One comment on higer taxes + UBI. This curve is interesting to think about, slowly ramping or fixed percentage? I prefer simpler when it comes to large scale concepts, but maybe it needs to ramp up and affect all income equally (long term capital gains as well).
It may be better to index it to the percentage of total income tax paid by everybody to prevent feedback loops, when higher ubi increases cost of living, increasing ubi and eventually driving the whole economy off the cliff. Something like a tax return but calculated not as a percentage of the persons tax but of mean tax. It can start as a very small percentage at the start (1% ~ 1K/year) and then grow as other social payments are folded into it.
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.
What confuses me about most discussions on this is the automatic assumption that taxes need to be raised to get UBI. Both sides seem to implicitly take this for granted, whereas it's fairly trivial to rework income tax to introduce UBI without anyone having a net difference in earnings.
Of course the real question is whether doing this would allow you to actually simplify anything, or if it's possible to simplify taxes with only minor (or desired) changes in net income.
ignoring the political acceptance of it, UBI would end up tax neutral for many. You also have to change the way you tax and create a wealth tax. ie, if you imagine the wealth distribution in a country, and overlay income tax, you will see it doesn't match wealth distribution, so you need tax models that tax wealth and match your tax take to the wealth distribution (not that you can do this perfectly, but just need something that tracks better). This would make the majority of people better off, politically that's a good thing. Businesses follow market forces, more people with more money should create opportunities for more competition. Where it can be problematic is where there is a limited resource, like housing, it could push rents up, however, it may also give people more opportunity to move out of cities, so hard to know how that would play out.
Many places where I have seen people wanting to introduce UBI, increased (flat percentage) tax is often also suggested. The percentage is then suggested to be set at a level so that:
- People at low average income will have more money (the UBI-increase will be higher than the tax-increase)
- Average income: You get as much as before.
- Higher income: you pay more in taxes than you get from UBI.
Basically it ends up being a way to move money from the ones with higher incomes to the ones with less. It will ofc still give some inflation as poor people have more funds for basic needs. But other people will have less - and the average person just as much as before. Limiting the effect of the inflation.
Some argue that if an UBI is introduced then a flat rate tax should be applied to all other income; in the US this would lead to reasonably large income tax increase.
The UBI is quite thinkable without an LVT, and if your accept the GPs description of housing supply curve, trying to solve the problem it creates by lining UBI to an LVT would just create a huge positive feedback loop and inflationary spiral.
Really, independent of the unlikely characterization of housing supply curve in this subthread, UBI makes more sense tied to a progressive income tax without preferential treatment of capital income than to an LVT.
Between these sorts of experiments and the effects of the U.S. stimulus payments, I think we have a growing body of evidence indicating that some type of UBI is not only fully compatible with a traditional understanding of capitalism, but can actually enhance the positive effects of capitalism on the middle class (i.e. grow it, instead of shrinking it).
The problem, of course, is that the story around taxation will have to change dramatically. Think the endless debate over whether the 1% are paying their fair share is tiresome now? That's nothing compared to the upcoming fight to make any progress whatsoever on progressive tax rates at the high end of the spectrum in order to fund UBI.
Hypothetically let's say you raised taxes by a third across the board. Only people who's taxes went up by more than that 560 a month would be paying more than they received in UBI. So it's a little bit deceptive in terms of how much taxes would need to increase by. The tax increase and monthly UBI amount should be tuned together to have the desired redistributive effect.
UBI doesn't have to mean everyone gets a higher income. It could be revenue/income neutral over the population as a whole if properly funded by tax adjustments.
I think the usual solution is to increase income tax? So basically the introduction of UBI is neutral for the average household, the extra money from UBI being equivalent to the extra money lost on taxes
Completely agree. I think my back of the envelope calculations were that paying for a reasonable UBI in the US would require a new flat income tax in the 12% range, a wealth tax in the 2% per annum range, or a land value tax in the 8% range. I don't think that any of those would be too huge a disincentive for Mr. Musk - most of his ventures seem to yield either -100% or +30% per annum.
The problem is that UBI only works if it's redistributive. If you don't change the income distribution, the distribution of goods and services doesn't change. It seems to me like cost of living UBI + regressive taxation would just cause inflation with the UBI always lagging behind the newly higher costs.
Random thought, what if that $1000 UBI was instead a percentage of something else? I'm not sure what though. The GDP Deflator? Total stock market cap? Something to keep it on a level playing field with everything else.
UBI has to always be talked about with the way you are going to fund it via tax.
This article says higher income would be better off. But no, they would be worse off as over some magical amount you'd be paying out more than you'd get via the UBI.
However paying for UBI can also be done via a wealth tax. This would be ( theoretically ) the nicest way to evenly tax the wealth distribution of a nation then smooth it over the the entire population until you pull everyone up over a certain poverty line.
But a wealth tax would not be popular, and could be hard to implement effectively.
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