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.
I think UBI and flat tax are fundamentally incompatible. Reasonable levels of UBI require high taxes, and doing so with entirely flat taxes will be quite punitive on the middle class. I think the vast majority of the population think there is a lot of merit to graduated tax rates as well, charging 50% tax on all of someone's income above $10,000,000 isn't as punitive to any sort of living standard as charging 50% tax on someone's first $30k of income.
If we want a UBI of $24,000/year ($2,000/month) for an adult population of 250 million we are talking 6 trillion dollars in additional government spending. Assume for a minute we can cut 2 trillion in spending so we are talking about a spending increase of 4 trillion. This would mean roughly doubling current government revenues. If you wanted to do so with a flat tax, you'd see rates near the top rate now on all income.
Are people ready for a world where you get $24,000/year from the government and pay something like a 40% tax on all your income? Compared to the current tax code you probably break even at roughly $75,000/year and for incomes above that you'd pay more in tax.
These numbers are so disingenuous without taking into account a tax rate increase. If you make $100k and pay $20k in taxes now, with a $10k UBI your effective tax bill is cut in half. If you tax rate goes up and you pay $30k in taxes and receive an $10k UBI, then the addition of UBI was net neutral to you.
The reality of a UBI would be the poor and lower middle net more money, the middle middle doesn’t change, the upper middle pay slightly more, and rich pay more.
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
UBI would be easily affordable if it was low enough. I don't know about the US but in the UK the progressive tax system means you don't pay any tax on the first £12,500. Scrap that and give it back as UBI instead then it would add up. The trouble is I don't think this is what the proponents have in mind.
In theory there would definitely be some tax increases even for middle class, ideally it'd be closely balanced so that the non-conditional UBI would balance out the tax increases
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.
There would obviously have to be a change in the tax rate to balance things out.
If we had a $10k/year UBI then a person make $100k/year would pay less than $5k taxes net if the tax code didn't change. I think if we a a 25-30% flat tax the numbers would make more sense.
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.
Funding a ubi wouldn't be that hard if we only cared about the kinds of things that get cheaper with time. Right now our federal tax rate is enough to cover 10k/year/pp (though nothing else), but if actually taxed the wealthy as much as we tax the middle class (for example, if we had a higher capital gains tax on public share sales, reducing the amount earned by the class of people who produce no real value and just earn money from stock growth), we could bring in enough to give out 5k/year/pp pretty easily. If everything that matters in life were getting cheaper the way computers and food did over the last half century, 5k/year/pp would be a good start, and as we got richer we could afford more.
But some sectors of the economy get more expensive with time, and those are what are killing us now and what prevents the UBI from being a good idea (before we fix them). Housing, Healthcare, education and childcare absorb more money every year and faster than the economy grows. Give people more money and those sectors just find ways to charge more. If we can't fix the way they do that, we get poorer in reality no matter how much more money we earn.
I realize this isn't how a lot of folks view things. To see it through my lens, imagine for a moment how wealthy we'd be if housing cost less than it did fifty years ago. If healthcare did. If education did. That's the world Keynes imagined, where we could be working 15 hour weeks (probably actually 25 hour weeks, but still) and still feel rich.
UBI is just an excuse to do the real fix, and that's tax the wealthy and the corporations their fair share.
It's ridiculous my tax rate is over 30% while wealthy people has it at 15%, and Amazon has it at 0%. That's the real problem! Yang wants to give people #1kBro so they can shut up about the real issue here is tax fairness.
Even 100% tax rate is not enough to pay for a meaningful UBI, even in the US. You will have to take major budget cuts somewhere.
Suppose we tax Forbes 500 at 100% level and the companies too. That would provide about 2 billion USD a year. Divided by population it will be less than $2k a person yearly.
Suppose you tax top 10%, I'd expect that to double this number. Still way not enough.
And we're not even close to military budget.
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.
To address the concept of UBI up front, I'm not a fan of it. I could get into the philosophical arguments of it but tugging heartstrings is one of the first signs of a failed argument (name calling is a close second). However, I will also say that I don't see any other way to deal with the kind of job disruption we're going to see as a nation over the next 15 years with AI tech progressing. Anyone who wants to argue against roughly 40% of the country getting a UBI for 5 years or so along with new job field training hasn't thought through what roughly 150 million armed and broke Americans can lead to.
FY2019 the US saw a tax revenue of $3.46 trillion in total tax monies, with right at half of that coming from income taxes at $1.72 trillion. Meaning, taxation for UBI would be a tax increase of $350 billion on top of current income taxes if you wanted to pay every single American a $1k monthly UBI. Last census showed 20% (ok, actually 19% but rounding up to keep numbers simple) of Americans do not pay payroll taxes (this is why I did not count FICA taxes with the $1.72 income tax number, because when I say 20% I mean 20%. So I excluded people who pay FICA, have an SSI exemption, income to low, ect)) so that means the base population numbre of 350 million I used now is 280 million total Americans (and we both know that a quick glance at the current U6 number on an unemployment chart will crush the pipe dream of 280 million Americans having jobs and paying federal taxes. So now we're talking some serious tax increases. And I think a lot of people might be shocked at how many people with two UBI checks coming into their household would consider that retirement money....adding even more tax burden to the rest.
I know some people like to blame Trump, some Biden, and some point to Obama....but we've been trying the free money experiment since the Great Recession with those first moves Bush made and every President has followed since. The Federal Reserve slammed rates to zero and kept them there because there has never been an economic recovery. Which is why the Fed has also artificially supported several private markets (don't even get me started on the Federal Reserve's trading desk when they want to buy a crap ton of stocks or bonds to stop a market slide when it starts getting around +1,000 or more.), and all it's achieved is giving us terrifyingly large asset bubbles and even more scary debt bubbles. Without getting off into a novel on the topic, quite simply, the answer is no....we do not have the resources available to hand out UBI. I've heard some advocate the logic of it's fine since we can print as much money as we need. People who say this simply don't understand how the US economy and the Federal Reserve work as for every single USD that is created...there is also debt created via the interest owed on that one dollar. This is why anyone who says they can pay the debt off or not add to it is either lying or selling something. The literal only way to address the US's debt (both public as well as Unfunded Liabilities....which total $170 trillion in debt just counting Medicare and SSI) is liquidation. Sure, we could "tell" the Fed no more interest and to waive all interest owed it....but that would make the USD toilet paper globally. And if that ever happens that the world views the dollar as useless then we'll see a crash on the scale of Mad Max stuff like doom prophets on youtube always swear is happening in 5 hours.
If someone is single and needs help, you can't beat the military (I joined the Army for this precise reason) for food, clothing, shelter, income, insurance, ect. That's where I got a lot of my college education for free, but if single there are way to many grants to not be able to do a few night classes a week since there are no wife or kids at home waiting on you. If you have a family as I did (wife and two toddlers) it was even better as the Army gave us free housing and extra money for groceries and my family enjoyed my benefits. As far as the intellect argument....we live in the age of the autodidact thanks to the internet. Anyone that can't be bothered to take half an hour a day to educate themselves doesn't want or need help. I left my job in automation right after the recession and since all that had happened I decided to learn how the economy works, how the dollar works, what the Fed is and how it works, how it applies geo-politically, ect. It's why nowadays I sit at home in my boxers and trade the markets while also having a second portfolio that is more passive and functions best if left alone.
If the middle class basically gets the same net amount, they would need to have their taxes increased by the same amount as UBI. That just follows from the premise of your question.
What is that in terms of tax rate? I don't know, Dane-pgp seems to have already answered with a concrete proposal.
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).
Only about 30-40 million people would likely net extra income with a UBI. i.e. If you increase my income taxes by $1000 but then give me a $1000 UBI check, its a wash. For some reason folks struggle to wrap their head around that part. Which is why I think a negative income tax is better mechanism.
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.
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