I've never had adequately explained to me how everyone gets an "income", when we're still paying income tax. Doesn't add up. The best one can say is that for earners, their first X dollars are untaxed, but that their marginal rates obviously must increase at some point. And if I make enough money that my taxes are supporting an indigent person's government income, then can I be said to have one, as well? The math doesn't add up to me, when the fungibility of money is considered.
$12,000 per year per person (for every U.S. citizen) = 3.8 trillion. So America will vote for less military spending, less education, or less of any set of things currently composing a huge hunk of this shoestring budget? Yeah, I don't know where else you'd get the money but taxing the rich disproportionately more. That's what pro-UBI is voting for. I'm not sayin' it's a bad idea or a good idea, I'm just sayin'... if the wealthy are on a power play, how can the middle and lower class score? Edit: Also, various conditions will change in unforeseen ways. Best prediction ever, 99.8% historical success rate.
Saying "tax the rich" scores points, but there just aren't enough rich. Middle-income earners, far more numerous, make the majority of total income and bear the majority of the tax burden. Taxing the top 1% of earners at 100% would yield one trillion dollars (assuming they continued working). To get close to 3.8 trillion, you have to tax everyone making over $100,000, including joint filers, at 100%, and again assume they will continue working to earn at that level when they can't keep a dime of their income. That thousand per month in "free money" will definitely come in handy.
I spent about an hour and a half researching (sigh another unpublished draft), and my line of thinking proceeded not terribly unlike your response and the resulting thread with rinx. When I realized that we would probably have to start taxing other forms of wealth to make a basic income happen, that's when I threw up my hands and decided to forego the convo. I will say that the issue of exactly how much wealth is hidden at the top of the distribution was a recurring theme. Phrases like "according to best estimates" or "some indicators suggest" kept cropping up, and without solid statistics to base a mathematical argument off of, I'm sunk. That the numbers are obfuscated to such a high degree is quite convenient for the wealthy. It's not like I consider it some widespread conspiracy, it's more akin to the collective effects of "yes, I have a bit of money, and I'd rather not tell you exactly how much." Also, any reports issued by the gov't on the subject of wealth are almost guaranteed to be low-balling, due to unreported/offshore/loopholes. So let's say that there's actually twice as much, $84 trillion, in wealth held by American citizens. That's still only twelve years of sustained basic income. You could argue that much of this wealth will be replenished if the economy continues to hum along at a healthy pace, but will business proceed as usual? No one has the faintest clue. I have yet to see a convincing mathematical argument from the pro-basic income crowd as to how it could work. That all of these numbers are framed in the context of only $1,000 per month per person seems pretty damning.
We can plan on taxing income every year, but we can only tax a dollar of wealth once, then it's not available in following years. Wealth is harder to measure than income, but I find a paper that appears to give a total national wealth held by individuals of $42 trillion in 2001. The rich (those in the top 5%) hold 57% of this, about $24 trillion. That's enough to keep the am_Unition plan going for six years or so before it runs out. I am not sure what you mean by this. Depending on definitions, the middle class all together contributes more tax revenue than the most wealthy. But there are far more people in the middle class. If the tax burden is measured per capita, the wealthy pay far more.We could tax wealth
Taxing that doesn't even come close to the tax burden we put on the middle class.
That doesn't make sense, why would that be the case? Wealth taxes can be yearly just like income tax. Lets explain it this way. Let's say I'm rich. I have 5 million in a trust that I live off of. Every year I draw down 3%, about 150,000, and that is what I live on for the year. At most and assuming my tax guy is a total idiot, I pay 15% capitol gains tax or about $22,500 for the year. Now lets say I'm upper middle class and I earn that 150,000 in my job. I'm paying about 28% of that in taxes, even if I've managed to property caffeinate my tax guy. That's $42,000 for the year. The burden of taxes for the person still working is much, much higher then the rich guy. Many wealthy people I know don't pay taxes as they are able to keep their reported income below 20k. Edited for typosWe can plan on taxing income every year, but we can only tax a dollar of wealth once, then it's not available in following years.
Taxing that doesn't even come close to the tax burden we put on the middle class.
b_b explained my point, and added some additional concerns. It's also worth mentioning that wealth-in-hand was income at some point in the past. If you can sock away most of your after-tax income of $108,000, eventually you can live off your savings like the rich guy -- if it isn't re-taxed out of your hands.
I think he means that wealth, once taxed, is owned by the government. If I have $100, and the government takes 5%, I only have $95 left the next year, and so on. One could theoretically be taxed to the poorhouse, whereas income is only taxed once in hand. Some assets grow over time and some don't, and many assets have over inflated valuations that make taxing them questionable, not to mention the fact that for a lot of entrepreneurs, wealth is often illiquid. These reasons make wealth taxes unappealing to me.
Core inflation currently stands at ~2.1% according to the BLS. Not sure where you're getting -3% (not that it matters for the sake of this argument, because it could be anything 5 years from now). You're making some great assumptions that everyone with money has it in an S&P index fund. What about the individual who finds herself holding property that used to be worthless but is now in a trendy area? What about the entrepreneur who is completely cash poor but just received an investment valuing their company at $10,000,000? Should he have to sell out to pay Caesar because he's "rich"? There are many scenarios (as in these two easy examples) where wealth taxes represent an upward transfer of money, not a downward as you're proposing.
I'm not assuming that, like I said, if they don't invest they are losing money to inflation (which has a historic average of 3%). So the government will drive them to zero either way. Your money needs to grow over time. I think these examples you gave are definite problems we would have to figure out if we implement something like this. But if France, Italy, and most nordic countries can, we probably can too. I also think its much, much more common for rich people to not pay taxes then I do for the cases you describe (someone overnight owning a 10 million dollar business without time to set up liquid reserves isn't showing up on my facebook feed that often). If we never implement systems because there are possible edge cases we wouldn't have taxes at all :)
What I actually mean is how can we ever use the language of "universality" when many, many people pay far greater than $12,000 (or whatever) in taxes? What we should be saying is there is a negative income tax up to the point at which one otherwise would have paid $12,000 in taxes, and a positive one thereafter, no? And to offset this the marginal rates would assuredly be steeper sloped than they are today. So in the end, it wouldn't cost $3.8T, but some lower amount that is probably pretty difficult to calculate. In total, it is definitely still a means tested welfare program (when the fungibility of money is considered), no matter what language we put on it. That doesn't make it right or wrong; I just think that if we want to seriously discuss the matter, it should be discussed in terms that describe it as what it is. My comment wasn't a critique of government spending or priorities, but rather a critique of the language that this discussion is always couched in.$12,000 per year per person (for every U.S. citizen) = 3.8 trillion.
I think you explained it pretty well. "Universal income" is simpler language, but what happens is that people earning at a middle level pay themselves $12,000 (i.e. no change) and those earning more pay themselves 12K and pay some more to cover the 12K payments to those earning less. Milton Friedman advocated a negative income tax along the lines you describe. Experiments found it was challenging to administer a NIT which 2. provides an ostensible incentive to work (a far greater concern when benefits are to be extended beyond the traditional welfare population dominated by female-headed families), and 3. restricts coverage to any manageable proportion of the population—the so-called "break-even" problem. The program eventually gave birth to the Earned Income Tax Credit which is still on the books. UBI might one of those ideas that looks better on paper than it works in practice. But it might not have to be very good to be an improvement over what we have.1. provides an income guarantee as generous as the cash and in-kind benefits already available to many welfare recipients in the United States,
a 1990 IRS study revealed that owing in part to the complexity of the EIC rules, almost 40 percent of EIC benefits were paid to families who were not eligible for them. Yet the finding of such a high error rate did not deter Congress from both enlarging and further complicating the EIC in the fall of 1990
I've advocated for a long time that a great place to start if we want to amend tax law to be more in line with our collective values that we should eliminate the payroll tax summarily. It is a horrible tax that is oddly regressive, and doesn't even apply fairly to different types of income or even across families with the same incomes. I grumble at it with every paycheck. Imagine just giving poor people a 12% raise, because that's what would happen if we started treating all income tax the same. Perhaps that would allay some concerns vis-a-vis minimum wage, earned income, etc. It was interesting to see the GOP argue for reinstating the 2% (or was it 4%...can't remember off the top of my head) cut in the payroll tax that Obama and they agreed upon as part of the recovery law. That was the serpent eating its tail if I've ever seen it.
I am not sure I understand your opposition, or maybe I don't understand what you mean by payroll tax. The 12.4% FICA tax pays into the Social Security program. Eliminating the tax would amount to a nice raise, but would require different funding or elimination of Social Security. There are two interesting features of the tax: 1. There is a cap on how much income is taxed, currently $118,500. Income beyond that level is not taxed. I think this is why you call it "regressive," because very high earners do not pay more than people earning at the limit. But judging by the benefits worksheet, you don't get higher benefits either. No one gets more Social Security benefits by earning above the annual limit. (High-earners were originally supposed to be completely excluded from Social Security.) So everyone contributes 12.4%, and everyone gets back in proportion to their contributions. Doesn't seem regressive. (I am ignoring the Ponzi flavor of the program and assuming that benefits are fairly calculated: that people who contributed twice as much get back twice as much on average.) 2. Contributions are split between employer and employee. I don't see why this matters to anyone's bottom line. It is sneaky that employees only see half of the total as a deduction on their paychecks, but even if the employer's contribution were printed on the check it wouldn't put more food on the table. Employers don't care how the tax is paid, they only want to know the total cost of keeping another worker employed, so making the entire 12.4% an income tax wouldn't affect salaries. It appears that only the employee-paid half of FICA is tax deductible, which is strange, but that also applies to everyone equally, and doesn't seem to raise a fairness issue.we should eliminate the payroll tax
Trying to talk about the payroll tax gets to the very heart of why we pay taxes, and what social security is, exactly. Neither of which are evident in its case. Is it a savings program, or is it a safety net? If it's a savings program (and I actually get my proportion back at some future point), then I want the money for myself. Give me 12.4% of my pay and mandate that I can't spend it until I'm 59.5, like an IRA. If it's a safety net, then by definition we're all in it together, and therefore it should be taxed as income like every other government program. I don't like how much we spend on the military, but I'm not absolved from paying taxes on it because I don't benefit as much from it as someone who lives in a place where there is a high level of military spending. I'm not at all arguing that the 12.4% should be collected as income tax. I'm arguing that social security should be funded by income tax (it it is in fact a social safety net; again, we've never really defined it). My gripe about how it is calculated has everything to do with the cap, whether it's a safety net or savings program. For example, imagine a married couple who each make $100,000. Combined, they make well beyond the cap, but separately they're both under. Annually, they'll pay $25,000 in payroll tax. Now imagine a married couple in which one spouse earns $200,000 and the other earns 0. Combined, they'll pay more than $10,000 less in payroll tax (plus the other "Marriage Penalty" they're not hit with, but that's a whole other story that will just piss me off more to talk about) than the first couple. They are free to take that $10,000 and dispose of it at will, including doing such things as investing in certainly higher average return programs. Taxing all income equally would of course require raising the income tax across the board, because it isn't probably sustainable to give up whatever ridiculous number the social security administration collects every year. We can go back and forth about whether it's regressive or not, but they way it is currently structured is the most nanny state program we have. Social security needs a dramatic reorganization and redefinition, so that we all know what it is we're paying for and why. There is no other program that has this tax and spend structure, and I would argue that it hurts earners more than it helps them.
$3.8 trillion is a lot of money. How about a back-of-the-envelope evaluation of the plausibility of extracting this much money every year from "the rich"? For simplicity, assume that "the rich" will continue working and earning as they did before UBI. (Might as well assume that everyone else will continue working and earning as they did before too.)taxing the rich disproportionately more