I don’t strongly prefer UBI over a negative income tax, and I agree with you that ‘ease of passing through the political system’ is not a compelling argument. In practice, a UBI with an intelligent tax framework functions the same as a negative income tax (no less nuance, just different). The link below is what you’re looking for:
I would highly recommend reading the link above for all the nuance in this space. Given the other benefits to UBI, such as supplementing it from additional Pigovian Taxes (taxes on undesirable things like carbon taxes & drugs).
Ultimately, both policies achieve the same important outcome in slightly different ways: a Basic Income Guarantee (BIG) AKA solid foundation of economic security for all.
And now we move to the motte, it seems. A program which simultaneously adds a UBI and a special tax specifically designed to take away the UBI from richer income groups is a UBI in name only, if even that; it is functionally just a more complicated form of income-adjusted welfare (e.g., a negative income tax credit but with extra steps).
It’s important to recognize that the new tax would actually have to be genuinely special/separate from the rest of the system in order to be functionally similar to what I have described, given that the highest income tax bracket in the US is only 37% (if I understand correctly).
Such an “intelligent tax framework” (especially if it includes Pigovian taxes) could involve imposing more administrative or cognitive costs on people who are trying to figure out how much they owe in taxes, unless one is actually just saying “a tax framework which is only different in that it hides the fact that some people are actually just paying the same/more in taxes even after accounting for the UBI.
Again, it might be plausible that this sneaky setup has political justifications, although I am fairly skeptical of that, given that I don’t think people are that gullible / I think some commentators will be very outspoken that this is just a deceptive form of income-adjusted welfare. Moreover, I’m also quite skeptical of the argument that the people who make more than the cutoff would actually care enough about such a relatively small payment to lobby against it, unless one is supposing that the new system would not actually replace/eat most pre-existing welfare (in which case I think the new program would unacceptably increase the deficit in ways likely to create its own political backlash).
Also, it is almost a red herring to claim benefits of imposing Pigovian Taxes as a way to fund the UBI, except insofar as one is appealing to the argument that such taxes are not politically feasible without reimbursement. But one does not need a “UBI” (emphasis on the “universal” and “basic” characteristics) to impose Pigovian Taxes, and in fact there are many proposals that take the form of limited rebates tied to specific taxes (e.g., carbon tax rebates). Additionally, it is possible that politicians/voters would still demand an end to the taxes while maintaining the UBI.
In the end, I disagree that one can have a UBI that is functionally equivalent to the kind of income-adjusted tax credit I’ve described, while still genuinely calling the UBI a “universal” basic income.
By intelligent tax framework, I simply meant lower tax % for people with less income, and higher tax % for people with more income. A graduated tax like we have today instead sales taxes or a flat tax. Maybe there’s an argument to use a wealth tax as well or instead, but most proponents I’ve seen support increasing the top marginal tax rate from
Pigovian taxes would not be substantive to the cost of a UBI, so I’m rather ambivalent as to whether they need to funnel back into a UBI. The best argument I’ve seen so far for funneling carbon taxes into UBI (Carbon Tax) is that:
All people have a carbon footprint
A Carbon tax would increase the cost of living for most people, and people could be financially hurt by gas (for example) being more expensive, so
Distributing the tax revenue back to the people directly would counteract that cost
Perhaps I shouldn’t have brought Pigovian taxes up, as they are not central or important to the debate of UBI.
We are disagreeing, if only insofar as that I disagree that a UBI can be universal and also functionally equivalent to an income-adjusted tax credit. Or at least, I think it is disingenuous to call that a UBI. And I think that if a UBI genuinely gives money to people making more than ~$120K a year without doing this whole bait-and-switch, it’s a terrible policy relative to alternatives (e.g., income-adjusted tax credits). (Which to be clear is not even to suggest that I think income-adjusted tax credits are a good policy; I simply think that they are almost strictly superior to a UBI, except maybe for political tractability or other non-policy reasons.)
I think we are not understanding UBI to mean the same thing. UBI is a government policy that distributes funds to all people equally, through redistributive taxes that are high enough for the wealthy to pay for the full amount. I don’t think there’s any bait-and-switch in that everybody should know from the start that people making 120+ per year will make net-less income.
The breakeven point should be somewhere around 50-70K I think.
The fundamental issue (unless I’m misunderstanding) with tax-credit is that if you’re poor and have not made a high income, you can’t get any benefit from them. It doesn’t accomplish the fundamental BIG (Basic Income Guarantee) like UBI or Negative income tax.
we already have a UBI-style structure for welfare in the UK. It’s called Universal Credit, but is set at a very low % of median income, so you aren’t living off it very comfortably. But the political economy here doesn’t seem very likely to support a much higher basic income any time soon. This imo gives the lie to the claims that simpler welfare systems on their own are more generous: I suspect for a variety of reasons the opposite is true.
A program which simultaneously adds a UBI and a special tax specifically designed to take away the UBI from richer income groups is a UBI in name only, if even that; it is functionally just a more complicated form income-adjusted welfare (e.g., a negative income tax credit but with extra steps).
UBI has always been a fundamentally redistributive policy proposal and is what people like Dr. Luther King Jr. and Milton Friedman meant back in the 60s. A special/additional tax specifically designed to transfer some wealth from richer people & distribute it to poorer people is most certainly what the name UBI means.
One thing I love about it is that it should benefit wealthy people a great deal as well. Not only would it reduce homelessness and petty crime drastically (as they are almost entirely caused by poverty), but rich people would know there is a limit to how far they can fall. Wealthy people are constantly afraid of losing their wealth, and UBI would meaningfully reduce that fear. A few rich people have told me it would make up for the higher taxes.
Finally, I find it much simpler actually than a negative income tax. My perspective is somewhat altered by the fact that I speak with a lot of homeless and impoverished individuals, and they would much prefer a simple check each month as it would be far more stable than a once-a-year thing.
A UBI by definition cannot distribute the new money in a way that is not universal. If you want to keep current taxes or even change tax brackets so that they are more progressive by increasing taxes on the wealthy that could still be a UBI, but it would mean that people making >$150K annually receive additional money for the government that they clearly don’t need, even if they are in a 50% income tax bracket. However, I don’t think you can in good faith call a program that adds a new special tax that only applies to the UBI and thus deposits money in rich people’s bank accounts only to immediately yank 100% of the money back a “UBI,” as that clearly goes against the spirit of the “Universal” characteristic.
You insist that this policy was supported by Milton Friedman:
UBI has always been a fundamentally redistributive policy proposal and is what people like Dr. Luther King Jr. and Milton Friedman meant back in the 60s.
However, I doubt this is an accurate interpretation of Milton Friedman, and I have only ever heard him talk about negative income taxes. From one quickly-found source:
The crowd at Yang’s Washington, D.C., rally on April 15 burst into applause at the mention of Friedman. But the famous free-market economist’s idea of UBI doesn’t square up with Yang’s. Friedman advocated for a negative income tax, which replaces levies on low-income individuals with supplemental funds from the government. Friedman’s plan consequently ensures that everyone in society receives a guaranteed minimum income, but it doesn’t redistribute money to people who don’t need it.
Wealthy people are constantly afraid of losing their wealth, and UBI would meaningfully reduce that fear.
A UBI would not save rich people from losing >90% of their income if something catastrophic were to happen to their business/etc., and it does not act as a better social safety net than alternative policies such as negative income tax or other means-tested/emergency assistance (e.g., TANF).
I don’t think you can in good faith call a program that adds a new special tax that only applies to the UBI and thus deposits money in rich people’s bank accounts only to immediately yank 100% of the money back a “UBI,” as that clearly goes against the spirit of the “Universal” characteristic.
I don’t think the ‘Universality’ of UBI has ever meant that every person will benefit from it. The universality thing points to the fact that no-one will ever go below it. It is a minimum base income that is universally applied, and that universality has nothing to do with the tax structure used to fund said program.
A program would still be a UBI if it was funded entirely from government oil profits or some other source than taxes. It could even be funded by wealth taxes not income taxes. The source of funds is irrelevant to a UBI being a universal income floor.
However, I doubt this is an accurate interpretation of Milton Friedman, and I have only ever heard him talk about negative income taxes.
I feel like we’re going in circles with this one. I already described how NIT is functionally identical to UBI after all is said and done. It just depends on how people feel about accounting.
A UBI would not save rich people from losing >90% of their income if something catastrophic were to happen to their business/etc., and it does not act as a better social safety net than alternative policies such as negative income tax or other means-tested/emergency assistance (e.g., TANF).
You’re completely right, it would not save them from losing all of their money &/or job income, but that’s not what I’m talking about. I’m saying that they will never fall below a certain level, and that level is enough to help a person recover at least part of their dignity & wealth over time.
Imagine you’re a rich person—something goes horribly wrong—now you’re bankrupt and have $0 in your bank account. Would you rather have to wait until the next April to get a big NIT check (you’ll have to wait a year for your income to go to 0), or get your $1,000 check at the beginning of the next month?
I’ve spoken to people on TANF and means-tested emergency assistance. It sucks and is absolutely awful for everyone involved. It’s especially rough because these people are in great need and it makes them jump through so many unnecessary hoops.
First, just ignore the whole thing about TANF; I included that on a whim and I’m aware of the many criticisms of the program, but I have no interest in defending it as it is not central to the main argument I’m making. That aside...
You say that:
The fundamental issue (unless I’m misunderstanding) with tax-credit is that if you’re poor and have not made a high income, you can’t get any benefit from them.
I suppose I should not have used the term “tax credit,” as I think most tax credits are non-refundable, but there are refundable tax credits (i.e., you can be paid by the government in excess of what you owe in taxes). What I have in mind would be a refundable tax credit, which also applies for people who do not pay excess amounts in income taxes. (i.e., it would be like receiving a $X check if you have not paid any taxes)
You say that:
UBI is a government policy that distributes funds to all people equally, through redistributive taxes that are high enough for the wealthy to pay for the full amount.
Curiously, in a separate comment you also say:
I don’t think the ‘Universality’ of UBI has ever meant that every person will benefit from it. The universality thing points to the fact that no-one will ever go below it.
I’m not exactly sure how to reconcile these two comments, but what I will say is: I do not get the impression that people usually have the “the government ensures all people will stay above X income” interpretation in mind when talking about a UBI (except sometimes when they are retreating to a definitional motte, as currently appears to be the case); most people have in mind “a government policy that distributes funds to all people equally,” as you wrote in one of your comments. (I thought this is also what Andrew Yang had in mind, but I must admit some unfamiliarity with the details of his plan.)
Ultimately, I’ll just conclude by saying that I think that redefining UBI in such a way as to allow a policy such as a negative income tax just destroys the definition of a UBI, and I think you will not find many people who are sympathetic to such definitional stretching (although they may unfortunately be unaware of what’s happening).
What I have in mind would be a refundable tax credit, which also applies for people who do not pay excess amounts in income taxes. (i.e., it would be like receiving a $X check if you have not paid any taxes)
I think this is the same idea as a Negative Income Tax. As mentioned before UBI and NIT are functionally identical and only differ in accounting terms.
I want to make it clear I’m not attempting to stretch the definition of UBI to include NIT. A Universal Basic Income is a very different mechanism from a Negative Income Tax, my point is that both policies achieve the game-changing impact of a Basic Income Guarantee (BIG).
UBI is a government policy that distributes funds to all people equally
My point here is that the government distributes those funds equally, establishes that baseline of economic stability, and that does not include how it’s being paid for. GiveDirectly is running a UBI experiment where every person in Maryland Liberia will receive UBI for 3 years. The UBI is not being paid for by taxes, but by philanthropy & international aid money. Whether something is UBI or not depends on the disbursement mechanism, not on the means of funding.
From what I’ve seen it’s incredibly likely (logical economically) that direct cash transfers—or funding guaranteed income—is the most cost-effective way to help almost all people in need philanthropically. If we can prove this claim with rigorous RTC trials, it could substantially blur the lines between paying taxes dedicated for UBI & spending money on high-impact philanthropy.
Wouldn’t a rich person or organization in Maryland Liberia also want to support GiveDirectly’s UBI program?
I don’t strongly prefer UBI over a negative income tax, and I agree with you that ‘ease of passing through the political system’ is not a compelling argument. In practice, a UBI with an intelligent tax framework functions the same as a negative income tax (no less nuance, just different). The link below is what you’re looking for:
I would highly recommend reading the link above for all the nuance in this space. Given the other benefits to UBI, such as supplementing it from additional Pigovian Taxes (taxes on undesirable things like carbon taxes & drugs).
Ultimately, both policies achieve the same important outcome in slightly different ways: a Basic Income Guarantee (BIG) AKA solid foundation of economic security for all.
And now we move to the motte, it seems. A program which simultaneously adds a UBI and a special tax specifically designed to take away the UBI from richer income groups is a UBI in name only, if even that; it is functionally just a more complicated form of income-adjusted welfare (e.g., a negative income tax credit but with extra steps).
It’s important to recognize that the new tax would actually have to be genuinely special/separate from the rest of the system in order to be functionally similar to what I have described, given that the highest income tax bracket in the US is only 37% (if I understand correctly).
Such an “intelligent tax framework” (especially if it includes Pigovian taxes) could involve imposing more administrative or cognitive costs on people who are trying to figure out how much they owe in taxes, unless one is actually just saying “a tax framework which is only different in that it hides the fact that some people are actually just paying the same/more in taxes even after accounting for the UBI.
Again, it might be plausible that this sneaky setup has political justifications, although I am fairly skeptical of that, given that I don’t think people are that gullible / I think some commentators will be very outspoken that this is just a deceptive form of income-adjusted welfare. Moreover, I’m also quite skeptical of the argument that the people who make more than the cutoff would actually care enough about such a relatively small payment to lobby against it, unless one is supposing that the new system would not actually replace/eat most pre-existing welfare (in which case I think the new program would unacceptably increase the deficit in ways likely to create its own political backlash).
Also, it is almost a red herring to claim benefits of imposing Pigovian Taxes as a way to fund the UBI, except insofar as one is appealing to the argument that such taxes are not politically feasible without reimbursement. But one does not need a “UBI” (emphasis on the “universal” and “basic” characteristics) to impose Pigovian Taxes, and in fact there are many proposals that take the form of limited rebates tied to specific taxes (e.g., carbon tax rebates). Additionally, it is possible that politicians/voters would still demand an end to the taxes while maintaining the UBI.
In the end, I disagree that one can have a UBI that is functionally equivalent to the kind of income-adjusted tax credit I’ve described, while still genuinely calling the UBI a “universal” basic income.
I don’t think we are disagreeing.
By intelligent tax framework, I simply meant lower tax % for people with less income, and higher tax % for people with more income. A graduated tax like we have today instead sales taxes or a flat tax. Maybe there’s an argument to use a wealth tax as well or instead, but most proponents I’ve seen support increasing the top marginal tax rate from
Pigovian taxes would not be substantive to the cost of a UBI, so I’m rather ambivalent as to whether they need to funnel back into a UBI. The best argument I’ve seen so far for funneling carbon taxes into UBI (Carbon Tax) is that:
All people have a carbon footprint
A Carbon tax would increase the cost of living for most people, and people could be financially hurt by gas (for example) being more expensive, so
Distributing the tax revenue back to the people directly would counteract that cost
Perhaps I shouldn’t have brought Pigovian taxes up, as they are not central or important to the debate of UBI.
We are disagreeing, if only insofar as that I disagree that a UBI can be universal and also functionally equivalent to an income-adjusted tax credit. Or at least, I think it is disingenuous to call that a UBI. And I think that if a UBI genuinely gives money to people making more than ~$120K a year without doing this whole bait-and-switch, it’s a terrible policy relative to alternatives (e.g., income-adjusted tax credits). (Which to be clear is not even to suggest that I think income-adjusted tax credits are a good policy; I simply think that they are almost strictly superior to a UBI, except maybe for political tractability or other non-policy reasons.)
I think we are not understanding UBI to mean the same thing. UBI is a government policy that distributes funds to all people equally, through redistributive taxes that are high enough for the wealthy to pay for the full amount. I don’t think there’s any bait-and-switch in that everybody should know from the start that people making 120+ per year will make net-less income.
The breakeven point should be somewhere around 50-70K I think.
The fundamental issue (unless I’m misunderstanding) with tax-credit is that if you’re poor and have not made a high income, you can’t get any benefit from them. It doesn’t accomplish the fundamental BIG (Basic Income Guarantee) like UBI or Negative income tax.
we already have a UBI-style structure for welfare in the UK. It’s called Universal Credit, but is set at a very low % of median income, so you aren’t living off it very comfortably. But the political economy here doesn’t seem very likely to support a much higher basic income any time soon. This imo gives the lie to the claims that simpler welfare systems on their own are more generous: I suspect for a variety of reasons the opposite is true.
UBI has always been a fundamentally redistributive policy proposal and is what people like Dr. Luther King Jr. and Milton Friedman meant back in the 60s. A special/additional tax specifically designed to transfer some wealth from richer people & distribute it to poorer people is most certainly what the name UBI means.
One thing I love about it is that it should benefit wealthy people a great deal as well. Not only would it reduce homelessness and petty crime drastically (as they are almost entirely caused by poverty), but rich people would know there is a limit to how far they can fall. Wealthy people are constantly afraid of losing their wealth, and UBI would meaningfully reduce that fear. A few rich people have told me it would make up for the higher taxes.
Finally, I find it much simpler actually than a negative income tax. My perspective is somewhat altered by the fact that I speak with a lot of homeless and impoverished individuals, and they would much prefer a simple check each month as it would be far more stable than a once-a-year thing.
A UBI by definition cannot distribute the new money in a way that is not universal. If you want to keep current taxes or even change tax brackets so that they are more progressive by increasing taxes on the wealthy that could still be a UBI, but it would mean that people making >$150K annually receive additional money for the government that they clearly don’t need, even if they are in a 50% income tax bracket. However, I don’t think you can in good faith call a program that adds a new special tax that only applies to the UBI and thus deposits money in rich people’s bank accounts only to immediately yank 100% of the money back a “UBI,” as that clearly goes against the spirit of the “Universal” characteristic.
You insist that this policy was supported by Milton Friedman:
However, I doubt this is an accurate interpretation of Milton Friedman, and I have only ever heard him talk about negative income taxes. From one quickly-found source:
A UBI would not save rich people from losing >90% of their income if something catastrophic were to happen to their business/etc., and it does not act as a better social safety net than alternative policies such as negative income tax or other means-tested/emergency assistance (e.g., TANF).
I don’t think the ‘Universality’ of UBI has ever meant that every person will benefit from it. The universality thing points to the fact that no-one will ever go below it. It is a minimum base income that is universally applied, and that universality has nothing to do with the tax structure used to fund said program.
A program would still be a UBI if it was funded entirely from government oil profits or some other source than taxes. It could even be funded by wealth taxes not income taxes. The source of funds is irrelevant to a UBI being a universal income floor.
I feel like we’re going in circles with this one. I already described how NIT is functionally identical to UBI after all is said and done. It just depends on how people feel about accounting.
“A NIT is like giving someone $50 and asking for nothing back, and a UBI is like giving someone $100 and asking for $50 from their next paycheck. Both result in the person getting an extra $50. The question of which is better depends on the details involved and how the person feels about them.”
Milton Friedman used guaranteed income and NIT interchangeably, and I would guess (although I can’t confirm) that he understood NIT and UBI to be two sides of the same coin. Maybe we can ask an AI language model to pretend to be Milton Friedman.
You’re completely right, it would not save them from losing all of their money &/or job income, but that’s not what I’m talking about. I’m saying that they will never fall below a certain level, and that level is enough to help a person recover at least part of their dignity & wealth over time.
Imagine you’re a rich person—something goes horribly wrong—now you’re bankrupt and have $0 in your bank account. Would you rather have to wait until the next April to get a big NIT check (you’ll have to wait a year for your income to go to 0), or get your $1,000 check at the beginning of the next month?
I’ve spoken to people on TANF and means-tested emergency assistance. It sucks and is absolutely awful for everyone involved. It’s especially rough because these people are in great need and it makes them jump through so many unnecessary hoops.
(Responding to two of your comments at once)
First, just ignore the whole thing about TANF; I included that on a whim and I’m aware of the many criticisms of the program, but I have no interest in defending it as it is not central to the main argument I’m making. That aside...
You say that:
I suppose I should not have used the term “tax credit,” as I think most tax credits are non-refundable, but there are refundable tax credits (i.e., you can be paid by the government in excess of what you owe in taxes). What I have in mind would be a refundable tax credit, which also applies for people who do not pay excess amounts in income taxes. (i.e., it would be like receiving a $X check if you have not paid any taxes)
You say that:
Curiously, in a separate comment you also say:
I’m not exactly sure how to reconcile these two comments, but what I will say is: I do not get the impression that people usually have the “the government ensures all people will stay above X income” interpretation in mind when talking about a UBI (except sometimes when they are retreating to a definitional motte, as currently appears to be the case); most people have in mind “a government policy that distributes funds to all people equally,” as you wrote in one of your comments. (I thought this is also what Andrew Yang had in mind, but I must admit some unfamiliarity with the details of his plan.)
Ultimately, I’ll just conclude by saying that I think that redefining UBI in such a way as to allow a policy such as a negative income tax just destroys the definition of a UBI, and I think you will not find many people who are sympathetic to such definitional stretching (although they may unfortunately be unaware of what’s happening).
I think this is the same idea as a Negative Income Tax. As mentioned before UBI and NIT are functionally identical and only differ in accounting terms.
I want to make it clear I’m not attempting to stretch the definition of UBI to include NIT. A Universal Basic Income is a very different mechanism from a Negative Income Tax, my point is that both policies achieve the game-changing impact of a Basic Income Guarantee (BIG).
UBI is a government policy that distributes funds to all people equally
My point here is that the government distributes those funds equally, establishes that baseline of economic stability, and that does not include how it’s being paid for. GiveDirectly is running a UBI experiment where every person in Maryland Liberia will receive UBI for 3 years. The UBI is not being paid for by taxes, but by philanthropy & international aid money. Whether something is UBI or not depends on the disbursement mechanism, not on the means of funding.
From what I’ve seen it’s incredibly likely (logical economically) that direct cash transfers—or funding guaranteed income—is the most cost-effective way to help almost all people in need philanthropically. If we can prove this claim with rigorous RTC trials, it could substantially blur the lines between paying taxes dedicated for UBI & spending money on high-impact philanthropy.
Wouldn’t a rich person or organization in Maryland Liberia also want to support GiveDirectly’s UBI program?