareholder based limited liability entities. Income tax should be the insurance premium business pays to limit the legal liability to the owners and shareholders of the business.

>> The attitude this instills is that of having to work hard, while scheming against the taxman, to improve your life.

Sounds like a lot of politicians I know. Really, how is this not being "Smart" and gaming the system? If we're all upset about being "fair" then we would have changed the system.

I wish somebody could come up with a framework whereby we drop people’s incentives, welfare, taxes, etc… into, I dunno, a sigmoid or something. This way politicians can do what they want to do: talk about, like, simple additions and subtractions. But then secretly it goes into a function that smooths it out, and makes sure we don’t provide big stupid cliffs to drop huge life changes into people’s laps (well my analogy clearly needs work but you get what I mean, I hope).

I'm retired.

I saved enough to live comfortably -not richly.

I spend almost all my time, writing code for free. My GH Activity Graph is almost solid green. I'm working on releasing my sixth or seventh free app in just a few years (almost all are open-source). Over the last dozen years, or so, I've released over 20 (most are deprecated).

I really don't look forward to having others destroy my work, anymore. After a fairly brief time, looking for work (at age 55), I quickly figured out that, even if anyone hired me, they would treat me (and, even worse, my work) like crap. They certainly did, during the hazi- er, interviewing process.

So I guess I'm one of those "disincentivized to work" folks.

Those employers are used to having economic coercion to push people into their arms.

They cannot fathom treating their employees with respect. Their employees are tools to be used, abused, and discarded. Human resources.

Yes, exactly. If you pay someone not to work, I can't blame them for not working. Sure it could be short-sighted, but that's not a moral flaw. The system is designed to keep people in poverty and dependent on the system. It's really tragic

Incentives can be even worse than that if you punish people for working (e.g. take away more benefits than their income increases.)

If your kids have to live on the street if you take that part-time job, it's not only short-sighted to stay on welfare, it's the rational thing to do even in the long term.

Even more rational is finding an unofficial source of income, which is what people in this situation often do. At scale, this may create a wrong impression that levels of welfare are adequate to guarantee the basics.

Yes, and worse, the incidents of unreported income like that also create a narrative to be spoon-fed to the public, that “welfare cheats” are taking advantage of everybody’s goodwill. I’m sure it actually happens. Everything gets abused by some. But people who are doing what you describe are usually not doing it out of greed, but to work around that broken system.

In this specific experiment, people earned $0.20 less for every $1 they were given mainly due to working fewer hours. Those hours were primarily shifted to leisure. (This is not a value statement, just what the study found.)

yeah clearly nobody on this thread read the findings

You call it a myth and then describe the very real disincentive to work, in detail.

Could have worked under the table. Babysitting would make sense in particular if you are available during the day and have children of your own that you are already watching.

A lot of poor people are really good at convincing themselves they have no choice but to do the thing they wanted to do anyway. It wasn't until I broke free of this attitude was I able to escape myself.

Could have worked under the table.

This is a ridiculous take! You’re arguing (or appear to be) that all-or-nothing welfare systems are fine because you can always just commit welfare and tax fraud if you want more money?!

Illegaling working as a daycare no less!

Yes, I believe that is correct.

I don't know how welfare fraud is investigated, but she probably has a near-zero risk of ever being audited for taxes. Again, welfare cliffs suck. EITC was supposed to replace them, but nothing else got rolled back because people were already dependent on those programs for jobs and benefits.

If one is giving a presentation to an audience on this sort of thing, it makes sense to highlight "these are the terrible incentives that are a problem with the system" instead of "here are some semi-illegal survival strategies that you could attempt if you are trapped in this terribly incentivised system".

I am certainly glad that you managed to escape. I don't think our society's response to the welfare cliff should be to tell people to break the law though. Surely we should redesign the law to lift everyone up instead instead?

> I don't think our society's response to the welfare cliff should be to tell people to break the law though.

I think you could make an argument that it should be. Getting people to break the law in a lot of small ways seems like it would be a good way to stop them from following the law to really stupid conclusions.

You should probably remove the welfare cliff to, but having a standing policy of "break stupid laws" seems like a tenable position for a society to take.

It seems like you are getting down-voted, but I think you are probably right.

One concern I have is that publicly announcing ways to break the law might result in the government cracking down on those particular ways. You could make a case for telling people how to break laws which don't really matter either way, and let them figure out how to break laws that are stupid and matter though.

Another, less pressing, concern I have is that if taken to its limit, no laws will matter anymore. I would hope human kindness would keep people from murdering and stealing from each other for the fun of it, but I'd expect some Tragedies of The Commons to occur. This could still be worth it though. I'm in a fortunate enough position to not really understand how limiting the stupid laws are, but I do understand that laws are hard to repeal.

Some would argue she was over-compensating: https://en.wikipedia.org/wiki/Compensation_(psychology)

the woman is correct in blaming the system. she understands that the disincentive comes from a systemic failure and deliberate misrepresentation/misconception. even @geohot said in some interview he'd rather die than receive UBI while his face and body language radiated 'LIAR'.

let the woman work & make sure her bank account statements aren't stressful. she'll take some learning paths to get certificates, qualifications, skills required for promotions, financials literacy and self-employment. pay for all of it in advance, set a time limit and rep limit for exams of three years and 12 exams. if she fails, don't pay for her learning paths anymore but keep her bank account statements stress free.

she'll have money to spend on the markets and sh'll pay at least some taxes ans she'll be evolving, living, and her children will, too, and her chances to meet a proper new partner will be much higher.

students in their early twenties who don't have children and are eligible for some form of federal financial support don't really need even more money and there are incentives to perform and get projects, grants, scholarships for all kinds of characters. apprentices who earn waaaaay too little should also get stress free bank account statements for obvious reasons.

have spent some time on jobseekers benefit a few years ago. It's soul crushing and you get just enough to get by, and i'm in country where the benefits are kinda ok.

always hear stories about people that spend their life on it, but it's barely a life, you're basically just stuck loitering.

This last part is just my opinion:

Most of the people i've seen/met on it long term, the kind people others see as "sponges" are usually somewhat unwell/sickly, not unwell enough to be recognized as officially "disabled" but they'd probably be in hospital a few times a year.

I've heard negative income taxes suggested as an alternative to our current approach. I'm not an expert on them, but it might be worth looking into for people who are interested in ideas for improving our system:

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

Re-introducing progressive tax rates would be a small start;

Though, allegedly, a majority of Americans don't comprehend progressive tax rates.

Many state income taxes reach the top income tax rate before the federal poverty rate (ie < $12k).

The federal tax rates are poorly graduated; the first, 10% rate, cuts at $11,600 over to 12%; and then we jump 10% to 22%, only for the next bracket to have only 2% bracket gap again. Imagine if the first bracket was 0% and went all of the way to welfare levels - approximately $30k, the US could effectively eliminate the additional complication of the Standard Deduction (also a paint point of illegal filing and fraud). Imagine if every bracket was easily defined at ~10% - that could make predicting and filing easier. This is addition to payroll taxes being flat and regressive - when they could be built into the income tax.

    2024 tax brackets
    Tax rate Single filers Married couples filing jointly Married couples filing separately Head of household
    10% $11,600 or less $23,200 or less $11,600 or less $16,550 or less
    12% $11,601 to $47,150 $23,201 to $94,300 $11,601 to $47,150 $16,551 to $63,100
    22% $47,151 to $100,525 $94,301 to $201,050 $47,151 to $100,525 $63,101 to $100,500
    24% $100,526 to $191,950 $201,051 to $383,900 $100,526 to $191,150 $100,501 to $191,150
    32% $191,951 to $243,725 $383,901 to $487,450 $191,151 to $243,725 $191,151 to $243,700
    35% $243,726 to $609,350 $487,451 to $731,200 $243,276 to $365,600 $243,701 to $609,350
    37% $609,351 or more $731,201 or more $365,601 or more $609,351 or more

I'm confused. These look progressive to me. Can you explain?

Wow! It's amazing how anti-tax Americans are when their taxes are so low!

My income is at the 24% level above, and I'm paying 52% marginal taxes in Ireland (or 35% of my total income after tax credits etc)

I believe those are just the federal tax rates. In the US you pay both federal and state taxes, so it depends a lot on which state you live in.

Their taxes probably are lower than yours, but probably not by as much as you think, and certain things like medical insurance are really expensive in the US.

American taxes are low because Americans are anti-tax. That's not amazing, it's democracy.

Who cares about marginal tax rates -- that is the rate you pay on your last one Euro of income. What really matters is effective (blended) rate.

In the US, there are normally two levels of income tax (Federal and State), and, rarely, there is also a local/city income tax (like New York City). Sorry, I am not familiar with the Irish income tax system. Since you mentioned that you are in the 24% bucket, your gross income is more than 100K USD. (Congrats: That is pretty high in Ireland where the median income is about 38K EUR.) If you add up all income taxes in the US (Federal + State + Payroll), I guess it is pretty close to your 35% effective rate in Ireland. So really, not so different.

Yes - first - this is progressive - but, not efficient in the context of Median income being $40k, poverty being $12k, and most welfare programs having a cutoff at ~$30k.

The 10% bracket is all under poverty level (the reasons this exists is somewhere between occasional part time work for seniors or teenagers, the standard deduction)

The 12% bracket includes ~50% of individual filers that are under most welfare levels. Does that 20% increase in tax rate make sense for that group? The Married/household rate covers the majority of American households, including median household income.

The 22% bracket... let's start with this is a 47% graduation increase versus the previous 20% increase (more than double)

The 24% bracket... again, a seemingly random increase of < 10% rate graduation increase

The 32% bracket... an 8 point rate increase, that's 25%...

The 35% bracket, back to a 3 point, 10% increase

the 37% bracket, even more decreasing, a 2 point, 6% increase

So; the rates of graduation increase are 10%, 47%, 10% , 25%, 10%, 6%; from a distance we can see that the 47% and 25% changes are definitely outliers; If, the top rates of change were at least at the top marginal incomes, it would make more sense.

It looks even worse if you also include the regressive 6.2% OASDI payroll tax. 16%, 18%, 28%, 30%, 38%, and 41% -- 25%, 55%, 11%, 26%, 8% (ignoring the employer's OASDI / Social Security)

Nc Income tax rates 4.5%

SC Income Tax Rates $0-$3200, 3% > $3200, 6.5%

Al Income tax rates $0-$500 2% $500-$2500 4% > $2500 5%

That is one of the most interesting ideas I read from Friedman.

I assume the administration of such a program is heavy though, but with future technological advancement and bureaucratic reform it could be possible.

The idea of replacing all welfare services with money in your hand derived from this formula is radical… and has its promise but I worry about those who rely not only on welfare for the economic side, but also the social support aspects.

> Back in my college speech class, a woman gave a presentation basically supporting the "welfare today is a disincentive to work" myth

Your use of the word myth here, without scare quotes, made your comment unnecessarily confusing.

Ignoring all the fallacies, you are correct about one thing; the recipients are of course not the problem, the problem are the proponents of such nonsensical, fantastical, infantile, and even outright immoral and unethical concepts like UBI or even welfare.

All we have to do to convince you that UBI and and welfare is immoral is to simply make you pay for that which you support and not force people who do not support it to have to pay for the cost against their will and under threat of government terror.

Immediately you will be converted from a supporter of getting and giving other people's money when you have to pay an additional 30% of your income to support others who you don't even know.

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