[NovemberWhiskey]

I don't even really know where to start with this.

First of all, your income numbers are household incomes, not an individual number. A significant number of your 'unemployed' are actually children, carers/homemakers, who belong to those households. Other unemployed are e.g. retirees who often times do not have a zero income.

You're indicating an effective tax rate based on the idea that the tax only pays for the UBI. Don't you have to tax more than that to, e.g., run the rest of government?

Social Security costs about $1tn per year. Medicare costs about $600bn per year, which is about the same amount as Medicaid. Means-tested cash and cash-like programs (EITC, food stamps, SNAP, school lunches) are perhaps another $300bn.

Canceling those programs would fund most of your UBI but would be represent an amazing transfer away from the poorest/oldest, which I suppose was not really your intent.

Funding any portion of UBI through a VAT is also regressive: less well-off households spend a significantly larger proportion of their incomes.

[bhupy]

> First of all, your income numbers are household incomes, not an individual number. A significant number of your 'unemployed' are actually children, carers/homemakers, who belong to those households. Other unemployed are e.g. retirees who often times do not have a zero income.

That doesn't really change much, it just halves the payment amount from 18,000 to 9,000. As I closed out, we can play with different levels of progressivity and generosity, but the idea is the same — my math was just the starting point. You can increase the amounts that the top 2 quintiles pay, you can increase the amount that the middle quintile pays (which is how most EU states fund their programs). This also doesn't even touch payroll tax revenues, which comprise about 35% of Federal revenues.

Also, "Unemployed #1-5" includes children, the disabled, and seniors. In that 10-person nation, 2 were probably children, 2 were probably retired seniors, and 1 was probably prime-working-age disabled. They are accounted for in the above math.

> You're indicating an effective tax rate based on the idea that the tax only pays for the UBI. Don't you have to tax more than that to, e.g., run the rest of government?

That was never the implication? Per this specific tax distribution, at worst you would increase the tax on the top quintile by 37%. And that's at worst, because there are definitely parts of the existing government that can be replaced by the UBI.

> Social Security costs about $1tn per year. Medicare costs about $600bn per year, which is about the same amount as Medicaid. Means-tested cash and cash-like programs (EITC, food stamps, SNAP, school lunches) are perhaps another $300bn.

Yes, none of this changes the above math, which we built up from first principles. Again, starting from those numbers, you can play with varying levels of progressivity and varying levels of generosity.

> Canceling those programs would fund most of your UBI but would be represent an amazing transfer away from the poorest/oldest, which I suppose was not really your intent.

EITC, food stamps, SNAP, and school lunches are indeed important for the poorest among us, but the implicit argument is that a lump sum non-means-tested amount per-person is superior to all of those.

Medicare and Social Security on the other hand are already a form of transfer to the richest. Individuals above the age of 55 account for 75% of wealth in America. Put simply, old people are rich. For two-thirds of seniors, Social Security has detached from the program’s original mission — to eradicate senior poverty — and is now the world’s most expensive upgrade from Carnival to Royal Caribbean[1].

Yes, there exists old people that are poor, but targeting social programs strictly on the basis of age is an extremely inefficient method of distributing welfare, especially since most old people are rich.

> Funding any portion of UBI through a VAT is also regressive: less well-off households spend a significantly larger proportion of their incomes.

I don't disagree with you here, but it's just another proposal for how to fund a UBI, per OP's request. What I showed you is that it is definitely within the realm of possibility to fund a UBI off of progressive income/capital gains tax alone.

[1] https://www.profgalloway.com/iowat-the-fuk

[NovemberWhiskey]

>Per this specific tax distribution, at worst you would increase the tax on the top quintile by 37%. And that's at worst, because there are definitely parts of the existing government that can be replaced by the UBI.

No, you'd increase the tax burden by 37% of their gross income, which is a totally different thing.

Your highest quintile household earning ~$235K per year: if they lived in NYC they'd be paying already about $72K per year in taxes (between Federal/state/local income tax and FICA, assuming it's a married couple).

Your proposal takes an additional $85K per year away from them. It therefore increases their taxes by 118%.

EDIT: also, I just noticed the quintiles in your example don't even sum correctly. You're distributing $180K but only taxing $174K.

[bhupy]

> EDIT: also, I just noticed the quintiles in your example don't even sum correctly. You're distributing $180K but only taxing $174K.

That's my mistake, typo due to overly quick math. It's too late for me to edit the comment, but the missing $6K needs to be distributed across the quintiles. This doesn't fundamentally change the math at all, and hence does not invalidate the argument at all.

> No, you'd increase the tax burden by 37% of their gross income, which is a totally different thing.

> Your proposal takes an additional $85K per year away from them. It therefore increases their taxes by 118%.

You're saying that it (a little more than) doubles their taxes. I never claimed otherwise, I meant that the percentage would increase by 37%, at most — which would in effect double their effective tax rate.

I want to do the math just to give your argument a fair shot. In FY2019, the total outlays of the US Federal government was $4.45 trillion. Per capita, that's $13,500.

Let's assume that there's literally 0 overlap between a UBI and all existing programs — extraordinarily unlikely, but I'll play your game — and we wanted to maintain an $18,000 UBI. That's essentially a $32,000 in benefits (I'm throwing in an extra $500 just to make my argument that much harder).

Let's go back to our fictional nation, where there are 10 people that are distributed exactly like they would be in the US today. We'd need $320,000 across 10 people.

Unemployed #1-5: 0

Lowest: $13,000

Second: $30,000

Third: $40,000

Fourth: $59,000

Highest: $178,000

Total revenue: $320,000 (this time I double checked!)

Now, because, in this scenario, $13,500 is not actually cash money, but is going towards existing Federal outlays, the net pocketed amount isn't actually $32,000 — it is actually $18,500.

Unemployed #1-5: $0 - $0 + $18,500 == $18,500

Lowest: $13,775 - $13,000 + $18,500 == $19,275 (effective tax -39%)

Second: $37,923 - $30,000 + $18,500 == $26,423 (effective tax 30%)

Third: $63,572 - $40,000 + $18,500 == $42,072 (effective tax 34%)

Fourth: $101,570 - $59,000 + $18,500 == $61,070 (effective tax 40%)

Highest: $233,895 - $178,000 + $18,500 == $74,395 (effective tax 68%)

These tax rates are Scandinavia-level rates. The middle class taxes are also high, but that's also true in most EU countries. These are also approaching FDR level marginal tax rates.

All that being said, these high taxes assume that there is literally 0 overlap between a UBI and over half of the existing Federal welfare expenditure — extraordinarily unlikely. This also totally ignores payroll tax revenue, which is about 35% of total revenue. And this is assuming 0 VAT, which most of the developed world has in some capacity. It also assumes that we want to continue to provide targeted welfare for a sub-section of society that is, on average, among the richest (old people). It also assumes that we want to pay equal UBI to everyone of all ages, rather than providing half the UBI per child, or some such percentage — I.e. should a family of 4 receive $74,000 per year? I think not. This is the most generous UBI. Like I said, we can play with different levels of progressivity and generosity of the system itself — but the general idea is the same.

The above math should show that a net increase in effective tax rate to 68% is the absolute worst case increase in income tax, assuming 0 overlap and 0 alternative taxation (both very unlikely), and assuming a comically generous UBI. At the very least, it should also show that it is within the realm of possibility to fund a UBI through progressive taxation.