A) A negative income tax and a tax-funded basic income scheme are exactly the same thing. In both cases, we have some function from pre-tax to post-tax income which is order-preserving [more pre-tax income always results in more post-tax income], happens to send zero pre-tax income to a positive amount of post-tax income [thus, there is some initial segment of income on which one earns money from rather than loses money to taxation], and, in a progressive scheme, has a decreasing growth rate [the marginal rate of taxation increases with income]. These are just different ways of looking at the same thing.
B) It’s never going to be the case that giving everyone more money just leaves everyone exactly equally as poor or well-off as before. In your example, the people who started out with $0 now have $5,000. Whatever the price changes one might consider to come into effect, it’s not going to make post-inflation $5,000 equal to pre-inflation $0. So clearly some people will benefit to some extent. We cannot simply glibly say “A priori, we know there will be zero effect on anyone, because of raised prices.” Whatever the actual effects of basic income on inflation, its significance will be subtler than this.
C) Indeed, there are those supporters of a largely laissez-faire economic structure who are fond of telling us how the free market will always ensure, through competition, that prices of goods are driven to the minimal level, matching the cost of production (so that there is no “economic profit” in the jargon sense of the term). Though you may not be among those who would say such things, I would put the question to the supporters of such tales as to how they would account for such a price shift, if that would indeed be a fear they would promulgate as making such a basic income scheme worthless.
Providing every American with $20,000 free would be almost impossible – For a family with one adult and one child, that’s double the minimum wage. Instead a program would just extend a lifeline, not be Santa Claus distributing impossible riches.
I’ve added underlining and emphasis to this previous post:
This is another benefit of non-cash aid. Free housing’s cost would vary region to region and might not be available at all in places like Manhattan. Note that free low-cost housing and food kitchens would have no interest to the affluent, thus limiting costs.
Let’s try the math. Joe has $1,000,000, receives $5000 and now has $1,005,000. Bill had $100, receives $5000 and now has $5100. In which inflation model is the ratio $1,005,000/$1,000,000, equivalent to $5100/$100 ? :dubious:
And, since the income tax schedule would need adjustment to fund such a program in any event, the cash version of OP’s program is precisely what people talk about when they talk about talking about negative income tax.
[Hm, I think the point I was trying to express in C) in my last post was not as well-expressed as it could be. Perhaps it should be ignored till I can express it more clearly (something about how the concerns about basic income becoming worthless because of price increases capturing its value are specifically fears of rent-seeking behavior which we should be seeking independently to eliminate anyway, and thus a problem orthogonal to basic income per se). Pretend I just wrote A) and B) for now.]
Am I the only person envisioning “Frito” from *Idiocracy *based on your first sentence?
Beyond that, the hardest sell on this whole scheme would be the idea that you’d have to basically raise taxes on the middle class/upper class enough to offset their basic income and then some, in order to literally write checks to the poor.
That’ll NEVER fly in the real world. The catch is that there’s some point at which a person would pay out exactly in raised taxes what they’re getting as their basic income. Anyone above that has absolutely nothing to gain from this proposal, and actually has something to lose from it.
The only way I’d see it really working is if the basic income was in effect a non-taxable bonus to the upper/middle class. By that, I mean that I could get behind an extra $500/mth for my family of four ($1500 per person, per year basic income).
But if my taxes went up to the point where I’m paying $6300 more in taxes per year than before, I’d end up paying $25/mth MORE after the basic income was applied. Why would people really want to get in on that action in that case? And the more you make, the more disparate that amount would be.
It’s the same argument as welfare. Would you be willing to pay a little extra in taxes so you don’t have to step over homeless people while taking your kids to the park? Or more cynically, would you be willing to pay for bread and circuses so the rabble is kept content instead of having riots that burn your house down?
And we see what a large swath of the American public think about that.
I also suspect that there are a non-trivial number of people on board with the idea of paying taxes to provide services and limited goods to the needy, who would absolutely not be on board with direct cash transfers. Enough people in the thread are opposed to the cash payouts without being against welfare in general to make me believe this would be so on a larger scale.
The Indian tribe in the OP is not the only one to have tried handing checks out to their tribesmen. Here is an article about a study of 24 tribes, some that hand out checks and some that don’t. The results were that poverty went up by 20% in the tribes that handed out checks.
There was less incentive to get a job and so many people didn’t. Even a bad job can provide skill training and opportunity for advancement. A guaranteed income provides neither. If results were similar in the country as a whole a guaranteed income would mean another 9 million people in poverty.
That wasn’t the point. I was saying that it would be an extremely hard sell to tell one group that everyone gets a check for X amount, regardless of income, but hey… your taxes go up by X+Y now.
It literally would come across as institutionalized robbing the rich to pay the poor, not as a safety-net program with clear benefits.
That’s my point- it would be a very hard sell to the US population. A large swath are already against welfare in general terms, and another good sized chunk would balk at the idea of paying cash and then throwing people to the wolves, and others would be aghast at the idea that there’s no employment stipulations or requirements. And yet more people would be against it because of the very blatant and obvious wealth redistribution component.
I mean, that’s probably my biggest complaint- at least with services, there’s a defined service that my money’s being spent on, and it can be clearly shown to be beneficial, or to benefit certain groups.
But if the government is literally going to take my money from me and just hand it to someone else as-is, I’m going to seriously resent that, because there are no guarantees that they’ll spend it on useful, non-frivolous stuff.
In other words, I don’t mind paying for WIC or things like that, but I would mind paying for some other asshole’s new TV or rims or beer. Why should I have to curtail my own beer-buying so someone else can get a Netflix subscription, or get a case of Bud Light? They didn’t work for that money; I did.
It’s little details like “how” that are the main problem with a system like this.
Look, if giving poor people money was the solution to poverty, then we would just do that and be done with it. But basic economics tells us that a dollar is worthless unless it is represented by the labor that produced it. Basic economics also tells us that welfare and handouts also have the unintended consequences of creating disincentives to find work and moral hazards that prevents the sort of good decision making that would help prevent someone from being unemployed in the first place (or at least mitigate the financial consequences).
To pay for such a system ultimately requires some form of wealth redistribution. So not only are you creating disincentives for poor people to find any work, you’re creating disincentives for small businesses to even exist.
And what typically happens, is that markets will adjust. That is to say, if you do “just give them money”, you’ve just shifted the demand curve for whatever products those people buy. This will manifest itself in the form of inflation and erode whatever purchasing power they might have had.
As **bump **pointed out, the marginal benefit for taking a low-paying job will effectively be zero. Which means you’ve just eliminated any job near or below the payout rate or forced employers to increase wages to compete with not working. Again, leading to inflation and eroding real spending power.
Think about it in it’s extreme form. If everyone received a check for $90k every year, how many people would actually work? And if mostly no one is producing anything, then how much is that $90k actually worth in real purchasing ability?
It strikes me that it’s always carrots for the rich and sticks for the poor.
“If the poor are given money with less effort, they’ll lose their incentive to work. What would society be without as strong work incentives as possible?”
“Ah, I see; the amount of effort required to earn money should be maximized, thus ensuring people working hardest rather than partaking of leisure. Ok, in accordance with this principle, what if we increase tax rates on the rich so that they too will be motivated to work harder (as it will now take more effort to increase their wealth by a given amount), and in the same vein, structure general policy so as to make it less rewarding to earn income passively (limit the ability to receive wealth through inheritance, increase capital gains taxation, make copyright less long-lasting, etc.)?”
“Are you crazy? If our money requires more effort, we’ll lose our incentive to work. What would society be without as strong work incentives as possible?”
This is my fear, that we are entering the very early phases of post scarcity society and that the transition is going to be hell. That’s why I favor instituting even a very small, weak basic income … because it will be in place when we REALLY need it, i.e., when most jobs are automated.
I don’t see any contradiction here. As you correctly point out, transfers of wealth from those who work to those who don’t disincentivize work both by the poor and by the rich. That has nothing to do with maximizing the effort required to earn money, but it is a bad thing nonetheless.
Jack Kemp’s First Law of Government - If you want less of something, tax it. If you want more of something, subsidize it.
It seems like your policy is contradictory - a basic income is certainly a way to obtain income passively, is it not?
A basic income is certainly a way to obtain income passively, yes. And our society seems to think passive income is a good thing when it benefits the already affluent and a bad thing when it benefits the currently powerless.
[QUOTE=Indistinguishable]
A basic income is certainly a way to obtain income passively, yes. And our society seems to think passive income is a good thing when it benefits the already affluent and a bad thing when it benefits the currently powerless.
[/QUOTE]
Except it’s apples to oranges. A rich person doesn’t get richer by magic…they invest their money and get a return on their investment, thus creating more wealth. They might not have to do anything more than hire an investment firm (paying them, of course, and thus providing jobs for this aspect as well), but that’s irrelevant…their MONEY is doing something.
Giving a poor person money isn’t the same thing. This isn’t to say that it’s a bad idea (which was what was supposed to be discussed in this thread), but it’s not a real meaningful comparison.
Low-tax, low-welfare = more work incentive. (However, if the guaranteed income - which is not the same thing as welfare, but since that’s the topic of this thread - is not forfeited by working a job, then the work incentive still largely remains intact.)
To say it’s the money that has done something rather than any person is to ascribe agency to an inanimate entity… Money doesn’t do anything; people do. Money is just a game whose rules we’ve made up and agreed to follow.
The point is, we’ve structured this game so that people who already live comfortable lives get to have their comfort entrenched while those whose lives are less comfortable are conditioned to feel their misery is deserved. And this conditioning presents an obstacle to our even conceptualizing structuring the rules differently.
We get so hung up on questions of work incentives, without considering that, if so many people are apparently so disinclined to engage in the sorts of activities considered “work” available to them, then in fact there is a gain in happiness to their being able to avoid this. We oughtn’t ignore this in our ledgers. People being freed from involuntary labor (and labor extracted under threat of destitution can hardly be considered truly voluntary) is a massive gain in freedom.
On the flip side, yes, we might also worry that if no one were to engage in certain kinds of work, then there would be no productivity of certain kinds for society to benefit from, to everyone’s detriment. The two have to be set against each other. But there seems to me always to be an extraordinary concern in these discussions about ensuring the poor do not enjoy any increased leisure nor the rich any decreased comfort, to which I wished to serve as some corrective.
In fact, leisure isn’t even necessarily the appropriate lens through which to view this. Bargaining power is fundamentally what it comes down to. For a basic income needn’t necessarily lead to less work being done. Sure, given the diminishing marginal utility of money, a basic income will likely lead to many people feeling less need to work… But less need to work doesn’t mean less work. If the employers who currently wish for work of a certain drudgerous kind to be done continue to wish for the same work to be done in the same quantities, the option remains always for them to increase wages till attracting a sufficient supply of workers to do so.
The effect of a basic income (or citizen’s dividend, or whatever one wishes to call it) is simply to smooth out the distribution of bargaining power in the world. I think this would be great, as a form of social insurance: more security for us all. At the same time, this is of course threatening to those who currently enjoy outsized bargaining sway. This is the sort of discussion that I think is obfuscated by doomsaying about “reduced work incentives” rather than “increased wage incentives”.
If a country has a reliable source of essentially unearned wealth (for example, like Saudi Arabia), it would make sense to me to share that wealth. But even then, well, evolution happens. If there’s a resources, life springs up to take advantage of it. With a guaranteed income, people would multiply until there isn’t enough of it to make a dent, if those people aren’t also contributing to the economy.
The thing is, there is a limit to production, but no limit to need. That’s why I don’t think resources should be allocated based on need.
I’m not convinced I’m right, though. I’m just expressing my fears.
But let me play devil’s advocate and turn the argument on its head.
As our basic premises, let’s say that 1) people are generally motivated to make money; 2) some people have better skills than others; and 3) society as a whole benefits when jobs are created and the economy grows. So based on these premises, what should our tax policy be?
We should raise taxes on the wealthy.
The logic follows: These people were motivated to make money so they applied their skills to creating jobs. Society benefited from this. These people must have superior job creating skills in comparison to the people who didn’t become rich.
So society would benefit if these wealthy job creators had their wealth reduced. This would remotivate their desire to make more money to replace that lost wealth. Thus remotivated, these people would create new jobs and all of society would benefit further.
Some possible counterarguments:
Wealthy people will quit the system - This counterargument violates the 1st premise. These people, like people in general, are motivated to make money. If you take away some of their money, they’ll just seek more rather than decide there’s no point in making any money at all. If people could just choose to live without wealth, they wouldn’t have earned it in the first place.
Just because they got wealthy once doesn’t mean they can do it again - This counterargument violates the 2nd premise. People who became wealthy either earned their money or they just got lucky. If they earned their money through their superior skills, then those same skills should allow them to do it again. If they just got lucky, then they didn’t really earn their money the first time.
This isn’t fair - This counterargument violates the 3rd premise. We’re discussing what tax policy benefits society as a whole not what tax policy benefits wealthy people.