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A UBI is a method of achieving the same effect as progressive taxation without the complexity and perverse incentives of tracking everyone's income and applying different marginal rates.

Suppose you have a tax system with progressive tax brackets and then a needs-based welfare system with benefits phase outs. It turns out, those two things (progressive rate structure and benefits phase outs) basically cancel each other out -- lower income people are supposed to pay lower marginal tax rates but if you're paying a 10% marginal tax rate and then have a 25% benefits phase out rate, that's the same as paying a 35% marginal tax rate. Worse, the benefits phase outs for different benefits often overlap, with the result that lower income people are often paying higher marginal tax rates than wealthy people, and there are some cases when their marginal rates even exceed 100% of marginal income.

So you have two unnecessarily complicated systems that mostly exist to cancel each other out, and to the extent that they don't they're doing something you don't actually want (excessively high marginal rates on poor people). It's better to just get rid of both -- no phase outs is the "universal" part of the UBI, and then you combine that with a uniform marginal tax rate for everyone.

You're basically getting rid of the progressive rate structure so you can lower the marginal tax rates on poor people to the ones being paid by rich people, and if that seems counterintuitive it's because the status quo is very stupid.

by zozbot23447 minutes ago|

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It turns out that a theoretically optimal non-linear taxation schedule features a UBI plus varying marginal tax rates (i.e. continuous tax brackets) that start out quite high (but sub-100%) in the UBI-clawback range (to manage the UBI break-even point while still offering a high subsidy to the very lowest earners) become very low for low-to-middle income earners and rise gradually for middle- and high-income earners. That's quite redistributive in intent, but the tax brackets themselves are neither "progressive" nor "regressive". Nevertheless, middle- and high-income earners do face moderately progressive rates.

by jltsiren11 minutes ago|

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You should repeat that claim with concrete numbers.

What is the effective marginal tax rate in the UBI-clawback range, including any housing / healthcare / childcare / whatever benefits lost due to income? And what is the minimum hourly net income that would encourage someone with guaranteed basic income to take a job instead of staying at home? With those two numbers, you can calculate an effective minimum wage, below which it would be practically impossible to hire anyone.

by AnthonyMouse41 minutes ago|

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That seems like a lot of added complexity just to make sure the lower middle class gets screwed out of receiving the UBI.

by zozbot23433 minutes ago|

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They benefit from greatly lowered tax rates on their earned income (this is also a 'carrot' for the UBI net-receivers themselves, at least at the higher end), and high growth because you don't need to 'soak' higher-earning folks, who only pay moderately progressive rates. The alternative either has the lowest earning folks getting screwed out of receiving a meaningful subsidy (which is really bad) or pushes the break-even point way too high, which is not really what you want either and is the main criticism of UBI from a practical POV.

by AnthonyMouse8 minutes ago|

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> They benefit from greatly lowered tax rates on their earned income

Lowered marginal tax rates. Raising the marginal rates on the lowest earners is raising the effective rates on the lower middle class.

> and high growth because you don't need to 'soak' higher-earning folks, who only pay moderately progressive rates.

But did you actually have to do that? Having the lowest marginal rates be in the middle is actually pretty expensive because it's also lowering the effective rate on everyone above them, or at best is just balancing out having the highest rates at the bottom. It seems like you're trying to increase the amount of the UBI while making sure the extra money comes from the middle rather than the top. Having approximately the top half (50% of the population) pay so that the second quartile (25% of the population) can get ~half the UBI instead of none both doesn't seem like a bad thing and doesn't seem like it would cost them that much rate-wise because it's a 2:1 population ratio and they they have a higher per capita base to apply the rate to.

And having the highest rates at the bottom is pretty bad incentive-wise.

> or pushes the break-even point way too high

What's the problem with the break-even point being somewhere around the middle? The people only slightly below that aren't actually getting a large subsidy, they're just not getting literally zero.

Meanwhile the amount of "well I didn't make that much money because I had half of it paid to my kid" marginal rate arbitrage you're reintroducing is large.