I mean, but, if everyone gets $12k, then doesn't $12k mean nothing? If I'm buying a car or a house, and the guy I'm bidding against is getting a $12k check, and so did I, then he ups his offer and I match it so doesn't the price just jump by the same $12k? After a year or two, won't the cost of living just go up so that the UBI no longer covers basic necessities? And isn't that just inflation... instead of printing money, injecting it into a different part of the cycle?
I know it's considered "regressive" but if we're going to pay for that I think it shouldn't come out of income tax, it should be sales tax. Specifically zero tax on basic necessities and an escalating sales tax on anything optional or luxury. A gluttony consumption tax, if you will. Want to spend your $12k on Nikes? You're only gonna get $3k of shoes for it. Make $300k a year and live on rice and beans? Keep your money. Want to buy a boat? 20% of that goes to pay for the UBI.
[edit] on the other hand, what I just wrote is probably also a prescription for destroying the world's most successful and productive economies, and the companies that fuel them. But taking a UBI out of income tax is a great way to make more people not want to work. And if Nikes get way too expensive, who knows how that could distort the economy. Maybe it would be better if the government just made some basic rules about minimum wages and work hours and let people fight it out for a buck like they do now. idk.
Dont forget that with a UBI system, it is not simply that everybody is $12k better off. It needs to be arranged against tax reform so that there is an income level which stays the same. Below that level, you would be better off. Above that level worse.
I'm not using actual proposed values, just an example. Lets choose $100k as the pivot point.
So person earning that currently pays $30k tax, meaning they get take-home of $70k. The new system means they get $12k UBI and tax needs to leave them $48k so they stay at the same salary level. They now pay $52k tax.
That means 52% tax rate, across the board.
The guy who previously earned $20k and paid $2k tax had a take home of $18k. He gets $12k UBI. Now he pays 52% tax on the $20k, so $10.4k. His take home is now $21.6k.
The closer you get to the floor, the better security there is. You can live on the $12k but you are not rich, and nobody goes without.
The $1m high earner should have paid $400k in tax but actually paid $100k because he pays $20k to an accountant. He now gets $12k UBI and pays $520k in tax because income tax rate is flat and the accountant needs to find another way to earn a crust, though he gets UBI, so..
I wasn't talking about UBI before but now we are.
The $12k is additive, but the factors that would reduce its value are multiplicative. If prices were to all double (an extreme case) it would still be equivalent to today's $6k. There's no scenario where everyone gets $12k but also the first $12k of everyone's money stops counting.
Sales tax on luxury items isn't a terrible idea, but the problem with relying only on sales tax is that very rich people (the ones who are getting most of the population's money) don't buy a lot, so the money just gets stuck in their accounts forever (or until they decide to buy all of the world's RAM). It can be one prong of a mixed strategy, though.
One part of inflation is driven by the difference between money entering circulation and money leaving it. UBI obviously brings a lot more money into circulation; it's generally assumed that taxes would have to be raised to remove the same amount.
> If I'm buying a car or a house, and the guy I'm bidding against is getting a $12k check, and so did I, then he ups his offer and I match it so doesn't the price just jump by the same $12k?
Only if something is preventing the market from responding to higher demand by building more cars or housing units rather than raising the unit price. And if that's happening then you're screwed independent of this, because anything that causes ordinary people to have more money would do the same thing. If energy costs went down then people would have the money they didn't spend on electricity and that would cause housing costs to increase.
This is why restrictive zoning rules are very bad.
> I know it's considered "regressive" but if we're going to pay for that I think it shouldn't come out of income tax, it should be sales tax.
Sales tax is considered regressive for two reasons. One, it's a flat rate, but that's the thing we want in this case because we're using it as the de facto phase out for the UBI. Two, rich people don't spend as much of their income. But that one has always been a giant fraud because it's really income tax that allows the rich to defer taxes (via unrealized capital gains), and when they do that they don't even pay taxes on the money they spend, since they can borrow against the assets and spend on credit.
So using a consumption tax actually works perfectly well in this case and is even more progressive than the status quo where the rich can avoid taxes entirely.
> they don't even pay taxes on the money they spend, since they can borrow against the assets and spend on credit.
They have to pay taxes on the income/realised gains they use to pay the loan back when it matures. It’s not completely tax free.
> They have to pay taxes on the income/realised gains they use to pay the loan back when it matures.
No they don't, they just take out another loan. If you have a billion dollars in assets that increases in value by an average of 10% a year and can borrow money at 6% interest, guess how long you can spend anything up to your entire wealth on credit before the recapitalized loan principal catches up to your assets.
Right, so... like yes, leaving net wealth aside, what Elon spends in a year on necessary purchases may be 0.1% of his net income, and I spend maybe 20% of my income, and a person making minimum wage spends 90% of their income, so it's not fair to tax that equally. I'd viscerally like to just tax rims and Nikes more than bread and cheese. But that gets shaky because who really decides what's a luxury good... and the decision can be a bureaucratic corrupt thing that makes or breaks a company.
Here's an idea I just kinda came up with: Maybe instead of what you buy, the first UBIx3 you spend in a year should be sales tax free. After that you pay sales tax which goes back into the UBI. But I guess that means tracking everything everyone buys... which would be a privacy disaster. Okay back to the drawing board.
I still think that in the case of individual buyers and sellers for houses and cars, a blanket injection of money just makes sellers able to raise their prices by the same amount.
And while it's true that if energy prices dropped, the same would sort of apply, that wouldn't be a tax out of the value people generate, it would be a boon to everyone... meaning in theory wages could go up and taxes go down and, as above, energy prices are much more of a strain on people with less money, so it would benefit them more, relatively speaking. Whereas a blanket $12k UBI to everyone would make it just as hard to compete to buy a house as before.
> Right, so... like yes, leaving net wealth aside, what Elon spends in a year on necessary purchases may be 0.1% of his net income, and I spend maybe 20% of my income, and a person making minimum wage spends 90% of their income, so it's not fair to tax that equally.
Elon is really the boring case because a) it requires the premise that unrealized gains are income (which brings in more sticky problems than you really want) and b) billionaires are over-hyped and the majority of total income is the likes of doctors and law partners, because there are so many more of them than they are of Elons.
But those people actually do spend a significant proportion of their income. Not all on necessities, but what kind of sane tax would tax only necessities?
> I still think that in the case of individual buyers and sellers for houses and cars, a blanket injection of money just makes sellers able to raise their prices by the same amount.
Suppose that everyone suddenly has an extra $12,000 to buy a car. Now, to begin with, this isn't actually what happens, because we're not printing the money. Whatever someone receives, someone else is paying in tax. For middle income people this is going to largely cancel out. For lower income people this is replacing SNAP and Medicaid and so on. It's a less dramatic change than it's made out to be.
But never mind that and suppose everybody actually had an extra $12,000/year. At existing prices, more people could now afford to buy a home, right? There is now additional demand for housing. And additional housing can be created by construction companies, who want that additional money. If it costs them $150,000 to build a housing unit and the price is $200,000 then they make $50,000 for each one they build. Unless somebody stops them, they're going to keep building more housing units as long as anybody is willing to pay $200,000 for them. Meanwhile $12,000 over 30 years is $360,000. So who is going to pay $560,000 for an existing unit when you can have a new one built for $200,000?
The problem only comes if you have zoning rules that inhibit new units from being built, because then everyone has to outbid each other on the existing stock. But even then it doesn't absorb all of the money, because some people would prefer to spend it on things other than housing.
> And while it's true that if energy prices dropped, the same would sort of apply, that wouldn't be a tax out of the value people generate, it would be a boon to everyone... meaning in theory wages could go up and taxes go down
Money doesn't care where you got it. A UBI and a tax credit are equivalent things. And if you don't think so then implement the UBI as a refundable tax credit and your concerns will be addressed, right?
> and, as above, energy prices are much more of a strain on people with less money, so it would benefit them more, relatively speaking.
Who do you suppose buys more electricity, a janitorial worker or OpenAI?