[jltsiren]

Is that what UBI has become these days? That everyone is supposed to get some extra money on top of whatever they already have?

~20 years ago, when UBI was a popular idea in my country, it was understood as a technical fix to the welfare and tax systems. It was supposed to simplify the systems and make them easier to understand. It was supposed to fix the perverse incentives people with low wages face, such as the extremely high (often >80%) effective marginal tax rates. It was supposed to automatically give people the benefits they are entitled to, without having to deal with the punitive bureaucracy. It was supposed to help people who fall between the categories in the existing welfare system. And so on.

And it was supposed to be funded by making it an accounting technicality, at least for the most part. Most basic welfare benefits, tax credits, and tax deductions would go away. Progressive taxation would go away. Standard deduction would either go away or become substantially smaller. And the highest income tax bracket would start at 0.

[elevatortrim]

Everything you say is still the idea and I agree but where does the idea that progressive taxation would go away coming from? What does it have to do with UBI?

[AnthonyMouse]

A UBI is a method of achieving the same effect as progressive taxation without the complexity and perverse incentives of tracking everyone's income and applying different marginal rates.

Suppose you have a tax system with progressive tax brackets and then a needs-based welfare system with benefits phase outs. It turns out, those two things (progressive rate structure and benefits phase outs) basically cancel each other out -- lower income people are supposed to pay lower marginal tax rates but if you're paying a 10% marginal tax rate and then have a 25% benefits phase out rate, that's the same as paying a 35% marginal tax rate. Worse, the benefits phase outs for different benefits often overlap, with the result that lower income people are often paying higher marginal tax rates than wealthy people, and there are some cases when their marginal rates even exceed 100% of marginal income.

So you have two unnecessarily complicated systems that mostly exist to cancel each other out, and to the extent that they don't they're doing something you don't actually want (excessively high marginal rates on poor people). It's better to just get rid of both -- no phase outs is the "universal" part of the UBI, and then you combine that with a uniform marginal tax rate for everyone.

You're basically getting rid of the progressive rate structure so you can lower the marginal tax rates on poor people to the ones being paid by rich people, and if that seems counterintuitive it's because the status quo is very stupid.

[zozbot234]

It turns out that a theoretically optimal non-linear taxation schedule features a UBI plus varying marginal tax rates (i.e. continuous tax brackets) that start out quite high (but sub-100%) in the UBI-clawback range (to manage the UBI break-even point while still offering a high subsidy to the very lowest earners) become very low for low-to-middle income earners and rise gradually for middle- and high-income earners. That's quite redistributive in intent, but the tax brackets themselves are neither "progressive" nor "regressive". Nevertheless, middle- and high-income earners do face moderately progressive rates.

[AnthonyMouse]

That seems like a lot of added complexity just to make sure the lower middle class gets screwed out of receiving the UBI.

[zozbot234]

They benefit from greatly lowered tax rates on their earned income (this is also a 'carrot' for the UBI net-receivers themselves, at least at the higher end), and high growth because you don't need to 'soak' higher-earning folks, who only pay moderately progressive rates. The alternative either has the lowest earning folks getting screwed out of receiving a meaningful subsidy (which is really bad) or pushes the break-even point way too high, which is not really what you want either and is the main criticism of UBI from a practical POV.

[AnthonyMouse]

> They benefit from greatly lowered tax rates on their earned income

Lowered marginal tax rates. Raising the marginal rates on the lowest earners is raising the effective rates on the lower middle class. That they don't get anything is essentially the purpose of your proposal.

> and high growth because you don't need to 'soak' higher-earning folks, who only pay moderately progressive rates.

But did you actually have to do that? Having the lowest marginal rates be in the middle is pretty expensive because it's also lowering the effective rate on everyone above them, or at best is just balancing out having the highest rates at the bottom. It seems like you're trying to increase the amount of the UBI while making sure the extra money comes from the middle rather than the top. Having approximately the top half (50% of the population) pay so that the second quartile (25% of the population) can get ~half the UBI instead of none both doesn't seem like a bad thing and doesn't seem like it would cost them that much rate-wise because it's a 2:1 population ratio and they they have a higher per capita base to apply the rate to.

And having the highest rates at the bottom is pretty bad incentive-wise.

> or pushes the break-even point way too high

What's the problem with the break-even point being somewhere around the middle? The people only slightly below that aren't getting a large subsidy, they're just not getting literally zero.

Meanwhile the amount of "well I didn't make that much money because I had half of it paid to my kid" marginal rate arbitrage you're reintroducing is large.

[jltsiren]

You should repeat that claim with concrete numbers.

What is the effective marginal tax rate in the UBI-clawback range, including any housing / healthcare / childcare / whatever benefits lost due to income? And what is the minimum hourly net income that would encourage someone with guaranteed basic income to take a job instead of staying at home? With those two numbers, you can calculate an effective minimum wage, below which it would be practically impossible to hire anyone.

[AnthonyMouse]

> And what is the minimum hourly net income that would encourage someone with guaranteed basic income to take a job instead of staying at home? With those two numbers, you can calculate an effective minimum wage, below which it would be practically impossible to hire anyone.

The answer to the first question varies from person to person, and from job to job since some of them are less desirable to do independent of what they pay, which means the threshold in the second question doesn't actually exist. There may be 100 people willing to work a specific job for $X/year but not 1000 people, etc.

[Ferret7446]

Mathematically equivalent does not mean human psychologically equivalent. e.g., people prefer a discount, even if the actual final numbers are the same. The framing matters

[AnthonyMouse]

So do something that works exactly like a UBI but frame it as giving them a discount. Call the UBI a refundable tax credit.

[seanmcdirmid]

UBI basically is an equalizer, instead of a standard deduction and graduated taxation, you get $N off the top and pay X% of whatever you earn. The progression comes in the money you get since it comes out of taxes from everyone, theoretically it is wealth redistribution especially if it becomes a significant part of most people’s income.

[AnthonyMouse]

That's exactly what it's supposed to be, but then opponents (or just people who are confused) will often characterize it as something else which is easier to find fault with.

[6510]

It could start out like that while we gradually dial down the other systems it is suppose to replace.

> Progressive taxation would go away.

There should be very aggressive progressive taxation. When you've absorbed a lot we should encourage you to stop hoarding and get a life.

Maybe do a license for a fund for a specific purpose. Then you can continue playing the game but the fund may only be spend on [say] high speed rail.

It seems fun to leave all the money in the companies and require them to explain to a committee what they are going to do with it. If apple says they are going to make phones the size of the fund begs to question why they are not already spending it on making phones?

[nout]

The current UBI frame is nothing like what you said. And I think this is the issue with UBI - the incentives are not aligned for it to be stable and reasonable over time, but rather to get much worse and misused over time.

[readthenotes1]

"Is that what UBI has become these days? That everyone is supposed to get some extra money on top of whatever they already have?"

You do know that the I in UBI stands for Universal, don't you?

What the people in your country were talking about is a Guaranteed Minimum Income. Related but different

[Izkata]

All of that sounds nice, but the current understanding is what fell out when people started questioning the specifics of how all of that would work.