As was foretold, we've added advertisements to the forums! If you have questions, or if you encounter any bugs, please visit this thread: https://forums.penny-arcade.com/discussion/240191/forum-advertisement-faq-and-reports-thread/
On taxing negative incomes
moniker
Registered User regular
Registered User regular
Welfare in its current form is, at worst, a failure and, at best, failing to meet the role and intentions that it was created for. It needs to be reformed or replaced so as to better reach those intentions and to help the poorest or most unlucky people in our society to make a better life for themselves. One of the more interesting proposals to achieve this is the Negative Income Tax.
What is a negative income tax?
Also: Free to Choose (watch volume 4)
Should the welfare system be replaced with this concept or should the current one be maintained, but improved? If so, what changes should be made?
What is a negative income tax?
Wiki wrote:In economics, a negative income tax (abbreviated NIT) is a method of tax reform that has been discussed among economists but never fully implemented. It was developed by Juliet Rhys-Williams in the 1940s and later by United States economist Milton Friedman in 1962. Negative income taxes can implement or supplement a guaranteed minimum income system.
A negative income tax would replace the current progressive income tax system used throughout most of the Western world. This would be replaced by a flat tax of, say, 25%, but each taxpayer would also be given $10,000 by the government. Thus a person earning only $4000 per year would pay $1000 in taxes for a net income of $13,000.
$10,000 + $4000 - $1000 = $13,000 net income (Overall, they would receive a net gain of $9,000 from the government.)
A person making $40,000 would be at the break-even point, essentially paying no taxes.
$10,000 + $40,000 - $10,000 = $40,000 net income
A person making $1,000,000 per year would pay close to the full 25% tax.
$10,000 + $1,000,000 - $250,000 = $760,000 net income
Also: Free to Choose (watch volume 4)
Should the welfare system be replaced with this concept or should the current one be maintained, but improved? If so, what changes should be made?
moniker on
0
Posts
"a method of tax reform that has been discussed"
I mean great, but what is it?
Currently, permanent assistance programs in the US are actually really difficult to get on. WIC centers often have a waiting list, so do low-income housing programs, and disability can take years.
Temporary assistance programs require that you were working and paying taxes before you got disabled or were laid off. They're not geared towards people who need help due to permanent disability or lack of educational or economic opportunities.
My concern about a negative tax is that there needs to be some stick to go with the carrot. What impetus would we give people on the NIT to get off their asses and get better jobs?
the "no true scotch man" fallacy.
The stick should be built into the carrot, not a separate part of the program. The NIT credit should be sufficient to live on, but "barely" enough, so that the incentive is natural. Working should by default be better than living off the social safety net. The trick of course is to find a level that will support the people that need it, but doesn't prove so "comfortable" that people have no reason to want to work.
Better living conditions. If I can sit on my ass in a shitty apartment with a 13" TV and do nothing while the Fed pays for it all, that's nice. If I can put forth a modicum of effort at Wal~Mart and get a better couch, nicer TV, and more channels to watch while the Fed still helps me pay for some of it, I'd do it. You won't suddenly go from receiving money to paying out to the government, that wouldn't happen until you're a part of the middle class or pretty damn close to it.
There are almost certainly problems with the current welfare system (show me anything in life without problems), but I'm not clear on just what they are supposed to be; what are we trying to fix, exactly? All I do know is that much of the hyperbolic rhetoric about welfare queens and freeloading immigrants is just that, as those are incredibly rare phenomenon that represent a vanishingly small fraction of the system's usage blown hugely out of proportion by political opponents of the system.
I don't know a lot about the system, but someone out there must have a better grasp of the real issues.
So if what you're saying is actually true, there ought to be rather a lot of statistics out there about a long average stay on welfare and a relatively high wage coming off of it. Could I see those statistics, please?
"I met a single mother of 12 kids in Iowa on my way through the campaign trail. The measley $192 our government tosses at her every week doesn't pay for diapers, let alone rent or groceries. If I'm elected, we'll double the negative tax for the poorest 10% of Americans!"
"Our troops in Iraq don't have enough body armor, and yet our government still writes $10,000 checks to the richest Americans every year. Remove welfare for anyone who makes over $100,000!!"
That guys wins in a landslide. Then, later, a politician from the other party:
"The double benefit for the poor and the income cap for the wealthy have created large arbitrary barriers to personal progress in America. If I'm elected, I'll restore reason to the process, and implement a progressive scale, so that no one will be unduly punished for pulling themselves out of poverty or achieving wealth."
Boom, back to progressive tax.
2) FairTax ftw.
If you give me $10,000 a year, I'd continue working, because that's that much more money on top of that.
The portion of people you have to worry about are the ones who work now, but wouldn't given $10,000 a year. I'm not sure how many of those people there are, but I would guess that an awful lot of them are students, which I don't think would be an entirely bad thing, and another significant portion of them are parents who would like to stay home with their children, which I also don't think is an entirely bad thing. This would also make switching jobs easier, going back to school for continuing education, etc.
You then have to take the benefits to be gained from such a system, such as reducing the homeless population, reducing crime, reducing poverty in general, etc.
I'm not sure where I sit, exactly, but I think it's probably an improvement over the system we have now.