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0 pointsScottBurson9y ago0 comments

I'm not necessarily opposed to means-testing; for example, progressive income tax rates can be seen as a form of means-testing, and I think they're a good thing.

What I care about is that the function from income earned to income (including subsidy) received be monotonic. Again, the income tax system (at least in the US) is carefully designed to have this property: when you make enough more money to move into a higher tax bracket, that higher rate is applied only to the amount of your income in excess of the lower bound at which that bracket applies. So the total amount of tax never jumps discontinuously, even though the marginal rate increases. Even though you keep less of your next dollar of earnings the more you make, there's never a point at which earning the next dollar will leave you with less money after tax.

The same should be true even if you're receiving a subsidy. That's all I'm saying.

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AnthonyMouse9y ago

The combination of a fixed-amount UBI and a fixed-rate tax does exactly what people want. The marginal tax rate is completely unwavering for everyone and the effective tax rate ((tax paid - UBI)/income)) follows a nice continuous progressive curve.

> Even though you keep less of your next dollar of earnings the more you make, there's never a point at which earning the next dollar will leave you with less money after tax.

The problem is that's not the only thing you want. You also don't want marginal rates of 75%+ for low and middle income people. It's not only that taking a $20K/year job shouldn't cost you $21K/year in benefits, it's that it shouldn't cost you $15K/year in benefits while you now incur more transportation and childcare expenses.

hibikir9y ago

A fixed amount UBI and a fixed rate tax doesn't do exactly what people want, because it is a huge tax break at the top, and a huge tax increase in the middle if we want to be revenue neutral: The shape of the curve is very different from the current one, and there would be huge winners and losers. Nothing short of a 50% fixed rate will not be a huge tax break for us in the 1%.

I don't know about you, but I don't think that the problem in the US system is that a family with two senior developers pays too many taxes.

Therefore, on top of a UBI, the only thing that doesn't screw the middle class over is to maintain a progressive tax rate.

AnthonyMouse9y ago

You have the math wrong.

> Nothing short of a 50% fixed rate will not be a huge tax break for us in the 1%.

The current highest bracket in the US is 39.6%, which doesn't come into play until you've made more than $400K. The vast majority of "middle class" people pay 28% marginal rates or less -- anyone up to $190K for single or $231K for married filing jointly.

A household making $200K currently pays an effective tax rate of ~22% -- and that's $200K after all the deductions. To meet the same effective tax rate with a flat tax against a $12K/year UBI would require a flat tax rate of 28%.

Moreover, to be in "the 1%" you need household income in excess of $400K.

And most of the actual 1% pay the long-term capital gains rate, currently up to 20%, whereas with a 28% flat tax they would be paying 25 to 28%.

coredog649y ago

There are some corner cases in the US system. AMT is a big one, but there are more than a few deductions that get phased out based on income.

briandear9y ago

That's still a disincentive: my effectively hourly rate decreases the more hours I work. Not sure how that's fair. A flat tax is the only fair tax. You make more, you pay more, but you aren't taking an effective pay cut per hour based on simply working more.

CydeWeys9y ago

Progressive taxation is more fair from the standpoint of society at large. You're being myopic in only considering it from your point of view. How is it "fair" to force someone who is barely making ends meet and struggles to sometimes put food on the table to pay the same exact tax rate as someone who is rich, and whose biggest economic struggle is wondering whether to upgrade to a bigger yacht this year or next year? That extra $1,000 you'd be forcing the poor person to pay in tax would feed their kid for a year, but the rich guy doesn't even notice paying that much extra. Money does not have constant utility across all people. Maximizing the total utility across society -- now that's fair.

Dagwoodie9y ago

The poor person isn't paying Yacht tax, country club tax, box seats tax, Porsche tax.

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taeric9y ago

Most flat taxes do not land in the "you make more, you pay more" scheme. Instead, they are in the "you spend more, you pay more." Which, doesn't sound bad, necessarily.

However, there are two problems that I see. I suspect there are more.

First is that what you spend is only related to what you make. Specifically, it is relatively easy to find ways to not spend money if you have extra. What this means is that, at an absolute level of what you make, a flat tax actually gives a very easy way for high income people to have a lower tax rate. Turning it into "the more you make, the more you can proportionally keep." Which is sorta antithetical to the idea of the flat tax.

The second problem is essentially the cold start problem. Society is expensive to keep going. There is not much of a way around that. So, the rate will have to be relatively high to get the necessary funds. And this will hit those with low incomes harder than the ones with high.

I don't think either of these are necessarily road blocks to the idea. But, I do think it will necessarily get complicated.

nocman9y ago

'Most flat taxes do not land in the "you make more, you pay more" scheme':

I think you are missing the point. If it is truly a flat tax, the number of dollars you are taxed goes up (in a directly proportional way to the number of dollars you make). So you DO pay more the more you make. It isn't even a logically arguable point.

"a flat tax actually gives a very easy way for high income people to have a lower tax rate.":

  -- again that's a completely illogical statement.  If it is truly a flat tax *EVERYONE* has the same rate -- that's the very definition of a flat tax.

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aninhumer9y ago

Except no one gets to higher rate tax by working more hours. They get there by working approximately the same hours and being paid more for them. So they're not "taking a pay cut per hour", they're just not getting as much benefit from raising their rates as they would otherwise.

No one is going to refuse a salary bump because it will increase their marginal tax rate.

cmdrfred9y ago

If you made $32.05 dollars per hour for 30 hours a week (50K a year) and paid 10% tax on those dollars, you would earn an effective after tax hourly rate of $28.84. If all dollars earned after 50K were then taxed at 15%, your effective after tax hourly rate for working more than 30 hours would be $27.24. A one dollar and six cent reduction. I believe the purpose of time and a half overtime is partly to correct this problem.

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AnthonyMouse9y ago

> Even though you keep less of your next dollar of earnings the more you make, there's never a point at which earning the next dollar will leave you with less money after tax.

hibikir9y ago

I don't know about you, but I don't think that the problem in the US system is that a family with two senior developers pays too many taxes.

Therefore, on top of a UBI, the only thing that doesn't screw the middle class over is to maintain a progressive tax rate.

AnthonyMouse9y ago

You have the math wrong.

> Nothing short of a 50% fixed rate will not be a huge tax break for us in the 1%.

Moreover, to be in "the 1%" you need household income in excess of $400K.

And most of the actual 1% pay the long-term capital gains rate, currently up to 20%, whereas with a 28% flat tax they would be paying 25 to 28%.

coredog649y ago

There are some corner cases in the US system. AMT is a big one, but there are more than a few deductions that get phased out based on income.

briandear9y ago

CydeWeys9y ago

Dagwoodie9y ago

The poor person isn't paying Yacht tax, country club tax, box seats tax, Porsche tax.

2 more replies

taeric9y ago

Most flat taxes do not land in the "you make more, you pay more" scheme. Instead, they are in the "you spend more, you pay more." Which, doesn't sound bad, necessarily.

However, there are two problems that I see. I suspect there are more.

I don't think either of these are necessarily road blocks to the idea. But, I do think it will necessarily get complicated.

nocman9y ago

'Most flat taxes do not land in the "you make more, you pay more" scheme':

"a flat tax actually gives a very easy way for high income people to have a lower tax rate.":

  -- again that's a completely illogical statement.  If it is truly a flat tax *EVERYONE* has the same rate -- that's the very definition of a flat tax.

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aninhumer9y ago

No one is going to refuse a salary bump because it will increase their marginal tax rate.

cmdrfred9y ago

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