Universal Income.

[Squeegee Beckenheim]

Oh it was definitely suggested.

By whom? Can you quote these "many" people?

That's how welfare works right now. So what's the benefit of UBI over increasing welfare?

Simplicity, for one.

When the first lockdown happened here in the UK lots of people lost their jobs and suddenly found themselves needing to claim Universal Credit. The system wasn't designed for this, and thousands of staff had to be reassigned from other departments, impacting those departments. In addition to that some people had to wait months for their payments due to the administrative red tape, and those who got their payment on time who hadn't previously experienced the benefits system found it difficult to cope because you have to wait over a month to actually get any money.

Had everybody already been receiving enough money to live on as a matter of course, none of that would have happened.

Also elimination of benefits traps, more incentive to work, and all the other things that have already been discussed at length in this thread.

 

[Belz...]

AAANNNDDDDDDD if you don't make $4000 but make $1000? You only pay $250 back? Great then it's not cost neutral. Or you pay back the $1000? Great then it's not 25%

What the hell are you talking about?

 

[Archie Gemmill Goal]

By whom? Can you quote these "many" people?

How has 'many' snuck in there?

I already quoted someone saying that there wouldn't need to be any tax rises to introduce UBI.

Simplicity, for one.

When the first lockdown happened here in the UK lots of people lost their jobs and suddenly found themselves needing to claim Universal Credit. The system wasn't designed for this, and thousands of staff had to be reassigned from other departments, impacting those departments. In addition to that some people had to wait months for their payments due to the administrative red tape, and those who got their payment on time who hadn't previously experienced the benefits system found it difficult to cope because you have to wait over a month to actually get any money.

Had everybody already been receiving enough money to live on as a matter of course, none of that would have happened.

I'm not sure in practice that's how it would work. For a start people's tax codes wouldn't change quickly so they would still be being taxed at the 'getting the UBI back' rate until they updated that and that's going to be a screwed system in a pandemic anyway.

Having to wait for your money is a policy decision that could be changed in the welfare system.

Plus UBI isn't apparently enough to live on anyway.

I mean I get that it's 'simpler' but that's only if you kind of ignore that the complexities in the welfare system also serve a purpose like giving you enough money to pay your rent etc and would still have to exist to deal with the things that UBI doesn't. Basic UC is fairly simple too, I have just been through the process and while it was slow it wasn't complicated.

Also elimination of benefits traps, more incentive to work, and all the other things that have already been discussed at length in this thread.

Can you be more specific please? Appreciate this might be repetition but it is a rather lengthy thread.

The benefit trap issue is only addressed if the UBI isn't recouped from low earners but some people here seem to argue it will be. Maybe the problem is that we have multiple people here who are putting forward different visions of how they see UBI working?

 

[Matthew Best]

No. 25% of $4,000 is $1,000. Instead of being exempt from paying tax on your first $4,000 you get UBI to offset the tax you would otherwise pay.

This doesn't make any sense, or I guess I'm just not quite understanding.

At the moment I earn $4,000 and pay no tax (because that's under the tax free limit) - is that what you're saying?

Then when UBI comes in and I earn $4,000 plus $1,000 UBI, I pay 25% tax, which means I get $5,000 and pay $1,250 in tax - which means I'm worse off by $250.

Presumably you can change these figures so it works out for this particular example and I'm no worse off and no better off, but how do you make it work the same for people who earn $3,000 and $5,000?

Please explain.

 

[Belz...]

How has 'many' snuck in there?

Ask lionking:

We have seen many people in this thread contend that nobody loses from a UBI. I think this is utter ********. What about you?

Sometimes, going from memory isn't the best strategy.

 

[psionl0]

This doesn't make any sense, or I guess I'm just not quite understanding.

You are not understanding.

Then when UBI comes in and I earn $4,000 plus $1,000 UBI, I pay 25% tax, which means I get $5,000 and pay $1,250 in tax - which means I'm worse off by $250.

You are not understanding. (Hint: what is 25% of $4,000?)

 

[Belz...]

You are not understanding.


You are not understanding. (Hint: what is 25% of $4,000?)

Psion I think it would be clearer if you specified to Matt whether the UBI is taxable in this example.

 

[ahhell]

Generally the way progressive taxes work, at least in the US if 4000 is below the threshold where you pay tax then when you get more than 4k, only the excess money is taxed at the higher rate. That's generally what's meant by "marginal rate" If your top marginal rate is 50% at 500k/year, the person only pays 50% of all the earnings greater than 500k. This is to avoid anyone actually being worse off when they earn more money.

4000*0=0
With the extra 1000
4000*0+1000*.25=250

Even if you want to tax the entire 5000 it wouldn't be that hard to figure a formula for increasing the tax rate such that you're never actually worse of on account of earning more. Just increase it gradually add an extra 1% for every 2% of income after whatever threshold or what ever formula you find best.

 

[Archie Gemmill Goal]

Even if you want to tax the entire 5000 it wouldn't be that hard to figure a formula for increasing the tax rate such that you're never actually worse of on account of earning more. Just increase it gradually add an extra 1% for every 2% of income after whatever threshold or what ever formula you find best.

Maybe worth a reminder that the original claim that started this back and forth was that 'you' as an employee wouldn't be BETTER off though.

Can you see why this is getting confusing for some of us?

 

[Belz...]

Maybe worth a reminder that the original claim that started this back and forth was that 'you' as an employee wouldn't be BETTER off though.

Can you see why this is getting confusing for some of us?

I think what's confusing is that we're discussing several different scenarios at once and we're all getting our wires crossed.

 

[psionl0]

Psion I think it would be clearer if you specified to Matt whether the UBI is taxable in this example.

The problem is that including UBI in taxable income is complicated.

One could set a tax rate of 20% on the entire $4,000 + $1,000 which would equal $1,000. But that would mean that the UBI was being taxed at 20% as well which means that a person was only receiving $800 UBI.

Alternatively, there could be a tax free threshold of $1,000 which meant that the tax rate would need to be 25% on the $4,000. Since the UBI immediately brings you up to the tax free threshold, its the same as if the UBI was tax free but you were taxed on every dollar you earned other than the UBI.

 

[TomB]

Maybe worth a reminder that the original claim that started this back and forth was that 'you' as an employee wouldn't be BETTER off though.

Can you see why this is getting confusing for some of us?

As a review:
In Post #754 dirtywick said:

Well it is a real concern. I work 4-6 hours of overtime per week by choice because I like having a newer truck. I might stop that if the government started sending me a check instead.

In post #756 psionIO said:

No you wouldn't. The tax scales would be adjusted so that you as an employee won't be better off. So you would still need to work that overtime if you want the truck.

I took that to mean that no one who was currently employed would end up with more money, based on psionIO's statement that dirtywick would not have extra money.

I'm assuming that while dirtywick probably makes decent money, he's probably more in the middle income/workling class range. (Apologies if this is incorrect.) I base this on his statements that he works overtime to pay for his truck. This is something I've seen a lot of blue collar Caterpillar workers do. The white collar workers don't have that option as they are salaried. So that's where I presume dirtywick falls. (Again, aplogies if inaccurate.)

psionIO did not say that it will be recovered through taxes from those with higher incomes, so I'm asking if this is the case for all incomes.

For a real world example: My wife, until recently, worked half time (20hrs) and brought home about $1200/month. Supposing UBI of $1000 and that being recovered by increasing taxes...If she will end up with $1200/month in the end, then effectively, the first $1000 is taxed at 100%.

And if she would only lose $200/month, why would she work when she can just take the UBI?

And, by the way, taxing $4000 at 25% is really taxing at an additional 25%. $4000/month is $48000/year. A single person is not taxed on the first $12400/year in the US. (Married couple: $25,100.) So you are already paying tax on half to 3/4 of that $48,000.

 

[Belz...]

The problem is that including UBI in taxable income is complicated.

One could set a tax rate of 20% on the entire $4,000 + $1,000 which would equal $1,000. But that would mean that the UBI was being taxed at 20% as well which means that a person was only receiving $800 UBI.

Alternatively, there could be a tax free threshold of $1,000 which meant that the tax rate would need to be 25% on the $4,000. Since the UBI immediately brings you up to the tax free threshold, its the same as if the UBI was tax free but you were taxed on every dollar you earned other than the UBI.

I understand that. I mean that if it's not taxable it should have been made clear in your communications with Matt because the other option has also been discussed in this thread and it's hard to keep track of everything.

 

[RecoveringYuppy]

Archie is employing the "I can think of an incredibly stupid way to do this, therefore it won't work" strategy.

This proposal and how to pay for it is fundamentally simple. It's a wealth distribution system. It's certainly stupid to think that everyone will have the same income before and after putting this in place. That would obviously be pointless. Paying for it is tax the rich, pay the poor. You may not even need to restructure the tax brackets for the lowest paid 80% of the population. Since most countries have tax brackets that don't tax people below the property line and UBI is initially about that much, then the current tax brackets wont touch anyone that who live solely on UBI. For people who are in a bracket where they pay taxes it works the same as just getting a raise. If for some segment of the better paid workers you decide it's too big a raise then you adjust the marginal tax rate for that bracket.

Let's say a country shoots for a higher goal than the poverty line. To avoid the issue of the government immediately taking back the money they just paid out, you set the first taxable bracket above the UBI income level.

How do you get upper earners to pay for it? Taxes. And guess what, figuring out how to do the tax has already been done. Governments know how to raise money through taxes. They know every point where money is flowing and how to divert it via taxes. This will be a political point and which segment of the population winds up paying the most will depend on who pushes back the most. When politicians have debated large proposals in the past do you think the tax arguments are actually about figuring out how to tax? They aren't, they are about who to tax.

 

[dirtywick]

As a review:
In Post #754 dirtywick said:


In post #756 psionIO said:


I took that to mean that no one who was currently employed would end up with more money, based on psionIO's statement that dirtywick would not have extra money.

I'm assuming that while dirtywick probably makes decent money, he's probably more in the middle income/workling class range. (Apologies if this is incorrect.) I base this on his statements that he works overtime to pay for his truck. This is something I've seen a lot of blue collar Caterpillar workers do. The white collar workers don't have that option as they are salaried. So that's where I presume dirtywick falls. (Again, aplogies if inaccurate.)

That's all correct, I literally have a blue collared shirt.

 

[psionl0]

I took that to mean that no one who was currently employed would end up with more money, based on psionIO's statement that dirtywick would not have extra money.

I don't know how often I have to keep repeating that those on low incomes WILL be better off. They will get the entire UBI and pay a certain percentage of their wages in taxes.

Dirtywick's personal anecdote suggests the he is in at least a median income group. These people won't be better off.

 

[arthwollipot]

Those are salaried office jobs though presumably? Which is not the issue I was raising.

Yes, but the idea is, in theory, applicable to other types of jobs as well.

 

[psionl0]

I understand that. I mean that if it's not taxable it should have been made clear in your communications with Matt because the other option has also been discussed in this thread and it's hard to keep track of everything.

The last time I tried to explain that this is all mathematical smoke and mirrors I seemed to enrage you. I'm glad we seem to understand each other better now.

Milton Friedman described a similar system called "Negative Income Tax". Those who's incomes were zero or below a certain threshold would actually get money from the government while those who's incomes were above the threshold would pay tax.

 

[arthwollipot]

The last time I tried to explain that this is all mathematical smoke and mirrors I seemed to enrage you. I'm glad we seem to understand each other better now.

Milton Friedman described a similar system called "Negative Income Tax". Those who's incomes were zero or below a certain threshold would actually get money from the government while those who's incomes were above the threshold would pay tax.

An article I saw posted - or maybe that I posted, I forget - upthread makes it quite clear that a UBI is absolutely not a negative income tax.

 

[psionl0]

Yes, but the idea is, in theory, applicable to other types of jobs as well.

Since covid-19 a lot of people have switched to working from home as well. This idea would have been unthinkable to employers in the past but it also seems to be working well.