So, Ireland recently came out with a study suggesting that a basic income would require tax rates of 40-60% to fund, seemingly suggesting this is a bad idea that screws over workers. It could cost Ireland roughly 50 billion Euros in a country with a GDP of....500 billion. Gee, that doesn't seem right, I mean, that's 10% of their GDP. my own plan of $4 trillion in the US is 20%, and I'd have tax rates in the 40-60% range roughly for most people (well technically more like 35-65% or so). Of course, UBI wouldn't have tax rates like that in itself. My actual plan has around an 18% tax give or take, and I'm comfortable with up to 20% (to be fair i do have other taxes and budget cuts), and my plan is closer to...20% of GDP. My first thought is "what's happening here? How much in taxes are they already paying?" Because not only does Ireland have a higher GDP than the US ($99k), they also are proposing a benefit not much different than I would propose here in the US, around 1200 Euros a month (assuming a Euro is roughly equal to a dollar here), I mean, if anything this UBI should be relatively affordable. To be fair their GDP is deceptively high, so the numbers don't add up, but assuming the numbers are 1/4 lower, that's still around $74k a person. I don't understand why they would need to pay more than 20% to fund such a UBI.
That leads me to ask, what do they pay now? After all they might have a strong welfare state that leads to higher taxes. Well, seems like it's 20% on the low end and 40% on the high end. Which means if UBI costs 20% more, we could see rates up to 40-60%. But is that a bad thing? Keep in mind, there's a difference between MARGINAL tax rates and total tax rates. As Scott Santens pointed out in his attempt to debunk this BS, when you consider tax rates with UBI, you need to consider the UBI as a massive tax refund of sorts. If you actually structured this as an NIT no one would complain. Because below the clawback, it's not seen as taxation, merely being given a net refund from the government. Sure, if you make say, $40k at a job, you might pay an extra $8k in taxes on top of what you already pay, but if you get $14,400 back, you're actually getting a net benefit of $6400. If you got a random $6400 from Uncle Sam (using US terminology here) on your tax return, you would be happy. If some republican president gave you a tax cut of $6400 you'd be praising him to high heavens (I've seen republicans praise Trump for far less). But when the MARGINAL tax rates go up, but you get a UBI offsetting it, most people actually benefit. You're not actually losing out. Yes, the marginal reward from working your job might be less relative to your income, but you will still see significant changes in income from working, and you will still probably have more money. Seriously, if you're in Ireland, and your taxes go up by 20% to 40-60%, here's what's gonna happen. You're going to pay more taxes, but at the new 40% rate, if you earn E36,800, you're going to be paying an additional E7,360 in taxes but get back E14,400. You're around E7k ahead. And to break even with what you pay now, you'd need to earn E72,000. For anyone above that, YES, your tax burden would be higher than right now. But UBI isn't for people at the higher end of the income spectrum. Yes, they get it on paper, but their total net tax burden will be greater than the UBI. And that's totally fair. It is fair to ask for those with the most to pay for everyone else in my opinion.
Will 40-60% be too high of a work disincentive? Well, we've had these questions before, and I think it's complicated. obviously any UBI will obviously lead to SOME decreased work incentive, as do a higher marginal income tax, but generally speaking, given the insane marginal tax rates of a traditional welfare state (not sure if Ireland is as bad as the US in this regard), we might actually see an improvement here. As for the rates in general, uh, 40-60% doesn't seem bad in and of itself, if combined with other tax rates we could get over laffer curve territory (70% or so), but assuming we keep marginal tax below 70% i wouldnt expect people to quit their jobs over that. The UBI itself could cause MORE of an issue since it could remove compulsion to work in the first place, but I haven't seen much social science suggesting it would happen at levels devastating to society. Of course, I don't know European countries' exact tax rates and welfare expenditures well. From what I can tell from the articles at the beginning, like 40% of the cost could be covered by cutting welfare? Well, I don't see the rates as really being THAT much higher then. Looking here their lowest marginal rate is 20% and the highest is 52%, so an extra 20% would be 40-72%, which is...about where I would say the max is. Again if you removed some existing welfare/social insurance you could probably squeeze it under the 70% limit.
In practice, is a UBI here questionable as a policy? Yeah, it's kind of brushing against that maximum ceiling of sustainable taxation here. But it also faces higher taxes than the US for the rich already. Top marginal income here is like 47% (including local taxes), not 52%. This means an extra 20% here gets us up to 67%, not 72%. But I don't think it's the end of the world either way. if people really have a concern about implementing this, they can do so slowly over time in order to minimize any shocks to the economy or complications which arise.
The point is, this article is misleading. It's the same thing Nixon did when McGovern came out in favor of UBI, go "OMG HE WANTS TO PUT THE WHOLE COUNTRY ON WELFARE AND MAKE YOU PAY FOR IT." It tends to be bait for angry working class voters complaining about taxes going to layabouts and blah blah blah.
Uh...again, most workers will benefit. I dont know Ireland's exact income distribution, but in the US, I see like 75% of people or so benefitting from UBI. People should not fear higher tax rates if they benefit more at the end of the day. Imagine if this was a $14400 tax credit combined with higher marginal taxes, I doubt people would complain as much. It's just the psychology of how peoples' brains work.
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