Your claim here is that a tax on the lowest income tax bracket is “less costly” than a tax elsewhere which raises the same quantity of revenue. I don’t understand how or why this is supposed to be the case. First of all, even with your small transfer example, I’m not sure if I consider the incentives to be that minimal. If a student would have stood to gain 800 dollars a month if they got a part-time job, and now they only stood to gain 700 dollars, I’d expect them to be less likely to get a job. But that’s not even relevant. Compare the two situations which you claim differ in cost:
Both situations, as you describe them, involve a UBI of 100 USD per person per month. In both situations (we will assume), part of the cost is paid by a flat income tax (this isn’t how I think a UBI should be paid for, but it’s easier to understand this way). In America A, there is also a 100% marginal tax rate on the first 100$ of everyone’s monthly paycheck (making it equivalent to a 100$ monthly GMI). In America B, there is only the flat tax, which has to be higher. In both Americas, the tax system must raise roughly 30 billion dollars a month. In America A, every wage earner pays 100$ a month in taxes from the first tax. Let’s say there are 150 million wage earners. That’s 15 billion dollars raised by that tax. The flat tax must be at a rate to raise another 15 billion dollars then. Let’s say the total amount of labor income in the US is a trillion dollars a month. To raise 15 billion dollars from a flat income tax, you’d raise it by 1.5%. America 2 is the same but the flat tax needs to be raised twice as much, to 3%, because wage earners are no longer all paying 100$. I’m oversimplifying here but don’t nitpick me. The point is that it is not at all obvious to me that a 100% tax on the 0-100$ income bracket is “less costly” than a 1.5% raising of the income tax across the board. In monetary terms it’s obviously exactly as costly, just much more regressive, and If there were some reason that it WAS in some way less costly, then I would expect it to be even less costly to raise all 30 billion of the dollars from that same tax bracket, by putting a 200% tax on the first 100 dollars. And this would apply if you wanted to raise a tax for anything, not just a UBI. No one would propose such a taxation scheme to pay for a 15 billion dollar investment in green energy for example. It has no advantage.
Your claim here is that a tax on the lowest income tax bracket is “less costly” than a tax elsewhere which raises the same quantity of revenue. I don’t understand how or why this is supposed to be the case. First of all, even with your small transfer example, I’m not sure if I consider the incentives to be that minimal. If a student would have stood to gain 800 dollars a month if they got a part-time job, and now they only stood to gain 700 dollars, I’d expect them to be less likely to get a job. But that’s not even relevant. Compare the two situations which you claim differ in cost:
Both situations, as you describe them, involve a UBI of 100 USD per person per month. In both situations (we will assume), part of the cost is paid by a flat income tax (this isn’t how I think a UBI should be paid for, but it’s easier to understand this way). In America A, there is also a 100% marginal tax rate on the first 100$ of everyone’s monthly paycheck (making it equivalent to a 100$ monthly GMI). In America B, there is only the flat tax, which has to be higher. In both Americas, the tax system must raise roughly 30 billion dollars a month. In America A, every wage earner pays 100$ a month in taxes from the first tax. Let’s say there are 150 million wage earners. That’s 15 billion dollars raised by that tax. The flat tax must be at a rate to raise another 15 billion dollars then. Let’s say the total amount of labor income in the US is a trillion dollars a month. To raise 15 billion dollars from a flat income tax, you’d raise it by 1.5%. America 2 is the same but the flat tax needs to be raised twice as much, to 3%, because wage earners are no longer all paying 100$. I’m oversimplifying here but don’t nitpick me. The point is that it is not at all obvious to me that a 100% tax on the 0-100$ income bracket is “less costly” than a 1.5% raising of the income tax across the board. In monetary terms it’s obviously exactly as costly, just much more regressive, and If there were some reason that it WAS in some way less costly, then I would expect it to be even less costly to raise all 30 billion of the dollars from that same tax bracket, by putting a 200% tax on the first 100 dollars. And this would apply if you wanted to raise a tax for anything, not just a UBI. No one would propose such a taxation scheme to pay for a 15 billion dollar investment in green energy for example. It has no advantage.