It misses the fact that work is fulfilling for (most) people.
I've heard talk of the government being the employer of last resort, which has its own problems. But just paying people to breath has problems as well.
I think you're missing the fact that wage labour isn't the only legitimate kind of work. Volunteering is also fulfilling for people. So is parenting and caretaking. So are any number of other activities which are hard work, very rewarding, beneficial to society -- and yet are uncompensated by a wage labour system. Under a UBI, those become more viable activities, so that wage labour no longer becomes the ONLY monetarily viable way of finding fulfilling work.
No argument there. I love the idea of creating a pool of money that goes to people who do work that is beneficial to society. Or even just to make art for personal enjoyment.
I'd just like to avoid having the government pay people to, say, drink and party. I think there does need to be some external social pressure / structure to motivate people. Otherwise, you wind up with the same political problems what current welfare programs have.
The best solution I can think of is that the government hires and trains people to do some form of public service if they can't find anything else they would rather do. Limit it to 20 hours per week. If people are really useless, give them a disability wavier. If not, have them plant free or clean up parks.
I've seen the impact of people living on the dole in Britain. It's not good for them or the society. It just abandoning them to lead a mediocre life.
Living on the dole is indeed terrible for people -- but it's terrible because it's a poverty trap. A poverty trap isn't created by supporting people who don't earn a wage: it's created by withdrawing support for people who do earn a wage (or engage in other forms of value-creation which the dole administrators disapprove of). Because a person on the dole is micro-managed in their activities, they are unable to volunteer or work part-time without risking losing their one reliable source of income. This is exactly what traps them in a life of unrewarding idleness.
Your proposal would create a poverty trap in exactly the same way as the dole (in fact this is how the dole currently works in Britain -- you've just described something quite akin to the Workfare program, aka slavery for the wageless). Unconditional basic income is not like this at all. It isn't paying people to be idle: it's paying people no matter how much they earn. Because you can never lose your basic income, you are never disincentivised from working. Thus people can volunteer, raise children, care for elderly parents -- or work part-time, or full-time, or in whatever situation they prefer -- without ever losing their safety net. This allows for nire diverse forms of value-creation to be created than in the kind of micro-managed nanny-state that you describe.
I don't like my proposal that much either. It has the flaws you mention, particularly if implemented by our current political class. I was being intentionally vague on the implementation and you assumed that current political forces turn it into a poverty trap. But current political forces also prevent an unconditional basic income.
It really comes down to how much you trust people to find their own path.
That clearly depends on how old they are. Below 18, you are required to be in school and you are not allowed to work. After 65, you get to live off our national pension plan and get free health care.
The other thing that makes me cautious about the unconditional income approach is the handful of rich kids that I knew in High School in Austin, TX. They had everything they could possible want handed to them and were miserable. It was puzzling as hell.
FDR had a really big internal debate over this during the Great Depression. Read a little of the history of that era -- it is not an easy tradeoff.
I think that any kind of micro-management of peoples' livelihoods create poverty traps. This isn't just a matter of current first-world political systems: it's also observable in developing-world charitable activities as well. Check out the evidence from GiveDirectly[1] to see how an Unconditional Basic Income works better in environments that are entirely unlike our first-world political environments.
Basically, I think that people are really good at finding their own paths. It's what people naturally do, providing that they aren't structurally prevented or disincentivised from doing so.
And yes, I've seen the miserable rich-kid phenomena first-hand, and agree with you that too much privilege can be a real handicap. That's why I think it's quite important that an unconditional basic income be genuinely basic: enough to survive on without any privation, but not enough to be decadent on.
I've found a neat mechanism for appropriately setting the level of a basic income: 50% of the mean individual income. Here in the UK, that would produce a basic income of roughly £12k/year -- a bit less than working a full-time job at minimum wage. Enough to live a fairly decent life in a (now) impoverished Welsh ex-mining village, or enough to barely scrape by with a bunch of flatmates in London. But not enough to be extravagant on, in either case.
The nice thing about pegging the amount of Unconditional Basic Income to the mean earned income is that it builds in an automatic self-correction mechanism. If too many people exit the workforce, the mean earned income would fall, and the UBI would fall exactly in sync with it. As the UBI falls, people would be increasingly incentivised to re-enter the workforce. As people re-enter the workforce and the mean income rises, UBI would increase along with the inevitable increases in inflation.
Basic income makes it easier to work, because one no longer has to choose between working and receiving benefits. There's currently a huge divide between working zero hours for unemployment benefit, and having to work many hours to get the equivalent in wages. With basic income there's no bureaucratic friction with signing on and off, or having to justify your need for support. Any extra hours worked give you extra money, and they'll be hours "on the books" - no need to hide the fact that you're working - which is a win all round.
>It misses the fact that work is fulfilling for (most) people.
Basic income is not against working, it's point is to let people work in all kinds of situations. Old-fashion social security usually makes the tax rate for certain part-time / freelancing work 100% (e.g. $100 increase in pay can reduce benefits $100, therefore the actual marginal tax rate is 100% and most people won't do that work).
> But just paying people to breath has problems as well.
You can do that in most Nordic countries, and it has many more benefits than disadvantages. For example, you can walk safely everywhere because everyone has sufficient social security. Street robberies and whatnot are practically non-existent.
1) Work is not nearly as fulfilling as doing nothing for most people. I have no trouble admitting this to myself. And while I'd probably still do something, I'd no longer see any need to make any compromises to work together with anybody else. That would be satisfying. It would also be an economically negative proposition, but I'd learn a lot. Or at least, I'd feel I do.
2) About the "Nordic countries". WTF ? Have you looked at the crime stats for Malmo ?
Please note that the nordic countries are in a somewhat special situation just because of their location. They also have very few homeless. Of course, homelessness is a death penalty there, merely because of the weather. That means that in Nordic countries everybody has a house, and not made from wood, double glazing, brick, generally solid and everybody's inside before the sun is down. Breaking and entering after dark is insane.
>2) About the "Nordic countries". WTF ? Have you looked at the crime stats for Malmo ?
Yeah, well immigration can create major problems with crime.
>They also have very few homeless. Of course, homelessness is a death penalty there, merely because of the weather. That means that in Nordic countries everybody has a house, and not made from wood, double glazing, brick, generally solid and everybody's inside before the sun is down. Breaking and entering after dark is insane.
Yeah, because we have a good social security and everyone can get an apartment.
> And while I'd probably still do something, I'd no longer see any need to make any compromises to work together with anybody else.
How is this a problem, when all the essencial work is done by machines and people who do like to do those particular types of work?
"Work is fulfilling" is one of many illusions the society created to shield itself from the fact that we are still, as we have been for the entire history, slaves who can only either work or starve. We are used to this state of the world so much that we've invented many cultural memes so that we can feel good about it.
It is very similar to how people invent 1001 reasons why death is good and gives meaning for life. It doesn't. It's just we can't bear the sadness of our situation, so we invent excuses and stockholm-syndrome ourselves to avoid the pain.
> You can do that in most Nordic countries, and it has many more benefits than disadvantages. For example, you can walk safely everywhere because everyone has sufficient social security. Street robberies and whatnot are practically non-existent.
To me that sounds like an argument against BI. You're basically saying that we can have the social safety benefits of BI for only 10% of the cost by using means-tested programs . Since that's what the Nordic countries are doing, and according to you it works really well.
Nordic social security works better than American social security, that's fore sure, but it can be improved on. The main problem currently is that social security assumes that people are either unemployed or employed full-time. This assumption is increasingly false. There's more and more part-time (and 'part-period', e.g. full-time for 3 days only etc.) and freelancing work.
Basic income really means social security without that assumption. If you work 0h/month, you get 100% social security. If you work 120h/month, you don't get anything (because you'll pay for the basic income through taxes). If you work 60h, you'll get someting in-between.
> It misses the fact that work is fulfilling for (most) people.
There are all kinds of work that people undertake today that are not paid for or economically rewarded. Providing a basic income allows those people to continue to do that work or explore new kinds of work that aren't paid for at this time.
> It misses the fact that work is fulfilling for (most) people.
No, it doesn't, instead, it leverages it. Basic income increases labor mobility and increases the ability of people to find the most fulfilling work (which may not be the most financially rewarding, especially in short term analysis.)
Not necessarily. People will only, for example, buy luxury items that are affordable - laptops, nice clothes etc. So, if most of the population which are sustained mostly on this form of base income cant afford said items, corporations theoretically wont be able to offload their products, products for which if you consider automation trends, the cost of producing should go down even further. No idea if this is sustainable.
Fund basic income with a large tax on various CO2 producing activities. With the idea that - on average - people can pay this tax out of the basic income received from it. And people will have direct incentives to find ways to reduce CO2 consumption. Then get rid of silly specific legislation that tries to achieve the same goal in less successful ways. Thus fuel efficiency, California's attempts at cap-and-trade, incentives for renewable energy - all should become unnecessary.
See Australian politics for clues on why that probably won't be an attractive option for politicians where you are. We implemented a carbon tax. While not perfect, it's a pretty decent stab IMO, yet is very easy to demonise and as such is wildly unpopular with hoi polloi.
It's a real pity that many good legislative ideas seem to be susceptible to simplistic populist attack if you yell loud enough.
> It's a real pity that many good legislative ideas seem to be susceptible to simplistic populist attack if you yell loud enough.
I'm having trouble finding it now (so please take it with a grain of salt), but I remember once reading a quote by a southern US politician in the 1950s that went something like: "I used to talk about paving roads and better schools and no one listened. Then I started pounding tables about [black people] and suddenly everyone supported me."
Similarly, Joe McCarthy (of McCarthyism fame) was a pretty unremarkable Senator for his first three years in office. Then one day, he claimed he had a list of known Communists working in the State department, and the next day he was a household name.
Populism has always been a really easy way for politicians to drum up fervent support. A shame that it rarely ever solves any problems.
I've been struggling with this concept for a while. How can we have an effective democracy when it's so easy for stupid, essentially malicious, but persuasive-sounding "political memes" to infect the working classes and derail processes which are actually in the country's interest?
I still don't know the answer but realising that the media were actually part of the effective bureaucracy was a revelation.
We've been lucky, for a long time, that the media has basically done the right thing for the good of the country. Collectively, they are in charge. They slip up every now and again, giving air time to toxic memes like the carbon tax thing, and of course the example you raised - McCarthy suddenly got traction because he comes bearing gifts of news. But generally it's been not too bad.
This idea seems to incur very high bureaucracy costs. What are CO2 producing activies? How much are each of them taxed? Who measures the tax and is responsible paying for it? Etc.
One selling point of basic income is that there's no loopholes and there's very little bureaucracy costs, therefore a larger portion of the money is actually used for consumption instead of doing unnecessary (for society) work.
Of course there are details to work out but it is fundamentally a solvable problem. A tax on any coal natural gas or oil should cover most of the bases (per ton of carbon contained). If it is being purchased for a use that won't end up in the atmosphere (IE carbon capture and storage), the burden is on the purchaser to prove the case for a tax write-off.
I don't think there's a reason to couple a CO2 tax to basic income. You can create a CO2 tax separately from basic income, as it has enough opponents as it is.
I suggested coupling them because I was looking for something that fits, "Solve as many problems with one go as possible, getting rid of as much legislation as possible."
If you create a significant CO2 tax separately from some specific program, like basic income, the fear is that it will be (and will seen to be) just a general supplement on government spending. Which has a tendency to grow until it cannot, so you're just putting off an inevitable crunch that we're already bumping up against.
But if you tie them together, the pain of the tax is balanced by the pleasure of the income. And people have been shown to enjoy that sort of thing. Witness the popularity of tax refunds, even though getting one is strictly worse for you than not getting one.
You don't need to tax actual CO2-producing activities. You just tax the production of CO2-containing fuels. The price is passed on to the buyer who produces CO2 with them.
You can then offer tax credits for CO2 capturing (with the burden of proof on the claimant).
Your suggestion has the same problems as most basic income proposals.
1) The numbers don't work out. Even a very steep CO2 tax will produce too little revenue for any form of meaningful BI.
2) The money collected on the CO2 tax could also be used for a general tax cut. So you still have the political problem of explaining to working middle class why their money is being handed out to lazy bums.
1) There are increasingly few people in the middle class
2) Very few poor people are lazy bums, in my experience. There "lazy bums" are also sometimes the people creating amazing music, Wikipedia, or other valuable (and un-monetized) cultural products
3) The author didn't specify a time period, simply that given the capital > labor trend, a BI will be necessary if we don't want absolute and complete inequality
1) The numbers don't work out. Even a very steep CO2 tax will produce too little revenue for any form of meaningful BI.
The USA currently consumes about 450 billion gallons of petroleum products per year, which is about 1.5 trillion pounds. We also mine about a billion short tons of coal per year, which is 2 trillion pounds. We have about 300 million people.
Taxing $0.75/pound on carbon fuels would generate a bit over $6k/year per man, woman and child. That's $4.5/gallon. This is enough to put a family of 4 at about $25K/year in basic income, which is just above the poverty line this year.
There is enough revenue. You just have to accept a higher tax.
2) The money collected on the CO2 tax could also be used for a general tax cut. So you still have the political problem of explaining to working middle class why their money is being handed out to lazy bums.
The middle class receives the money as well. This kind of program - where everyone pays and everyone receives - has proven very popular in the past. See social security for a demonstration.
Your carbon tax of $1500/ton of carbon is a couple of orders of magnitude bigger than any proposed carbon tax. Proposals are for $20/ton to reduce greehouse gas emissions to targets. Estimates of the social cost of carbon dioxide range from $50 to $200 per ton.
The level that I suggested is not out of line with what is already accepted as customary in many European countries. And the net impact on most would be minimal because the cost is returned fairly directly to the people paying it.
Consider a tower of blocks with two legs, of equal height, and a problem that the tower is too short. If you lengthen one of the legs and not the other, the tower tips over. But that's not a necessary result of the tower being taller; it's a result of the tower being off balance. If you lengthen both legs by the same amount, the tower stands.
You can of course argue that tower height and tower balance are the systemic variables, with length of tower legs being incidental - and this is a perfectly reasonable point of view, but how would you propose we determine how to draw those lines in public policy? If we're free to draw them wherever we please, discussion by discussion, this seems like a fully general counterargument (http://wiki.lesswrong.com/wiki/Fully_general_counterargument) against any potential change: we can't raise the height of the tower, because that involves lengthening both legs, and I prefer to change one thing at a time; we can't lengthen one of the legs, because that changes height and balance and I prefer to change one thing at a time.
And where the money to pay for that will come from?
Apparently corporations will be subsidizing this:
"How would we pay for it? We could start by getting
corporations to pay their taxes. As I mentioned above,
corporate profit margins have hit an all time high, and
that money will circulate far faster if it’s placed in the
hands of consumers."
You tax everyone more and give everyone more money. The average person will receive x euros more every month and pay taxes x euros more every month in income tax. The richer than average will probably slightly lose net income and the poorer than average will probably slightly increase net income.
There are various income models, and that's just one example.
Money and business moves to where it's most welcome for the same reason people move to neighborhoods with low rates of theft (after all, taxation and inflationary monetary policy is theft no matter which way it's painted).
The reason people can't find work now is due to the failures of central planning, not the lack of it. Communist and hard-socialist countries all have tried the basic income idea and failed. The only exceptions are where the basic income is funded through resources, not confiscation of wealth - and even this takes wise, benevolent leadership.
When you confiscate wealth to provide a basic income, you create a disincentive to create wealth and an incentive to not work in exchange for basic income. This creates a rapid increase in both, which backfires because you have more people to support with basic income and less revenue because business owners scale back.
It all sounds good in theory, but in practice...
Edit: Interesting on the downvotes without the explanations. Do any of you live in the real world?
> Communist and hard-socialist countries all have tried the basic income idea and failed.
I know of a few short lived experiments, but I'm not aware of any country that has implemented a basic income, let alone failed at it. Could you let me know where you're thinking of?
> It all sounds good in theory, but in practice...
You're looking at the effect, and not the cause. What caused the global banking crisis?
1.) Cheap money via gov't Fed Policy (created the artificial boom)
2.) Government mandates in mortgage lending (caused a lot of people to buy homes when they weren't in a realistic position to do so)
I'll bite. What I mean is people were paid a basic wage to do very unproductive (even counter-productive) work. So I suppose that's a little different than getting a basic wage without working at all.
I seem to have edited my post while you were answering a point I later took out because it didn't seem relevant to the main point (which is that I don't think anyone has introduced basic income yet).
However, I don't believe in your analysis of the banking crisis, either. You seem to have missed out a lot of other reasons. From wikipedia:
> In its "Declaration of the Summit on Financial Markets and the World Economy," dated 15 November 2008, leaders of the Group of 20 cited the following causes:
During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions.
i.e. Though it was also a failure of other things, it was by large part a failure of corporate risk assessment and lack of regulation.
Communism didn't offer a basic income. People were paid for doing works at jobs. Which everyone had. The constituion of communist Poland even listed having a job as a citizens duty.
The reason people can't find work now is due to the failures of central planning, not the lack of it.
How can you ignore globalization and automation? Even if you think those things have had no impact to date, they undoubtedly will in the future, right? Particularly the latter.
Also, keep in mind that nobody is proposing communism. Milton Friedman advocated a basic income.
The idea seems to be that you can free up a lot of the money wasted on bureaucracy and pay out to everyone indiscriminately.
The Mincome experiment (http://en.wikipedia.org/wiki/Mincome) dabbled with this idea and the results were rather surprising. Most people seemed to want to work rather than loaf around and collect benefits.
Don't think you'd have to "tax the rich like crazy". Would returning to the tax rates of the 1990s be "crazy"? Would closing corporate loopholes be "crazy"? Would investigating why trillions of dollars in tax havens have somehow escaped oversight be "crazy"?
> The idea seems to be that you can free up a lot of the money wasted on bureaucracy and pay out to everyone indiscriminately.
This idea does not stand up to any scrutiny at all. The cost of administering a welfare bureaucracy is minuscule compared to the cost of a BI program.
> Don't think you'd have to "tax the rich like crazy". Would returning to the tax rates of the 1990s be "crazy"? Would closing corporate loopholes be "crazy"? Would investigating why trillions of dollars in tax havens have somehow escaped oversight be "crazy"?
None of those suggestions would come anywhere near the amount of money needed for a BI program.
> The cost of administering a welfare bureaucracy is minuscule compared to the cost of a BI program.
Most of the cost of administering a welfare bureaucracy is in validating and enforcing the conditions on beneficiaries. Unconditional Basic Income avoids these costs quite directly.
I honestly don't think any bureaucracy would be trimmed whatsoever; it'd be replaced. All of those government jobs wouldn't be cut, they'd be moved to the new program. No matter how simple you try to make it, something like this would end up ridiculously complicated. You'd need a bureau in charge of deciding how much a person in each zip code gets, how much taxes to raise, which taxes to raise, monitor improvement, monitor areas for local government abuse (billing the federal government for fake people to get the extra cash, as an off-the-cuff example), etc.
In the short term yes, but these trends are not limited to one region or country, they are global. Its likely that we will see most developed countries adopt some from of basic income sometime in the future, at which point there wont really be anywhere reasonable to go to escape it.
That's probably true, but its worth thinking through. If the rich leave and take their automation capital with them, then there will again be work for people to do, reducing the need for basic income. The question is: how much other capital can the rich take with them? They should be entitled to their property, of course, but how much of it is totally theirs to take over to say China? Google's IP is its capital. It is the result of the efforts of Google's founders and investors, of course, but was also massively subsidized. It was created by Berkeley and Stanford educated engineers, institutions that receive major federal support. It was a use of the internet, a system that was created by the DOD. They of course benefited from roads, etc, and all the other public utilities. How much of an equity share in the company would Google have given out to replace these services and inputs from scratch? That's a difficult and nebulous question but I don't think the answer is zero. I think that amount, whatever it is, would be a reasonable expatriation tax.
Google's capital is its social organization. If they "leave," the social organization collapses, and all of those engineers can reorganize. Thus, google leaving creates the conditions for its replacement. No worries.
Are there any models that can prove/disprove these ideas? Like - take today's situation, plugin all the numbers starting from income taxes to welfare etc and simulate it and see? It would be very interesting to see that.
Also, these kinds of ideas should be tested on a smaller scale - may be a town of 25,000 people? That would be really interesting.
Did you mean "orthogonal" in place of "mutually exclusive"? If they were in fact mutually exclusive then any central planning should have a dramatic (and negative) effect on your business.
I also hate this idea, but I agree that the long term trend is for society to support very few jobs. Do you disagree that this is the trend? If not, do you have any better ideas for what to do about it?
With basic income, wouldn't the economy adapt to the fresh money supply and rents and other costs raise to account for it? It would effectivly be additional currency inflation by a different name?
> Maybe instead of giving everyone cash, the government could provide people with a default shelter, food plan, etc.
The problem that BI advocates see with that is that there is much greater overhead in managing a default shelter program, food plan, non-food-non-shelter-necessities-of-life-plan, etc., than just establishing and managing a single universal cash allowance plan.
It has a higher overhead now, but how many people would actually use it, versus BI?
Also you can always increase BI (and if everybody gets it, that is going to be a fairly popular campaing promise), but people can only eat so much food.
> It has a higher overhead now, but how many people would actually use it, versus BI?
It has a higher overhead even with a much smaller number of people using it, because the overhead is involved in enforcing the conditions which don't exist for unconditional basic income. (That is, the overhead in existing social welfare programs is largely costs expended to prevent people from using them, either at all or in the incorrect amounts for their particular qualifications. A fixed universal unconditional entitlement doesn't have that overhead because it doesn't have that function.)
> Also you can always increase BI (and if everybody gets it, that is going to be a fairly popular campaing promise), but people can only eat so much food.
People can recieve and derive utility from virtually unlimited amounts of food (just like money), even if they can only eat a limited amount, as food is a commodity.
And as much as the point you make about the politics of raising BI is frequently made about any social benefit, I don't think there's much reason to believe its true of BI. There are quite a lot of people who are already aware that benefits have costs (both personal and social), and the people who have the most interest in focussing on the personal cost also have the most resources to bring the social costs to the public eye.
That being said, there's no reason BI levels couldn't be managed by a politically insulated group (something like the Federal Reserve), and plenty of reasons why a legislature might prefer to leave those kinds of decisions to such a body.
How's the government going to decide where to put people? The poor people get to live in the richest neighborhoods in NYC? Or do they get pushed out to the cheaper areas of Harlem? In the first scenario, the costs are insanely high. In the second, you're forcing the poor into a bad neighborhood.
Food: who decides who gets what? Vegan options OK? Food allergies? Only organic?
Whenever personal decisions are left to the government, things get bad.
You can go look up economics papers on Google Scholar or SSRN about the benefits of direct payments versus in-kind payments. You might worry that someone will use their direct payment and spend it on hooch, but you can't stop that: if you give them food stamps they will trade that for money and then spend it on hooch.
Actually you can stop it, by doing exactly what he says - you can eat free food at this particular place, but so can everybody else. It stops hunger, but it has a resale value of 0.
There would likely be inflation. However I would bet that it would not be to the point where the BI amount of money resulted in 0 value. Also another thing to consider is the effect it would have on salaries: they would rise (and not just in an inflationary way). Since now you have people grabbing any job they can even at shitty salaries (HN crowd likely largely excluded) companies would actually have to "compete" against the BI since the pressure to take an underpaid job is relieved.
Not entirely sure the system would work, but it seems more viable than the current efforts ("Let's do X again, but this time we'll call it Y!"). Great article.
If people are working for a combination of extra cash and personal satisfaction (as opposed to "not eating catfood under a bridge"), you could safely eliminate minimum wage and some jobs would probably be priced at close to or near $0. I can't tell you how many times I've gone to a bookstore or even library and had to fight my brain telling me to rearrange all the books in the correct order. Given unlimited free time, you'd have to pay someone to stop me.
On the other hand, I'd expect unsatisfying or unpleasant jobs to pay more, since people could fearlessly tell their bosses where to put it.
If I had to guess, though, you'd also have an uptick in part-time jobs, especially the shitty ones. Maybe most people don't want to be a garbage man 5+ days a week, but if the pay is good you might find quite a few people who are willing to be garbage man once a week or once a month.
If the range of current monthly incomes in society is from $M to $N, and you add $X to all incomes, you'd expect price levels for goods to rise by varying ratios depending on the good but generally somewhere between (N+X)/N and (M+X)/M, meaning that goods would generally become more affordable for those on the lower end of the scale and less affordable for those on the higher end of the scale.
It's not the same, with inflation people still own the same percentage of wealth (people with 0 still have 0). With UBI the distribution of income changes, it's minimum is no longer 0 but some hardcoded amount. So even if prices would adapt, you'd end up not only with different prices, but with a different distribution of wealth. In the extreme case, if the basic income was huge, everyone would pretty much be able to buy the same things, with the basic income set to 0, the distribution of wealth would be more exponential as wealthy people naturally get more and more wealthy and people with 0 stay at 0. You probably want something in between, with good incentives to work hard, but also good conditions for poor people and a higher velocity of money (if you give money to people with no money they'll spend a higher percentage of it, fueling the economy in the right areas).
For all of these "Trends" that seem to "push us towards an unconditional basic income" I'm sure there are stronger "Real Quantified Trends" that push us in the opposite direction.
Basic income on top of everything else doesn't make much sense (cost-wise).
But if we could trade B.I. for Social Security, Medicare, Medicaid, SNAP, and other social progams-- it would probably be more cost efficient as individuals look after their money better than other people do.
Here's a video from Milton Friedman (not Tom Friedman!) who is advocating for a negative income tax-- a variation of basic income.
> The welfare bureaucracy is largely dismantled. No means testing, no signing on, no bullying young people into stacking shelves for free, no separate state pension.
You can't use Social Security funds to fund a Basic Income. It operates similarly to a pension fund so it would be equivalent to confiscate peoples lifetime savings. Good luck explaining that to someone who is just about to retire.
You can, however, say that going forward, people will pay into basic income instead of social security; and that no one born after [policy-change date] will receive social security in the future (since they never paid into it.)
Possible in theory. But then you have to explain to people why they are paying the same amount of tax as people one year older than them, but will still receive a lot less when they retire.
> You can't use Social Security funds to fund a Basic Income.
Yes, you can.
> It operates similarly to a pension fund
It presents itself as one, but it really operates as a general-tax-supported social-benefit program with a variety of eligibility criteria.
> so it would be equivalent to confiscate peoples lifetime savings.
Sure, some people would politically attack it that way, particularly if the general BI reduced the SS benefits to which people already qualified would receive. Its less subject to this political attack, however, if SS is merged into BI in such a way that no one currently paid into SS ends up with less BI at any point than they would have received from SS.
Medicare and medicaid wouldn't really apply so much to this as there are systemic problems that make spending money on healthcare not such a good idea. Rather, with a BI we should also include a universal health care option to avoid the issues with consumer healthcare spending and marketing.
The problem is that when consumer make bad decisions (i.e. don't go to the doctor and develop serious health problems), the government in the end still has to foot the bill. You can't turn people away from emergency rooms and have them die on the street.
Indeed, but the point is that with BI, they would be on the hook for those excess costs. Preventative medicine is cheaper and when the excess cost of an ER visit comes directly out of patients' pockets, they will be more diligent about prevention.
Good analogy is car maintenance. Most people are very diligent about oil changes because they (inherently, I would argue) recognize the cost structure.
A lot of people aren't very diligent. It just so happens the old mantra of "every 3,000 miles" doesn't apply to newer cars, so when people forget and do it at 6,000 or 8,000, there aren't any negative effects.
And I would say people don't change their oil because they know their engine will die if they go too long. They do it because it's been ingrained in their head as required maintenance, and that sort of thing is normally taken care of nowadays in a much larger package that includes filters and belts (because people vaguely remember about oil, but they're clueless about the other things.)
I'm not the one you were responding to, but my point here is that people aren't going to ensure prevention without a ton of conditioning or some greater authority forcing them to do so. The voter turnout for Australia, where people are forced by law to vote, was 93% in 2010.[0] In the USA? 41%.[1] People can't be asked to run over to their local elementary school for 20 minutes and pick the first name that pops into their head once every four years, so I doubt any sort of repercussion not mandated by law will have an effect.
I often find that when somebody claims "you can't do x" that we learn a lot by asking, why exactly is that.
In your case I am wondering why exactly is that we can't turn people away - in aggregate it is likely to save more lives since seeing people dying would be an excellent motivating factor for others to make sure they pay their health care insurance -- and since they would therefore have it and would be able to get treatment earlier, which is cheaper, thereby causing the price of health care to be pushed down (treating people in ERs is frighteningly inefficient).
Frankly, reports from doctor-friends who work in ERs indicates that a large part of costs are treating people who are dealing with preventable often drug-related problems that create emergencies because the people involved are basically incapable of prevention. Seeing other people on the street homeless is apparently not enough incentive to keep people from becoming homeless themselves. I have no idea why seeing other people dying from internal bleeding because they didn't have the foresight to buy medical insurance to get the appropriate medication to treat their issue would curb behavioral patterns which seem to be flawed at a very fundamental level.
> In your case I am wondering why exactly is that we can't turn people away - in aggregate it is likely to save more lives since seeing people dying would be an excellent motivating factor for others to make sure they pay their health care insurance
How exactly does this help people in emergency situations? Or those who go undiagnosed with a condition despite having a primary care physician? What about those folks with a disability that makes it difficult for them to access health care? What about people who are discouraged from getting health care because of discrimination? What about people who live in rural areas far from some kinds of medical treatment?
Bottom line is that death is not a motivator for people in the way you think it is. Even if it was, what kind of society threatens its members with death for failing to participate in your model vision of capitalism?
Aside from all the obvious issues with poor people or people who just don't like the idea of insurance, I want to know how turning people away works with employed, well-paid, insured people like me who might just be coming in without ID after some sort of accident or medical emergency.
I agree, but unfortunately I don't think "basic income and no other welfare programs" is a politically stable policy. No sooner will it have been introduced than politicians will be tempted to screw with it to help a favored constituency.
Go to work as an inner city teacher? Here's an extra 20% in your BI.
Live in an area damaged by a hurricane? We'll bump your BI for a year or two.
I don't think a "simpler" tax code would last much longer for the same reason.
The only way I think it could actually work is if we turned over the whole thing to a bunch of unelected technocrats like the Fed (which might not be a terrible idea since it gives them another lever on economic policy...)
One of the proposed advantages of BI is its simplicity (which among other things means few loopholes and lower enforcement overhead). The point the poster you quote is making is that no tax code will remain simple for very long.
In fact you support that point. Many of the complexities we have now come from adding "just one more feature" to the tax code, until we end up with something so complex that there is an entire industry built up around paying taxes.
If he said "In exchange for supporting inner-city teachers, we will be indirectly subsidizing H&R Block to the tune of $2B" you might ponder whether or not it's worth it.
Why not? If you get BI out of any political process, you already had a majority in support of the simplification. It just requires vigilance, which our current track record for is terrible, but any economic system or any political process requires vigilance, and a BI isn't any different.
It is true that over the entire history of the United States, the American public has proven itself apathetic to the abuses of their politicians, but that is a cultural problem that needs to be solved regardless of having a basic income or not.
They already do. Working in an inner-city can substantially reduce your college loans as a teacher, especially if you were getting something higher, like an ED.D. (doctorate in education)
Substantially getting closer to zero assets is not really what I call society valuing education - but that is not your point. My point, though, was this: it turns out it's possible to provide incentives to people without manipulating a BI scheme - you just actually pay people money, like, you know, income from work they're performing. So there is no reason to assume that introduction of a basic income should be opposed because it would introduce unmanageable complexity as well, especially given that it would most certainly eliminate far more complexity.
It's true. While the basic income is a superior system to welfare in theory, political reality assures it wouldn't be handled in the way Friedman would prefer. It would just lay the foundation for all sorts of political redistribution, which would be very destabilizing.
There already is a negative income tax. It's called the Earned Income Tax Credit. The only catch on the EITC is that it's based on both income and the number of qualifying children.
Can somebody explain to me how basic income can work in terms of the cycle of spending? If companies have to pay for all of people's income through a taxable percentage of their income, then these companies will only receive a share of that amount back through consumer spending? So the economy will shrink in a vicious cycle, right?
I think it is hard to be confident about what would happen. If most people elected to stop working the economy would probably contract. If instead the impact were to give more people the option of making longer term choices, you might see the economy expand.
If the basic income is set at a basic enough level, work should remain an attractive option.
Wouldn't the basic income value need to vary across regions? For example, the notion that:
"Every single adult member receives a weekly payment from the state, which is enough to live comfortably on"
would mean a different value in San Francisco than in Grover, NC.
If the government adjusted the basic income to account for regional cost-of-living, I imagine it would be popular to maintain a fake residency in an expensive area while actually living somewhere cheaper.
If the basic income wasn't adjusted for different areas, you would probably see some areas become rich elite enclaves while other areas become basic income ghettos.
>> If the government adjusted the basic income to account for regional cost-of-living, I imagine it would be popular to maintain a fake residency in an expensive area while actually living somewhere cheaper.
Good hack.
>> some areas become rich elite enclaves while other areas become basic income ghettos.
This is basically the direction we're already headed in already.
I am inclined to agree with you but I'm not certain. There are some arguments that those living off of BI would form a unique subset of the population and might effectively be ghettoized at least in terms of colocation as opposed to the more economic/social aspect due to their similar needs/means.
That doesn't mean those living exclusively on BI mightn't wind up ghettoized. I don't see why this would be any more true than in any other situation, though. (and as I've said elsewhere, I don't think BI should presently be enough to live comfortably on without draining savings).
> There are some arguments that those living off of BI would form a unique subset of the population and might effectively be ghettoized at least in terms of colocation as opposed to the more economic/social aspect due to their similar needs/means.
The people living primarily off BI (that is "the poor") would likely continue to be segregated, to a certain degree, both physically and socially from those more well-off. But that's not an effect of BI, that's true of the poor now and basically for all of human history.
Given how often I've had the government send things to the wrong address for me, I am fairly sure that they don't know where I truly live (most of the time), even when I gave them the address.
Unlikely. I know of a lot of people who live in New Jersey but register their auto in another state under a relative's address for cheaper insurance. I also know people who use an old address or the address of an acquaintance/relative so their child can attend a different school district.
That just implies that communication in government is poor, particularly if it is a local or state government that wants to know something from the federal government. I am sure the IRS would have no problem finding those people if they were so inclined.
I became a South Dakota resident in January (while I was in CA.). Despite only having spent a week in the state last summer. I haven't been back since then.
This would never work. You're telling me a grandmother who lives in Manhattan will be forced to leave her family and move to a small apartment in Kansas? That's political suicide to suggest anything like that.
If you want to live some place forever, buy the property. Buying and renting each have risks. Buying risks that you will lose your initial capital, but you get to live there. Renting risks that you might have to leave the property, but the landlord absorbs the risks of the property value declining.
We can't really have effective policy if someone experiencing some kind of risk vetoes it.
It's political suicide to suggest that a grandmother who is currently receiving $0 in basic income should instead receive more? You haven't thought this through.
> If the basic income wasn't adjusted for different areas, you would probably see some areas become rich elite enclaves while other areas become basic income ghettos.
Some places have been rich elite enclaves and other places ghettoes for pretty much the whole history of human civilization; its pretty clearly already the case now (and not just between widely geographically separated areas like San Francisco and Grover, NC; its true within cities like San Francisco -- or any other city of substantial size anywhere in the world.)
A flat national BI doesn't create that problem, it just fails to completely eradicate it (it likely does reduce it by reducing overall income inequality, so, as far as the issue is even relevant, its one in favor of adopting BI, not against it.)
Living in an expensive area is a consumption choice.
If I live in a mansion in that Grover, NC, would you say that my expenses were high so I deserve more basic income?
High prices are the market telling you to consider looking someplace else to live.
This is how the good ideas of progressive intellectuals get destroyed: other progressives want to weigh them down with all sorts of other social engineering baggage. (Conservative intellectuals have good ideas that get destroyed by other conservatives, too.)
I agree that choosing an expensive lifestyle is a consumption choice. I was just trying to make the point that it's difficult for a government to determine what basic income is "enough to live comfortably on".
Those kinds of decisions alienate voters and, as a result, are desperately avoided by congress critters.
Without having to depend on the job market, people are free to move to areas with no work and a very low cost of living, and not be bunched up in the areas with the best handouts.
The net result will probably be higher costs of living everywhere, but in the US there is so much space that the effect is diluted.
Add to that the increased demand for basic services in those areas, and you'll wind up with something that looks an awful lot like economic growth in those areas.
Add to that the ability to grow food for oneself, and I bet we see lots of people move somewhere they can rent a home with a large garden, and turn their basic income into a small scale farm with extra earned income at local farmers markets. As that money moves around in a community, even if %40 of every pay cycle is extracted by walmart, the local economy has people who have time to build small bussinesses. Now a mom and pop store doesn't have to support the family, it just has to pay the rent on the store and bring in enough extra money and or good will/personal satisfaction that mom and pop keep it running.
How is that different from what happens now? How many poor people can afford to live in Manhattan penthouses right now? By leveling out people's relative wealth just a little bit, this should reduce the ghettoization, not increase.
Russians tried it with USSR.
Every time new technology is introduced everyone gets scared that jobs go away. Over time the level of service and innovation requirements go up providing more jobs for those that adapt. Such as life. Don't make the world what its not. It most likely won't work. :-)
Basically the government guaranteed to get you a job with a basic income. All seemed like a good idea "from each according to their ability, to each according to their need" until folks realized that the people deciding basically were the ruling class and the working class now worked out of fear of Gulag instead of financial rewards.
Russians tried the exact opposite: everyone was required to work in the USSR. You'll get a minor prison sentence for avoiding work (IIRC it was called "went to jail for idleness"). The law was hard to enforce though.
What the blog post describes is, basically, communism. The official communist party line in USSR (correctly) identified the lack of automation (advanced technology) to make it a reality. Basically the official state goal of the Soviet Union was to advance the science and technology towards achieving that goal, hence the repressions against religion, endless attempts to identify and focus "more important" sciences and skip "less important" ones, introduction of pyatiletkas (5 year plans), etc.
The question is whether there's (1) something they can do that's more valuable than watching TV and (2) some reasonable way we can motivate them to do so.
If (1) and if a lower BI is an effective way of motivating that behavior, then that's a good argument for a lower BI. It doesn't follow that the optimal level is zero. I don't expect the number that would stay home and collect their $1 of basic income would be substantially greater than the number that currently stay home and collect their $0.
Given 300 million people, it's prudent to consider the net impact and not sweat the details too much.
Say a policy makes 200 million people better off in some virtuous manner but creates 10 million free loaders. Is that a horrible policy? Say the value of the virtuous benefit is 10x the cost of the free loading?
For what it's worth Britain has around four million adults living on benefits (else they'd starve) who have never had a full- time job in their lives. No idea what they do with their time but aside from the odd part-time job, they depend on someone else working on their behalf. That is a truism not a criticism. Sounds like a pretty good experimental group for testing the suggestion mooted here.
I thought it was a good thing that you don't have to work unless you want to do so for additional income.
Which one of us is wrong? Which one of us will be wrong in the future, as more and more jobs can be automated and thus disappear while the amount of people on this planet keeps increasing?
Australia already has essentially this setup. Every person in the country can be paid $492.60 every two weeks ($12,800 yearly) and up to another $121 every two weeks ($3,146 yearly) to help with rent.
Everyone qualifies, forever, irrelevant of past job history, education, family status, etc. etc. There is no time limit for the payments.
The only difference between this and the article, is that if you get a job, whatever you earn is deducted from your payments.
I personally think it does a fantastic job of making sure there is no poverty in the country, and it means Australia has an enormous middle class.
The interesting part in the article is that in order to receive this payment, you have to be actively looking for work. Not sure how this is measured, but the qualification makes it philosophically different from the unconditional wage being advocated.
You are right, you must apply for x jobs per month, and keep a logbook of that activity.
In that sense, yes, it's philosophically different from the unconditional wage, but it's a good example of the effect on society (no extreme poverty, huge middle class, higher taxes, etc.)
"The Report, Poverty In Australia, shows that in 2010, after taking account of housing costs, an estimated 2,265,000 people or 12.8% of all people, including 575,000 children (17.3% of all children), lived in households below the most austere poverty line widely used in international research."
That's not a Basic Income. BI means you don't lose it when you start working. If you lose your benefits by working, that is a perverse disincentive and a divide between those on welfare and those working, and that's what's wrong with the U.S. status quo.
>The only difference between this and the article, is that if you get a job, whatever you earn is deducted from your payments.
That's a pretty significant difference considering that the major selling point of a UBI is that (relative to traditional welfare) it doesn't have the problem of penalizing people for earning money on top of the transfer payments.
I don't think it's the same. What you're describing is the unemployment scheme -- "the dole" -- and it's not so clear cut. There are asset tests: if you have a certain amount of savings in the bank, you can't get it immediately. You also need to go in for interviews frequently and keep diaries of your job search.
The basic idea is on track, though. You know that no matter what happens, you'll be able to eat and put some sort of roof over your head. I'm curious to see if the social welfare programs continue to remain generous as Australia's government deficits increase and non-white immigrants continue to flood into the country.
Can we come up with a solution that doesn't strong-arm workers into keeping society's dead weight around? Why make sure that every non-worker in society has enough money to eat McDonalds and watch cable TV at the cost of the freedom of everyone to make and spend money as they please?
thank you for this. I'm an empathetic person, but every morning I drive out of my driveway to work and look at the house across the street from me with three people who stay home all day in their house watching TV.
When I get home, their TV is still on and the other people in my building and I are exhausted from working and finally get some time for recreation, usually in the dark. The other neighbors say the across-the-street people are selling opiates. They should be made to do something in return for their government money: anything useful around town like cleaning up, repainting signs, babysitting- not just getting free government money to capitalize their opiate sales.
I love my job, but not enough that I would come here everyday first thing in the morning if I weren't being paid. That's why the Wikipedia example mentioned in the article is a _terrible_ counterexample for OP's point. First, Wikipedia is a _clone_, not an original work. Second, it's billions of micro-contributions, not people working 40-45 hours per week like the others in my building and myself. No one is that motivated. As posted yesterday, the theory of the Tyranny of Structurelessness is real. Only a small portion of society functions without leaders. And I admit that I am not one of its leaders (yet!), but I am comfortable for the most getting led toward productive efforts.
That's why I believe poverty is a failure of leadership. It's the inability or disinclination of leaders to herd those people into something useful. It's cheaper to pay them to stay home. It's got nothing to do with them being lazy, as someone else wrote. MOST of us are lazy, not merely the unemployed.
Have you considered the fact that you don't know anything about the lives of the people who live across the street from you and maybe you should refrain from judging them so harshly?
> Why make sure that every non-worker in society has enough money to eat McDonalds and watch cable TV at the cost of the freedom of everyone to make and spend money as they please?
To turn this question around, why do we want only slaves to live comfortably, while denying this right to people who are free?
Yes, slaves. Our culture, out of necessity, managed to successfully hide this fact from most of the people, that we are all slaves. We need to work, or else we starve. Some of us are lucky and do the things they would have done anyway living free, but for most of us, it's just global slavery we're in denial with.
Automation may finally free us all, and this is the point most people (suprisingly, even here on HN) seem to fail to understand.
I think in the end this wouldn't work. It'd play out something like this:
A certain percentage of the population would stop working entirely since they no longer need to. (Particularly when politicians push the basic income amount up to placate constituencies)
Because workers bow out of the system certain industries lose productive capacity. Maybe we stop producing enough food, or enough fuel.
Prices rise (assuming a moderately free market), which causes the basic income amount to rise and it spirals out of control from there.
A certain % stop working for existing businesses. However, since there is greater money velocity in the system (vs. investments), there's still high demand (likely _higher_ demand). Businesses which had been slow to automate their production do so, spending more money on high-skill positions.
Prices temporarily increase to pay for this capital investment, but within a few years drop to below prices pre-BI.
Note that the author DOESN'T advocate necessarily doing this today, but that this is somewhat inevitable. I think I agree — eventually, the vast majority of jobs in our society will be automated / done by machines. Either we give these people a BI, or a very large segment of our population falls into poverty, which has other damaging political ramifications (revolution?).
> A certain percentage of the population would stop working entirely since they no longer need to.
Everyone I've ever seen argue this has had strong opinions about how other (more greedy and venal) people would act. They, of course, would still work, but the great unwashed masses would sit on their backsides and take the money.
I suggest, instead, we try specifics. Given a basic income, I wouldn't be lazy. Nor would anyone I know, which includes some very poor people who would love to work if they could only do better than on benefits.
I suspect (though I don't know), that you wouldn't be lazy, either.
Also, the evidence of limited trials is that this increases work, not idle people:
They, of course, would still work, but the great unwashed masses would sit on their backsides and take the money.
The counter argument would be the existence of industries that people will already not work in.
For example Italy has a 38.5% youth unemployment rate. It also can't get enough workers for the garment industry. So why don't the youth of Italy want these jobs? Maybe the work is seen as menial (so a cultural condition) or maybe the wages are too low (they think they deserve more) or maybe Italy has made hiring citizens too difficult (so they shift to the black economy), but either way their reluctance is sustained by a welfare state that allows them to not work.
The same can be said in this country with the absurdly low unemployment rate in North Dakota while the disability rate has shot through the roof. Unless you think people have suddenly and inexplicably become disabled this is clear evidence that people are willing to go on the Government dole rather than get a job in North Dakota.
I'm not even saying these people are evil or irrational. (It actually seems entirely rational to me) In a similar situation I'd probably do the same thing.
The question is: how many people currently working would stop working if they didn't need to? (particularly in the areas vital for the basic functioning of society) That question is so impossibly difficult to answer that I don't think any system we come up with won't have potentially disastrous consequences.
> That question is so impossibly difficult to answer
I agree, which is why I think we should not implement a basic income immediately, but that we should proceed with further trials and examine the evidence on the ground.
> The same can be said in this country with the absurdly low unemployment rate in North Dakota while the disability rate has shot through the roof. Unless you think people have suddenly and inexplicably become disabled this is clear evidence that people are willing to go on the Government dole rather than get a job in North Dakota.
Or, people who are able-bodied and unemployed have chosen to move out of North Dakota (perhaps due to work available elsewhere), and/or people who are disabled have chosen to move to North Dakota for financial or environmental or other reasons. Either of these would both reduce the rate of unemployment and increase the rate of disability without people "choosing to go on the Government dole".
> The question is: how many people currently working would stop working if they didn't need to?
The price consequences of BI are such that this is self-limiting. Once you set a level of BI, the more people choose to opt out of work, the less affordable it is for people to choose to opt out of work. Less people working -> higher market clearing cost of labor -> higher market clearing cost of all goods and services -> reduced standard of living for people on fixed incomes (including whatever point the BI is set at.)
Although the unemployment rate is low in North Dakota there are actually only about 17,000 open jobs. This wouldn't even employ all the unemployed people from Minneapolis.
Compounding the issue are a lack of housing, and the fact that over half of those positions are low paying dead end jobs like fast food, walmart, etc. It's also very far away from almost everywhere - a four to nine hour drive from the closest major airport.
The question is: how many people currently working would stop working if they didn't need to? (particularly in the areas vital for the basic functioning of society) That question is so impossibly difficult to answer that I don't think any system we come up with won't have potentially disastrous consequences.
I don't think it's all that difficult to answer. When I leave the office building I work at the end of my day, the janitors are just showing up. They probably already only get paid the basic livable wage (probably less), so why would they show up to work if they were getting the paycheck anyways? I can think of 100s of other jobs that someone wouldn't show up for because they aren't worth the time, they aren't fun, or even remotely interesting.
Basic income is just that - basic income. Some people who want to have more than that will work. Janitors still want iPads or cable television - and they will be incentized to work for that on a competitive market for those products and services.
0 hours of janitoring = small comfortable house and enough food
5 hours of janitoring = small comfortable hosue and enough food and cable televsion
If people simply stopped working when they could live "comfortably" why would they buy iPads, cable television, new cars? Employment history and reputation aren't going out the window with this plan either. A janitor will be good at his job because he knows if he gets fired he won't get reccomended for other janitorial jobs - and his chance of getting an iPad in the future goes way down.
I know janitors who buy lottery tickets, eat out at restaurants and have cable television - according to you those wouldn't exist because they could "janitor" less and live without those.
I never said any of those wouldn't exist, but I'm a firm believer in rewards. Right now a janitor is rewarding himself with a paycheck so he can do what he wants otherwise the flip side is poverty.
Here's the thing. Let's say you made $100k per year working 40 hours/week with benefits. If I were to pay you to not work but get a smaller wage (keeping your benefits), what percentage would be acceptable to you? 90%? 80%? 50%? What is it worth to you to not have to work?
There is a number that most janitors would probably accept. I think a fair number of retail employees too.
> When I leave the office building I work at the end of my day, the janitors are just showing up. They probably already only get paid the basic livable wage (probably less), so why would they show up to work if they were getting the paycheck anyways?
There's something that deeply bothers me about the notion that the above is a bad thing. Yes, you would no longer have access to low-wage janitorial services. But that's your problem, not your janitor's. Do you think he wants to be scrubbing toilets for a subsistence wage?
The world will not fall apart for want of janitors, or garbagemen, or baristas.
Imagine a world where, at some time t=0, there are zero people filling these jobs because of a basic income. It truly doesn't take all that much enterprise to see an opportunity in a world with no janitors. At t=1, there would still be janitors, but there would be fewer of them, the ones that exist would be better-paid, because they're now working for something approaching the wage that you might demand if someone asked you how much it would cost to clean their office.
Do you think he wants to be scrubbing toilets for a subsistence wage?
Thanks for proving my point. No, I highly doubt he wants to scrub a toilet for a subsistence wage. I think a janitorial job would go empty for a long, long time. So now, instead of me focusing on my job, I have to take time out of my day to do something I'd pay someone for.
It would be better if you get your basic livable wage but still have to work (exceptions made for childcare, students, disability, etc.) and depending on the job you get what the market deems as extra. So, if you get $20k per year as a livable wage (figure just chosen for easier math) and a job would've paid $25k, you get the $5k difference in your paycheck. This would help keep the low-interest, but easy, jobs staffed.
" I have to take time out of my day to do something I'd pay someone for. "
But apparently you wouldn't pay enough to have them do it, so it's more valuable to you to use your time to do that job.
If you paid more, you could more effectively utilize your time.
"So, if you get $20k per year as a livable wage (figure just chosen for easier math) and a job would've paid $25k, you get the $5k difference in your paycheck. This would help keep the low-interest, but easy, jobs staffed."
So you would only be getting paid 5k then. If I don't work at all, I get 20k. If I work, I get 25k.
I think that's what you're suggesting. Unless you're suggesting you get nothing if you don't work, at which point we don't have a basic income anymore, and this idea is moronic.
because they still would be better of working, just possibly at a lower hourly rate.
basic income: 1000 USD.
unemployed janitor: 1000 USD
employed janitor: 1300 USD.
He does not need to work anymore, but it might still be worth it.
Many of these arguments assume that in (say) 50 years, all the janitorial/toilet cleaning/fruit picking jobs (i.e. shitty) jobs won't have been replaced by robots. I think this will happen whether it puts people out of work or not, so maybe we stop people from needing these jobs in the first place. Sure there will be some manual labor left to do, but it'll be highly paid so you can do it 5 hrs a week instead of 50 for some extra cash for your house party.
> So why don't the youth of Italy want these jobs? Maybe the work is seen as menial (so a cultural condition) or maybe the wages are too low.
If you can't make a living wage at these jobs, then by taking the job you are hastening your own demise. If you already have a living wage, then taking a low-paying job will give you a supplemental income. If you can work part-time at a low-paying job, then you can still spend your other time educating yourself or looking for a better job.
Also, if you can't fill your factories with the wage that you're offering, then the free market is telling you that you need to either increase the wage, or learn to make do with less, i.e. decrease output.
It's worth keeping in mind that a number of the people who would show up in statistics as not working would be devoting themselves to activities that are socially beneficial but not currently economically viable: community art projects, gardens, mentoring children, cultivating time-intensive abilities that are inhibited by the archaic idea that the only worthwhile way to exist is to work 40+ hours per week. I know that's what I'd do.
I'd also like to travel, and would be more than willing to work a sane amount of hours to contribute to the basic functioning of society in exchange for the means to do so. With respect to the Italy example -- raise wages enough and I'd bet the shortage would disappear. If the societal need is great enough, the prices will reflect that (maybe we don't actually need more garments?).
The basic functioning of society would need to be redefined a bit -- perpetual economic growth is neither sustainable nor desirable at least while it comes at the expense of the environment, or social and medical well-being (obesity, depression, etc).
It's worth keeping in mind that a number of the people who would show up in statistics as not working would be devoting themselves to activities that are socially beneficial but not currently economically viable: community art projects, gardens, mentoring children, cultivating time-intensive abilities that are inhibited by the archaic idea that the only worthwhile way to exist is to work 40+ hours per week. I know that's what I'd do.
I'd also like to travel, and would be more than willing to work a sane amount of hours to contribute to the basic functioning of society in exchange for the means to do so. With respect to the Italy example -- raise wages enough and I'd bet the shortage would disappear. If the societal need is great enough, the prices will reflect that (maybe we don't actually need more garments?).
The basic functioning of society would need to be redefined a bit -- perpetual economic growth is neither sustainable nor desirable at least while it comes at the expense of the environment, or social and medical well-being (obesity, depression, etc).
If there were no work left in the world for humans (and yet I was still allowed to live), I might devote my entire energies to the education of my daughter.
Today, that is called idleness. But in that future world, perhaps it would not.
Yes, market forces can only be controlled by getting rid of the market. At that point social forces will only be materialized through physical force.
The difference between a socialist and an individualist is in how they think the physical force equation (applied to the society in which they live) will work out for them.
It might be best just to have some portion of people become an idle class and another class of people become the productive class. (But allow people to move between them.)
I don't think it's compatible with universal suffrage, though. It ends up a lot like an aristocracy, albeit an aristocracy that people can join at will. Is that acceptable? I dunno.
I'd be far more worried about this sending a false prosperity signal that could exacerbate our already insane and unsustainable population levels. What's really depressing is that not a single comment here or on the article even mentions this.
Why the hell should I pay even more and subsidize those who have more than two kids?
I don't think the number of kids goes up with prosperity. Developed countries and upper classes typically have much lower birth rates than their counterparts, and some countries are even experiencing negative population growth.
> I'd be far more worried about this sending a false prosperity signal that could exacerbate our already insane and unsustainable population levels.
Strong social safety nets seem to be pretty strong contributors to reduced family size (which is why the developed world has low natural population growth and many of the places with the strongest safety nets have negative natural population growth) because people don't need children as a form of old-age insurance.
> Why the hell should I pay even more and subsidize those who have more than two kids?
A fixed basic income per adult is self-evidently not a subsidy for having more kids. In fact, compared to existing welfare policy (where the principal basis for cash benefits is number of dependent children), its a disincentive for that.
You shouldn't, of course we could limit couples to replacement rate of birth, if that's 2.1 for couples or 1.05 for individuals, they could sell a fraction or all of their "right to reproduce" to people who want to have 3 or more kids.
It makes perfect sense that 2 people should be able to replace themselves with 2 people. Nobody said 1 child policy, plus I mentioned a market for people who don't want to have kids selling off their "rights to reproduce."
Your response is simplistic and doesn't even outline any of your concerns about what I've posted.
Trying to control people's reproductive rights goes against eons of human nature and evolution. And creating a "market" where you can sell these rights sounds like a horrible mash of Ayn Rand and Huxley.
And the real problem was they didn't adopt a two child policy a few doubles ago. (Basically the US is in the same position - we have the same landmass as china, but 1/4 of the population)
> I'd be far more worried about this sending a false prosperity signal that could exacerbate our already insane and unsustainable population levels.
Hello there, person I'm very glad entered this conversation as you did.
You're talking about a great taboo. No one wants to admit that not every precious snowflake can do exactly what they want to be a shining star. Saying that we have too many precious snowflakes, or that we shortly will, is akin to saying that and it makes people nervous.
But there are a lot of us, aren't there?
And our population plan seems to be "Reproduce however you want until nature starts killing us off."
It could be that our coming jobs shortage is the result of too many people. Our geographic area is big enough that there will always be a certain number of jobs because of the different specialized tasks necessary in each locality.
But everyone wants a kid, and it seems the people who don't plan for those kids, whether rich or poor, have the most.
This worries me more than global warming, nuclear proliferation and synthetic marijuana (mostly jk) combined.
A certain percentage of the population would stop working entirely since they no longer need to.
True. The problem is, as things are now, a certain percentage of the population will be forced to stop working as they are made obsolete by increasingly efficient globalization and automation. As that percentage increases, eventually either society will collapse or something fundamental will have to change (such as implementing a basic income).
To give one example the Google Car.
If this car works as advertised millions of jobs will get irreplaceable lost.
Cab drivers / Car Manufactures / Truck driver etc.
When the car was invented, millions of horse and buggy operators, manufacturers, and horse dung sweepers lost their jobs. Their jobs were then replaced by used car salesmen, mechanics, the tires industry, etc. etc.
But it is a bit presumptuous to believe that all future inventions will destroy jobs. A great example of the reverse is the compiler industry.
As compiler technology / programming languages have become easier and easier... smaller and smaller teams of programmers have been able to get more things done. This hasn't destroyed programmers... it has instead increased the demand of programmers.
> This hasn't destroyed programmers... it has instead increased the demand of programmers.
Nor has invention of internal combustion engine decreased the demand for cars. Programming today is far from its full potential, just like transportation was 100 years ago. Software is a very young technology and it is just beginning to take over the world, but keep in mind that developing it is a) high-skill job, and b) mostly aimed toward automating other people out of their jobs.
Maybe. But others will be created (or made simpler), to wit: a teenager can now rent a google car (since he isn't driving it won't cost much more than an adult) which will enable him to do things like wash peoples windows (which is neither technically difficult nor especially dangerous) thus driving down the cost per window washing, enabling more people to enjoy this luxury.
Or, assuming you are right and delivery men are unemployed in great numbers which I agree is likely, then (as transportation prices plummet) there will be more jobs for packaging. Imagine that instead of having to collect your kids in day care, go shopping and the go home and cook you can instead preorder your groceries, have your Google Car pick up your kids, spend the time talking with them in the car, go to the shop and pick up your package (which will take 10 minutes at most, since you have likely already been charged when you made the order) and then home to cook, which kids you actually get to talk to and who are now a lot less stressed.
Even then self-driving cars will also create other oppertunities, because there is no reason the car has to stay in the lot until you get home. It might as well drive to the nearby car cleaner (which can be out-of the way since the time is essentially free, although the gas used is not) for a cleaning. That is more business (and it is low skilled) and better, nicer cars.
> will enable him to do things like wash peoples windows
Until next year a new type of window will come that doesn't have to be washed.
> there will be more jobs for packaging
There won't. Humans are already being optimized-out of packaging by automated, self-adjusting warehouses and package machines.
> you can instead preorder your groceries
Being produced, packed and delivered by machines.
> It might as well drive to the nearby car cleaner
Which has been automated-out of his work years ago because how this job requires any skills cheap machines don't have right now?
Rest of the things you write about are things people will be able to do instead of working.
The point is, computers are not replacing particular jobs and creating new ones (of similar skill levels). They are replacing whole classes of skills humans have with jobs that have significantly higher requirements and significantly less open positions.
Automation. Can you imagine the consequences of a driverless car on transportation industry for example? Or automated cashing machines on cashiers? Or cleaner robots for cleaners? You see, simple jobs are going to be replaced in the future. These people will go unemployed, because there will be no simple jobs for them. This is a trend, yes, and it won't happen overnight. But there's one crucial fact -- it doesn't just stop at replacing simple jobs. It will eventually replace even more demanding ones, such as knowledge workers. Infact, only human creativity seems to be the only thing which we can't automate YET, but perhaps eventually will be able to. What this means is that the current capitalistic system has to fail eventually because we lose jobs, and it seems very certain that automation is going to be the beginning of the end.
This has been happening in China too -- recently(late last year) there was news about Foxconn replacing over a million jobs with robots in China. What this means is cheaper products which are also accessible to those who don't work. It narrows the purchasing power gap between those who work and those who don't.
You point has been argued a lot recently, but if it were true then surely nearly everybody would be unemployed by now? After all how many of you are scribes, weavers, carpenters and farmers (or farmers helpers)? Less than 20%?
Then why don't we have 80% unemployment? Because we found other jobs for those people, the economy is much, much bigger, life is much, much better and everybody is better of.
And it isn't like that hasn't happened again and again and again through history.
So I ask you, what proof do you have that this time it is really different? As opposed to every other time we thought it was different through history?
I'll tell you why this time is different. Each time we had growth in technology that had the potential to displace a huge number of workers that technology also enabled a massive decrease in the costs of transactions (railroads, motor vehicles, the internet, etc). This allowed a massive growth in the economy which enabled these displaced workers to find new jobs. Also consider that the growth in technology didn't eliminate jobs, but it shifted them. The technology of old still required a mostly proportional human energy input to produce output. New technology decreased that proportion, but it didn't eliminate it.
This last point is the difference that this new wave of automation has compared to the waves of past. It is unprecedented in human history to be facing a future where human effort can be multiplied by such enormous multiples that the value of labor approaches zero. This coming automation revolution would have to simultaneously grow the economy to greater proportions that automation reduces the cost of labor. I don't believe this will ever be possible, but definitely not in the time period that a properly developed AI and robotic technology could corner the market in labor (once developed, less than a decade). Society is not prepared for what is coming, and it will be disastrous.
No, it's basically a tautology based on continual technological progression. Imagine if we could build a robot that was exactly equivalent to a human. If it ran on less energy than a human, then basically no human would be needed for any task. Now imagine a continuum of less sophisticated robots that excel in certain tasks beyond what certain humans can do.
there was a type of employee at the beginning of the Industrial Revolution whose job and livelihood largely vanished in the early twentieth century. This was the horse. The population of working horses actually peaked in England long after the Industrial Revolution, in 1901, when 3.25 million were at work. Though they had been replaced by rail for long-distance haulage and by steam engines for driving machinery, they still plowed fields, hauled wagons and carriages short distances, pulled boats on the canals, toiled in the pits, and carried armies into battle. But the arrival of the internal combustion engine in the late nineteenth century rapidly displaced these workers, so that by 1924 there were fewer than two million. There was always a wage at which all these horses could have remained employed. But that wage was so low that it did not pay for their feed.
The arguments people make against this are that humans aren't horses. Humans can learn and adapt much better. But they can't do that infinitely, and some will reach their limits faster than others.
This is a powerful point to ignore. The Great Recession has shown this trend might be establishing itself already; the percentage of people not participating in the workforce in any fashion spiked, hasn't recovered, and isn't showing promising signs of ever recovering.
What a basic income will tend to do however is reduce the need for a minimum wage. Currently the minimum wage exists to solve a problem: People need to survive, and to do that they need to work enough to enable that. The problem is with workforce participation being compulsory, absent a minimum wage the price for labor in unskilled work rapidly drops. Where you can find someone desperate for 7.00 an hour, you'll find someone else equally desperate willing to take 6.90 an hour. There will be yet another person willing to take 6.80, and this trend continues until you reach a point where you're better off scraping whatever you can do to survive.
So it's actually preferential for the labor force to shrink some; instead of everyone competing for the tiniest slice of a paycheck just for survival, you'd have a labor force with much more power, ensuring that you don't have to settle for work at 7.50 an hour just to eat. On the contrary: You'll stand on a corner and flip a signboard around in the air for 20 bucks a day only if it's worth your time, and to buy the extra 6-pack or whatever you desire, but don't need to survive.
On the contrary, I see a falling dollar in the world market which is reinvigorating the US Manufacturing industry. As China's middle class grows, they become impatient with China's loose policy of eradicating their own currency to promote local jobs. The Chinese middle class has begun to rise, and with it, the cost of production in China.
In the US, the weaker economy has hurt the US Dollar, making manufacturing cheaper again in the US. So for the first time in over a decade, Apple Computers is building a US Factory.
It's not just a weaker dollar causing manufacturing to return to the US, though (especially relative to China) that is definitely part of the cause.
Rising fuel costs threaten global supply chains. Especially in areas that have a less-than-cordial relationship with the US such as China, there is some uncertainty that things will stay as they are.
Another powerful trend that is reinvigorating the US manufacturing industry is the re-evaluation of the spoils of offshoring. Companies such as GE are discovering that there are many side benefits to bringing production back to the US: Shorter supply chains from manufacturing to retail, better quality from production, and greater feedback from shop floor to engineering.
One of the biggest unaccounted costs of offshoring was the effects it had on the lifecycle of a product. That article points out how GE was able to take a $1600 water-heater from China and sell it for a profit $1300, just by manufacturing it from the US. It turns out that in off-shoring the production, they lost most of the feedback in the product's lifecycle that enabled them to refine the design far beyond what they thought was 'final'.
> You'll stand on a corner and flip a signboard around in the air for 20 bucks a day only if it's worth your time, and to buy the extra 6-pack or whatever you desire, but don't need to survive.
This is key here. Plenty of people are willing to work beyond survival for luxury goods.
An interesting repercussion of such a system is the potential for unrestrained creative endeavour. Fear of meeting basic needs will no longer be the primary motivator for most workers. Free to think of and most importantly act on new ideas, our massive population will be able to attempt to function like a distributed network. There will be those who choose to only consume, but that is no different today, many people are simply required to perform a meaningless job in order to do so. I would imagine that the benefit of freeing millions of willing inventors outweighs the drain imposed by all those who only consume. Then again, this only makes sense assuming that most repetitive and "busy" work can be automated.
Ok, yes to: "towards" and "trends." However, not "forces" the bring us "all the way to."
OP misses the point that even though I am listening to free electronica on youtube right now...
1. It was once sold for money by its creators
2. Its creators tolerate it being given away for free in order to develop their reputations and bring in an income through performance and sales. This an example of symbiotic capitalism, not volunteer work.
3. My listening is driving ad revenue for google.
So it's not really free out of the goodness of the creator's heart. It's free +to me right now+, b/c atm I'm not currently in its "for-pay whirlpool." Advertisers, clubs and music afficiandos are in its for-pay whirlpool.
Finally. OP claims "we are motivated by autonomy, mastery, and purpose, but not money." This is only true for a small cluster of artisans.
But what about Deviant Art, Wikipedia, and most of YouTube? Also, a lot of musicians can barely afford to eat, even with touring. I imagine it would be liberating if that wasn't even necessary.
One worry I have with Basic Income discussion is that what most people think the minimum required just to live is very high, which frames the discussion wrong.
Basic Income probably shouldn't cover much beyond rent in cheap, shared accommodation, heat and some electric, and groceries, and healthcare, if that is provided separately.
Basic Income should never be enough to live comfortably on with no drain on savings, at least until we've reached a place where we don't need human labor for very many tasks (if ever). I say this as an avid supporter of a basic income.
> Basic Income should never be enough to live comfortably on with no drain on savings, at least until we've reached a place where we don't need human labor for very many tasks (if ever).
Its seems to me to be self-evidentally economically impossible for universal BI to do this (which, incidentally, means it probably can't replace all existing social benefit programs, because you probably still want to have some programs that people can live on without a drain on savings, though these would need to be time limited and almost certainly have other qualifications) unless we've reached that point of labor-irrelevance.
If you set the level of BI such that it would allow such comfortable living given pre-BI prices, the resulting effect on prices would quickly drive such comfortable living back out of reach for those relying solely on BI.
You can mitigate poverty and economic inequality with BI, because the inflationary effects will be no greater than the income boost given at the low end of the scale, but there is a declining marginal benefit of each additional dollar of BI.
It may be impossible, but that's certainly not self-evident. We tax things other than labor, and that portion is liable to grow as we approach irrelevance of labor - and not irrelevance broadly, but specifically as is necessary to provide that comfortable life.
That said, I'm not hugely stressed about determining precisely how impossible a policy is when I don't support it anyway.
> seems to me to be self-evidentally economically impossible for universal BI to [be enough to live comfortably on with no drain on savings] unless we've reached that point of labor-irrelevance
Why is it economically impossible? It seems quite possible to me.
For example, suppose that 20% of the population _must_ be engineers for society to survive. But the other 80% of the population is irrelevant to production. The 80% could be given a BI of $40k, while the 20% could be given a salary of $200k (or $2M if you like).
(The 20% and 80% figures could just as easily be reversed, if you consider 20% to be "labor-irrelevance" -- although it is not irrelevant if it is necessary to the survival of society to ensure it's done.)
Whatever means works out best, in theory and practice, of course. I don't have a strong opinion on what that looks like, in this case. Conceivably no increase, quite possibly a lesser amount that ramps up over time or a fixed lesser amount, or potentially the full amount but with much of it earmarked for medical and educational expenses.
> "How would we pay for it? We could start by getting corporations to pay their taxes."
I don't know why people keep harping on corporate taxes. If anything, taxing corporations is regressive -- the taxes ultimately get passed on to consumers through higher product prices, regardless of their income levels.
Taxing corporations doesn't produce magic money -- it's still taxing people in the end, but it's the consumers. Far better is higher tax rates on investments, and higher taxes on the rich. We should be taxing the people who own the corporations, or are paid huge salaries by them -- that is, if you believe in progressive taxation.
> the taxes ultimately get passed on to consumers through higher product prices, regardless of their income levels.
It increases producer prices which shifts the supply curve to the right, but its pretty self-evident that the effect on actual prices is dependent on price elasticity of demand in the markets for particular products, and that price elasticity of demand is not independent of the income of the people in the market for the product.
> Taxing corporations doesn't produce magic money -- it's still taxing people in the end, but it's the consumers.
No more than taxing labor income (which the US does disproportionately, as much capital income faces lower income tax rates and labor income is subject to additional, non-income taxes) is really taxing corporate stockholders, because it shifts the supply curve for labor increasing market clearing prices of labor and eating into corporate profit margins.
> We should be taxing the people who own the corporations, or are paid huge salaries by them -- that is, if you believe in progressive taxation.
But taxing high salaries is "regressive", just as much as taxing corporations, taxing consumers -- after all, if you shift the supply curve for management work and increase the market clearing price of that good, you are increasing producer costs and, therefore, shifting the supply curve for the good produced in a way which increases the market clearing cost, resulting in price increases to the consumer to pay the taxes. If you are going to make this argument for corporate taxes, you have to apply it to whatever you present as the alternative to corporate taxes, as well.
> but its pretty self-evident that the effect on actual prices is dependent on price elasticity of demand in the markets for particular products
Of course, but there's still the "minimum profitability" that a business seeks to have. Suppose three firms compete to sell widget X, and consumers are willing to pay up to $10 for it, but the companies sell it at $5 due to competition (it costs $4 to make and distribute). Then the price is determined by supply cost + reasonable profit, determined by competition. If the government removes part of that profit, they'll raise prices accordingly, and sell for $6 instead, since that's still within the demand price elasticity -- otherwise the firms would decide there wasn't enough profit and get out of the business entirely.
> No more than taxing labor income... is really taxing corporate stockholders
The difference is that taxing labor income can be intentionally progressive, which is widely believed to be a good thing.
> But taxing high salaries is "regressive"
That just doesn't make any sense -- words can't be redefined like that. The very definition of progressive taxation is taxing high salaries (EDIT: incomes) of individuals at a higher rate than lower ones.
I understand your overall argument -- it's certainly debatable to what extent you believe corporate taxes to affect prices, vs to what extent you believe personal income tax to affect market salaries. But that doesn't affect the point I was making, which is that corporate taxes are ultimately passed onto people, and that this is not done in a progressive way. But by taxing people directly instead, this can be done progressively.
> That just doesn't make any sense -- words can't be redefined like that.
I used the quotes and the "just as much as..." reference because I was applying your logic about corporate taxes to the alternative you proposed. I don't agree that either is regressive, obviously, and I laid out exactly why that logic was wrong earlier in the post, before showing how if you ignored the fact that the logic was wrong and applied it consistently, it would say the same thing about your alternative as it said about the thing you proposed the alternative to.
> The very definition of progressive taxation is taxing high salaries of individuals at a higher rate than lower ones.
Actually, the usual definition is about taxing higher incomes at a higher rate. Confusing income with wages or salaries , so that one ignores non-labor (and, particularly, capital) income in considering the progressivity of taxes, is a pretty serious error.
But 'reasonable profit' isn't a constant. Just look at the airline industry - no single airline has had a consistent profit margin (most have not even been consistently profitable!). Thin margins aren't incentive to leave an industry - if they were then grocery stores would not exist (as they all have razor thin margins) and WalMart, Target, Kmart would all have switched industries.
In your example, if taxes of $0.50 are added, the firm may still sell widgets at the post-tax price of $5 and accept the reduction in margin from $1 to $0.50.
>"corporate taxes are ultimately passed onto people"
I don't really get this argument. It's always made as if the taxes are applied in a vacuum where market forces no longer exist.
If corporations are operating in a competitive market, they will seek cost advantages and continue to compete for market share. Raised taxes represent an additional expense (for the purposes of this discussion), much like raised energy prices. It is not always the case that these costs are passed on to consumers. Rather, smart companies seek to become more efficient, reduce costs elsewhere, or even realize a slightly lower profit margin per unit in order to maintain or increase market share vs. other competitors.
There's also the option to reduce executive compensation, decrease shareholder dividends, and a host of other options available in the interest of remaining competitive. A smart company could actually outmaneuver other competitors, wind up with more volume, realize the same net profit after taxes, and pass lower prices on to consumers.
I mean, there are just a ton of other variables here. And, those who advocate low or no corporate taxes are frequently free marketers. So, it's very interesting to me that they all but completely ignore very relevant free market mechanisms that can countervail the effects of raised corporate taxes.
IMO, it's just an oft-repeated meme that "higher corporate taxes are automatically regressive because they automatically create higher prices for consumers".
Possibly. Unless the tax code gave them incentive to cut costs elsewhere instead. I would guess such incentive to be logical, given the problem they're trying to solve.
In any case, one of the big premises of the article is that hiring less is happening anyway and contributing to the need for a basic livable income. So, that's a bit circular.
And, of course, that's just one of many potential cost-cutting measures.
> Raised taxes represent an additional expense (for the purposes of this discussion)
Raised income taxes aren't really an additional expense, because they are taken out of after-tax net income, not gross income. That complicates the analysis substantially.
This is precisely the reason I don't understand it when people say the cost of the tax will be passed onto consumers. What cost? The tax is on profits...
You may see it that way, but most businesses do indeed see tax liabilities as a cost of doing business. Just because the profits are taxed doesn't mean it's not a cost of some sort. For instance, you could say today's taxes are the cost of doing business next year or even quarter.
Depends on how the company applies the math. If a company wishes to treat tax liability as a cost of doing business, I fail to see how that couldn't be done.
Isn't it an easy solution though? Based on what you've said, companies have likely already done what they can to reduce expenses to what they consider an optimal place.
I'll try an example, although that might not be totally valid (I'm not really up on current tax laws). These are all made-up numbers and rates:
Say you sell a widget for $100, and it costs you $70 to make. Your profit on that is $30, of which let's say you pay $5 in taxes, so let's say you walk away with $25 per widget.
If the government bumps up the taxes by a percentage that makes the tax be $6. As a corporate policy, the easiest way to keep the same returns to investors is to tack on another dollar to the price and sell it for $101. Profit is $31, pay $6 in taxes, still walk away with $25/widget.
Your competitors are in the same boat as you are, regardless of what the tax rate was/is. Theoretically, if they weren't stealing your business at the lower tax rate, they won't steal it any more or less at the higher tax rate.
Sure maybe you consider some other areas to cut costs, but haven't you done that already? I know it's a silly over-simplified example, but if I own a company and I don't want to give back my profit, I raise my prices to compensate, and so do all competitors. The people that lose are the customers.
I see the rationale in that argument, but I think one of the things you're missing is that companies won't just automatically raise their prices in unison.
Smart companies may hold their prices constant and take a per unit profit hit to capture more share, allowing them to maintain or even increase overall profit. They may introduce higher margin products and/or develop entirely new strategies or lines of business.
And that is the free market mechanism that I mentioned: each company must adjust to the new reality and try to use it to gain an edge over its competitors. They do this all the time.
And, given this new incentive to maintain profits, they may be more aggresive in finding cost reduction elsewhere. One might argue that companies are doing all they can now, but you might be surprised at how new realities create new incentives.
The other important thing with returning shareholder value is how Wall Street works. It is very much a time-relative game. For example, how did the company do vs. last quarter or same quarter last fiscal year? Viewed this way, you can see why some companies pump the brakes on all out profit-maximization over a given timeframe, instead opting to ensure that the line keeps moving up and to the right over a longer period. So, it's more complicated than all companies are always maximizing profit at all times.
Finally, your example that the easiest thing to do is to raise the price by, say, $1 doesn't really hold, irrespective of what direct competitors do with their pricing. They must still keep prices in line with what the market will bear. If not, consumers may begin looking for substitutes or go without (depending on the product). So, while it might be the simplest thing for a company to try, it might not be accepted by the market.
This is all part of the free market at work. So, your simplification is tempting, but I think it goes back to creating that vacuum I mentioned, ignoring all of the many market variables that countervail the assumption that $1 in increased "cost" equals $1 in increased price.
If the market has reached the pre-tax equilibrium, would an added evenly-applied tax change competitiveness at all? I guess I don't see how that would change anything at all. If you and I are competitors, and we both pay the same tax rate, that's already factored into our businesses in some way. Sliding it up or down an equal amount on both of us won't change the me vs. you competitiveness right?
I get what you're saying regarding only pricing what the market will bear, but on the flip side of all this, consumers suddenly have more money, so I could make the argument that the consumers are willing to pay more because they suddenly have more in their pockets, and around the mulberry bush we go...
>would an added evenly-applied tax change competitiveness at all?
Any variable can change competitiveness, as companies may differ in their responses to it.
For example, look at fuel prices for airlines. When they increase across the board, some airlines may raise prices, others may cut back on services offered, still others may add baggage fees, some may focus on increasing volume on more profitable routes, some may lower prices and heavily promote their lower fares to gain market share, while others may risk prepaying for fuel at current prices or hedging with shorts, etc.
Point being, of course, that the same change that hits every competitor will produce different responses and effects. This can completely alter the competitive landscape. And, it's virtually a guarantee that you won't simply get some uniform, across the board price increase.
If we don't acknowledge this, then we are looking at the change in a vacuum, completely insulated from the realities of free market behavior.
>I could make the argument that the consumers are willing to pay more because they suddenly have more in their pockets
Yeah, I think I actually mentioned that in another post (too much risk/work to view another post mid-reply on this tablet). Anyway, it could definitely be the case that consumers can bear more, however, it is not neccesarily 1:1. That is, there are a lot of variables that might impact whether they'd be willing to spend that extra money on that product. Also, there is still some price that the market simply won't bear for a given product, irrespective of the extra money in consumer pockets. In any case, there is certainly no guarantee that companies can simply pass on the additional cost.
And, it can also be the case that some companies can, but others cannot, given their prior prices.
No more than taxing labor income (which the US does disproportionately)
If you have a point to make, please try doing it without blatantly lying. It's common knowledge that the US has substantially higher corporate tax rates than almost anywhere else:
> If you have a point to make, please try doing it without blatantly lying.
I'm not blatantly lying. US taxes on labor income are disproportionate to taxes on other income sources, both because of the favorable rates applied in the income tax system to capital income, and because labor income is subject to additional taxes.
> It's common knowledge that the US has substantially higher corporate tax rates than almost anywhere else
Whether that's true or not, its entirely irrelevant the claim I was making.
The headline U.S. corporate tax is higher than that of many other countries, but it also has many more loopholes than the corporate tax of many other countries. As a result, the effective corporate tax rate in the U.S. is relatively low, around 13%: http://en.wikipedia.org/wiki/File:Effective_Corporate_Tax_Ra...
However I believe the parent's point was just that taxes on personal earned income represent a much larger share of total U.S. tax receipts than taxes on corporate income do, i.e. the U.S. mainly taxes labor income. And that is true; the corporate income tax accounts for only 10% of federal tax receipts: http://www.cbpp.org/cms/?fa=view&id=3822
Seriously? What tax rate do you pay on your regular 40h a weke job? What tax rate do you pay on investments? Most people are taxed roughly 36% (28% income tax, 2% medicare, 6% social security) on their labor, however investments are only taxed at a flat 15%. Hence, the US disproportionately taxes labor over investments.
Do you have other evidence that shows that investment income is in-fact taxed higher than labor income in the US?
Paying employees is a business expense, so the money is not taxed as corporate profit. Paying dividends (outside of the context of a co-operative where you've pre-committed to paying certain dividends) is not considered a business expense and so the money is taxed as corporate profit before being distributed.
I don't think it's the same thing, because your salary is an expense to the company, so they don't pay taxes on that amount. (Some states/cities do tax corporate revenue as well as corporate profit, but not federal taxes.)
I'm not saying they are taxed on the amount of money they pay you. Well, there is Social Security (US) taxes that they pay but you could argue that's money that should go to the employee anyway if there was no such tax. I'm saying the company makes money that is taxed and then they pay you out of that money in which you are taxed for receiving.
Ok, granted, not all the money that the company has on hand that is paid into your salary is taxed as corporate income, but the idea is valid. I agree not at the same level as taxing profits and then taxing dividends which is essentially the same money.
I'm just going with the notion that it is not uncommon for money to be taxed as it is exchanged from one entity to another.
"Most people are taxed roughly 36% (28% income tax, 2% medicare, 6% social security) on their labor, however investments are only taxed at a flat 15%."
"Double taxation" may not be an entirely accurate label (more like "an additional pass of taxation"), but the fact that dividends (in particular) are taxed as corporate profit before being taxed as individual profit makes that 15% figure misleading for dividends, which is what the child comment brought up: "Arguably, you get double-taxed if you own stocks."
Really, the number of times the money is taxed is irrelevant (except wrt paperwork) and we should be looking at the total tax level, but the point is that it's more than the nominal tax rate on qualified dividends if we're going to be comparing tax rate on labor income to tax rate on non-labor income, apples to apples.
Of course, that's specifically for dividends; bond premium payments and capital gains are a different discussion.
Various countries have dividend imputation for that:
> it reduces or eliminates the tax disadvantages of distributing dividends to shareholders by only requiring them to pay the difference between the corporate rate and their marginal rate.
Really the FICA portion (medicare + social security) is nearly twice that, because your employer has to match it. You explicitly see the 2X if you're self-employed, but even otherwise that's money they're spending to employ you that could be going to you and is instead being taken as tax revenue.
> (28% income tax, 2% medicare, 6% social security)
This year, the 28% tax bracket for a single individual stars at $87,850 taxable income. The Social Security cap is $113,700, and the Social Security tax is levied on all income below this. The individual standard deduction is $6100 and the personal exemption is $3900.
That means that for an individual, a 28% income tax rate means income is above $97,850 while paying Social security taxes means income is below $113,700. I sort of doubt this covers "most people".
For a couple, the 28% bracket starts at $146,400 taxable, the standard deduction is $12,200, and personal exemptions are $7,800. So in this case the rate you quote applies to income over $166,400 and below $227,400 if both members of the couple have equal salaries. Again, hardly "most people".
Of course the 15% bracket definitely has a marginal rate of 23% or so, again ignoring EITC and various other tax credits you can claim at those income levels that phase out with income, since they're certainly paying FICA at that point.
> investments are only taxed at a flat 15%
It really depends. Dividends are sometimes taxed at this rate and sometimes at your normal income rate, depending on whether they're qualified or not. Capital gains are, if you hold long enough. And capital gains can, of course, still affect your AMT exemption, meaning that if you're in the the AMT phaseout range your marginal rate on even long-term capital gains is about 22% (15% + 25%*28%, since the phaseout applies to normal income).
Of course once you make so much money that the AMT becomes irrelevant your marginal rate on capital gains drops back down to 15%.
Sure, but I assumed oijaf888 was talking about marginal rates on income, which affect whether you want your marginal dollar to be salary or investment income. If we start talking about overall rates, there is no plausible way at all to claim that "most people" pay an overall Federal rate higher than 15%.
Except capital gains taxes don't include inflation in the calculations.
So let's say your stocks in aggregate rose 4% that year, and the inflation was 3%. You made 1% profit (in purchasing power). You pay 4% * 0.15 = 0.6% which is 60% of your profits and only 38% of your income.
It increases producer prices which shifts the supply curve to the right, but its pretty self-evident...
If you're taxing corporate income, it's pretty clear that Apple's and Google's supply curve will shift to the right. Not so much Samsung's or Nokia's. Taxing corporate income harms exports. Trying to tax only the corporate income from products and services sold in the US is in essence a VAT and then we're not talking about corporate income tax.
>But taxing high salaries is "regressive", just as much as taxing corporations, taxing consumers
I disagree here. For this to hold, executives would have to strive to keep their pay where it is. But this simply isn't realistic. Executive pay has exploded beyond belief in the last half century, it's completely unprecedented.
There is no reason to allow individuals to siphon off so much capital, and no benefit to it. Standard of living with $1B is no different than $10B (which is why after Steve Jobs hit $6B he stopped bothering with making any more money).
So in a no corp-tax world, if a US C-corp just keeps retained earnings and not pays out a dividend, then what? (Like Apple did for years.)
Granted, you still have capital gains from stock trading, etc. But if corporate profits not taxed, the company can simply sit on the money. They don't have to spend it on R&D, or anything else, as they do not need a tax write off.
It's a double-edge sword and there really isn't a silver bullet.
> you still have capital gains from stock trading, etc.
That's the whole point -- without corporate taxation, shares in corporations are more valuable, and the taxation is drawn from capital gains instead -- and capital gains tax should be far higher, of course (and ideally progressive as well, based on your total income).
Sure, companies can "sit on their money", but they already can. And that money is presumably invested anyways, so it's still being productive (on R&D in other companies, for example), and it certainly gets spent eventually.
> Sure, companies can "sit on their money", but they already can.
Not entirely, it is taxed at least once when earned (corp earnings tax).
Personally, high capital gains tax gives me a lot of hesitation, as you actually want to encourage people to invest and not dissuade them from doing it.
> Personally, high capital gains tax gives me a lot of hesitation, as you actually want to encourage people to invest and not dissuade them from doing it.
Interesting. I hold the opposite position as I would rather make company re-investments more attractive.
> ...Switzerland appears to be taxing total networth.
This is a wonderful idea! Though I could imagine the games that could be played with valuations.
While I agree with the points you make, there are no easy answers here. The problem with technology concentrating wealth in the hands of fewer and fewer people is that it gets really hard to tax those individuals. Partly because these people can move around easily and avoid your taxes, partly because it becomes morally difficult when the amount you're taking off one person is literally 100,000x what you're taking off someone else but also because, unlike the middle classes, the sums involved make it worth those individuals' time to hack the tax system to avoid taxes. Companies at least have offices or retail outlets that are stuck in your territory and can be inspected by tax inspectors and have turnover that cannot be disputed. So successfully getting at the proportion of GDP that the government needs to be able to give everyone a basic income may well be easier if you go after companies.
My feeling is that corporations shouldn't have a disincentive to make money.
Rather all ways of extracting money from corporations should be taxed at a high income tax level (rather than the low dividend and capital gains levels).
So corporations should have literally zero disincentive to make money? Is that what you intend to argue? Because that seems to imply that corporations should be completely unfettered in every conceivable way, be it legal, economic, ethical, or otherwise. Am I missing something there?
"Disincentive" is not the same thing as "impediment." This isn't to say I necessarily agree with the parent comment, but you seem to be responding to an overly strident reading of something that wasn't quite said.
Yes, you are missing that the idea is to tax the money when individuals get it out of the corporation for private use. Right now capital gains and dividends taxes are relatively low.
> My feeling is that corporations shouldn't have a disincentive to make money.
Corporate taxes are not a disincentive to make money. They are (since the structure of deductions applying to them makes them a tax on retained profits more than income) a disincentive to retaining profits within the corporation to avoid the taxation the stockholders would pay were the profits distributed (or earned by a business subject to personal rather than corporate taxes in the first place.)
> If anything, taxing corporations is regressive -- the taxes ultimately get passed on to consumers through higher product prices, regardless of their income levels.
Actually, the studies show that corporate taxes are essentially a proxy for the taxing the ultra-wealthy - a cut in the corporate tax rate is very similar to cutting the highest marginal income tax rate.
After all, if corporate taxes truly fell on the poor, Republicans wouldn't be for cutting them.
You started off with an interesting addition to the conversation, and I was hoping for a reference regarding the relationship between corporate taxes and the ultra-weathy, but instead I got a gratuitous, tired, over-used, boring, ad-hominem about Republicans that added nothing to conversation.
No he didn't. The national Republican Party is outspoken about raising taxes on lower income people, in "broadening the base". In the election-year expose of Romney's secret fundraising speeches, we learned about "the 49%" of Americans who don't pay taxes. Well, we didn't learn about it, it's a very common trope for conservative politicians.
It's no secret that Republicans largely support "base broadening", as well as less-overt attacks on the finances of the poor like their CURRENT attempts to divorce the farm bill from food stamps, to further cut food stamps.
You're trying to enforce some politically correct echo chamber where a national political party isn't responsible for their votes and their policy.
Republicans are openly for raising taxes on the bottom 50% of Americans, are openly for decreasing wealth transfer like foodstamps, welfare and unemployment, and are openly for lowering (and abolishing) corporate taxes.
Those are their policies and it is utterly and totally fair to state that and reference it.
Your comment and jellicle's comment are not quite the same thing.
Even then, you are painting some of the party's platform in a negative light without showing why exactly that is their platform to begin with nor why you consider them terrible ideas. Some of their reasons may be bad, but that doesn't mean all of their reasons are.
No he didn't say they were bad, he was just agreeing with the person that said they were bad. But I think it's fair to say that the tone of the discussion implies these two people feel negativity towards the GOP's platform without stating why.
Disagreeing with someone's idea doesn't inherently make that idea bad. People who have the notion that another person's idea is bad solely because they disagree with them with no other evidence is simply a shallow person.
Who is blocking comprehensive reform of the banking sector (which arguably drove not only the US into a recession, but the world as a whole)? Republicans
Draconian anti-abortion laws? Republics
Raising student loan interest rates while keeping lending rates to banks near zero? Republicans
If only these issues were as clear-cut as you seem to think they are.
There is plenty of evidence that the risky loans associated with the home mortgage crisis were motivated by federal policies advocated by Democrats such as the implicit guarantees associated with Fannie Mae and Freddie Mac.
The student loan debacle is another example of unintended consequences of government loan subsidies and there is considerable evidence that those subsidies are simply captured by the colleges and universities when they raise their rates.
Regarding defense spending, it isn't a surprise that the US spends lots of defense since the US basically provides a national defense capability for itself and most of its close allies. There is certainly plenty of ways to be more efficient on defense spending but Congressional support for inefficient defense spending is hardly a Republican phenomena. It is a systemic problem.
Anyone who thinks that the ACA is the be-all-and-end-all of healthcare systems is delusional. It is a bureaucratic nightmare riddled with stupid incentives, accounting flim-flam, and ridiculous complexity. Add to that the completely reasonable thought that the more appropriate location for these services, if they are going to be provided, is the states.
Immigration reform: Unending posturing from Democrats who seem to want no limits to immigration and Republicans who seem to want no immigration at all. On top of that, I don't think the public knows what it wants (i.e. no real grassroots consensus)
Abortion: I'm not going there other than to say neither Republicans nor Democrats are uniform in their opinions on this topic.
My basic philosophy is that neither party is acquitting itself with much distinction these days. It is foolish to think that the flaws in our public policy are the fault of either party alone -- they are both complicit.
The issues are pretty clear cut, the issue is you're getting bogged down by political party labels that have little meaning. If someone performs a bunch deregulation that's not a "left" position no matter what party they claim to be in.
Maybe the reason they are blocking reform on the banking sector is because they feel it wouldn't be necessary if only the Executive branch would actually enforce the laws already on the books that apply?
Maybe the reason they oppose abortion laws is because they feel they are saving human lives who have no say in the matter?
Maybe the reason they support such amounts of military spending is because they feel it is the nation's responsibility to do its best to provide for a safe and secure world, including using the military for life-saving operations?
Maybe the reason they are blocking current immigration reform is because they disagree with the methodology being proposed that is possibly unfair to current citizens including the ones who immigrated here legally and followed the law to become citizens?
Maybe the reason they are trying to prevent implementation of universal healthcare is because they feel the current law is ripe with corruption, waste, fraud, eventual failure, and will in the end actually make things worse?
You are again one of these people going with the notion that since you disagree with the other people's ideas you get to assume that the ideas are somehow bad. Notice that in no way did you explain why these ideas are inherently bad, you simply disagree with them. You are perpetuating the fallacy that they are bad simply because you say they are while ignoring the possibilities that they have good reasons to think that way. Next thing on your agenda will be to ridicule them in some way to show your superiority over such backward-thinking people in a feeble attempt to convince us you are right without actually having to prove anything nor support your accusations.
You are again one of these people going with the notion that since you disagree with the other people's ideas you get to assume that the ideas are somehow bad. Notice that in no way did you explain why these ideas are inherently bad, you simply disagree with them. You are perpetuating the fallacy that they are bad simply because you say they are while ignoring the possibilities that they have good reasons to think that way. Next thing on your agenda will be to ridicule them in some way to show your superiority over such backward-thinking people in a feeble attempt to convince us you are right without actually having to prove anything nor support your accusations.
Not at all. Being young, I will simply wait until the older majority dies off. It happened with black rights. Its happening with gay marriage, and it will happen with other socials issues.
Yet again, I'm failing to see your explanation as to why the platform is bad. Nor do you even really attempt to counter the quote of my comment that you provide other than say "not at all". In fact, you ignore pretty much ignore everything I stated. You just continue with the snide comments that do not support your argument; they just stroke your ego and false sense of superiority.
If your ability to win a debate that involves deciding how society should function is based around outliving the people you simply disagree with then I foresee a sad future. Because one day the younger generation will follow your example to disagree with you and put your older self out to pasture as that stupid old person who doesn't know anything.
But I suppose they may be right.
By the way, read your history. Black rights didn't happen in the US because the older generation died off; a few brave souls of the generation that was in charge stepped up to make it happen. Some of them died for it so you should at least have some respect. At least they were able to make a valid argument as to why they were right and not fall back on meaningless talking points that made them feel smart.
Currently, I see gay rights moving forward without anyone waiting on people to die off. Your argument is not only comical, it doesn't exist.
I'm not going to debate why the republican's platform is bad, I'm just going to throw my opinion in that I believe it only serves a minority of the country.
I don't post here to stroke my ego. I could not care less what someone on Hacker News thinks of my ideas or perceptions, although I do enjoy quality discourse.
You can CLEARLY see how public sentiment towards gay marriage has changed over the last 10-15 years. Either this occurred because of people changing their belief structure (doubtful) or because people with one mindset aged out of the population.
Republicans are also openly for reducing burdens (both regulation and taxation) on the wealth producers so they can make more of it and spread it around. Taking half of earners' incomes with one hand and blocking ways to earn more with the other will NOT end well. I'm making a good buck, but at this rate of taxation I'm gonna have to resort to self-sufficiency homesteading with zero taxable income. Remember the goose & golden egg?
Totally not fair to present only the allegedly "bad" parts of a position without the good goals that necessitates it. Opening the paths to hiring more people is quite fairly coupled with telling the capable to stop sitting around collecting checks; if you're going to socialize health care payment, you'll need to stop giving companies reason to not have more than 49 employees.
> Republicans are also openly for reducing burdens (both regulation and taxation) on the wealth producers so they can make more of it and spread it around.
Wow, you really do drink the trickle-down effect Kool-Aid.
You can't "spread the wealth" if there isn't any. Printing more money doesn't make more wealth, it just diffuses it more. If I stop working, you can't tax my now-nonexistent income.
I don't believe there is correlation between a lessened burden on wealth producers and it being spread around.
The burden on wealth producers is very low, one of the lowest points in the modern era.
You would expect in this era of hyper-rich and low-taxation that the wealth would be spreading around.
But it's not. Record profits for corporations (read: wealth producers) is turning into record stock highs, record numbers of billionaires and record lows for the middle class.
I refuse your argument because the world around me clearly shows that our "wealth producers" have figured out how to depress labor costs and increase investor returns. Great for them, but that concept is 100% contrary to your "wealth producers spread wealth".
No, wealth producers rightfully squeeze labor costs and rightfully return the biggest amount of money to themselves, their boards, and their investors. That's not spreading wealth downwards, it's spreading laterally only.
This isn't something you need to believe or not believe. The stats are in, decades of trickle down have not had the intended effect and various sources have shown this.
It's a pretty well supported fact that lessening the tax burden on the mega rich doesn't cause them to go opening businesses and it's surprising people ever believed such nonsense. Why would a rich person take a risk on a new business venture when the a fund can provide a steady, predictable return year after year with very little downside?
I think it's because many people don't separate a businessman from the business.
A businessman doesn't open more businesses when he has more money.
A businessman opens businesses when investors will pay and the market will support it.
Turns out, a businessman doesn't need his own money to start businesses, because without a market, there's no point of starting the business, and with a market, there is investment available to seize it.
We do have problems indeed. And as long as people continue to get bogged down with the silly "Democrat/Republican" song and dance, the issues can't be addressed. The parties are practically the same thing (see: Bush Jr. vs Obama) so seeing one side as a friend and the other as an enemy is just a straw man boxing match.
> Actually, the studies show that corporate taxes are essentially a proxy for the taxing the ultra-wealthy - a cut in the corporate tax rate is very similar to cutting the highest marginal income tax rate.
If by "wealth" you mean "net worth", then because that is even harder to administer than income taxes.
If by "wealth" you mean "income", we do that, but earning income through an entity with separate legal entity whose income is not taxed and retaining it in that entity becomes an effective tax dodge if it is permitted. Which is why corporate "income" tax (which is effectively a tax on retained profits) is included as part of the income tax system.
Given that the vast majority of wealth in this country in held in liquid assets or in real estate which is already taxed based on value, why do you suppose that a scheme to tax it would be more complex than the corporate tax system which employs on the order of ten thousand people and generates returns that are often thousands or even tens of thousands of pages and has been shown to be amenable to a wide variety of gaming through manipulating the timing and geographic incidence of profit?
There will be some complicated edge cases but there will be relatively few and the ability to game them is less because wealth is a simpler concept than income.
> Given that the vast majority of wealth in this country in held in liquid assets or in real estate
Source?
> There will be some complicated edge cases but there will be relatively few and the ability to game them is less because wealth is a simpler concept than income.
How is wealth a "simpler concept" than income. AFAICT, income is far simpler (and, in fact, involves a strict subset of the assessments necessary in assessing wealth.)
Non-financial non-real estate assets account for 5.8% of the total according to the Fed's flow of funds report (Z.1) table B.100: http://www.federalreserve.gov/releases/z1/Current/z1r-5.pdf. Note this also includes non-profits but that's a relatively small distortion.
Wealth is the value of everything you have less what you owe. Every item can be valued by seeing what people would pay for it, which is usually just its current market price. How do you determine income objectively? You could merely take wealth at two points in time but our society has declined to define it that way because much of the money coming in might go to some sort of expense which ought to be excluded, which is neither objective or simple, and because some changes (such as fluctuations in asset prices) are assumed to be transitory and therefore impractical to tax. The latter is actually the source of most of the perfectly legal tax evasion in this country: Hold stocks, generate value, pay nothing until you sell which needn't be ever.
> Every item can be valued by seeing what people would pay for it
"What people would pay for it" is a controversial quantity that can only be speculatively and uncertainly answered unless you are actually selling it in an open, unrestricted auction (even actual sale under real-world conditions often doesn't answer this, since its possible that both buyer and seller have non-financial interests which motivate the sale decision such that the purchase price does not represent the market value.) For pure interchangeable commodities with robust markets, this is less of a problem, but for many real world assets (including real estate) this is not the case.
Note that while real estate is already subject to ad valorem taxes (and other value-based policies, such as eminent domain), valuation is not at all free from contention even with those taxes as just one piece of the overall tax picture; if wealth-based taxes were the primary tax system, that problem would be magnified.
> How do you determine income objectively?
If you can value wealth objectively, you can value income objectively, since income is just a subset of the changes in wealth. The problems in income valuation are problems in wealth valuation (which is why, e.g., capital assets are valued at sale for income purposes, which becomes less viable of a solution to the problem of valuation if you aren't taxing the change in wealth but taxing the wealth in each year it was held.)
Of course, there are imperfections in some assets. Let's not talk in the abstract. We've established that this problem applies to 5.8% of assets. Some percentage of those have reasonably computable valuations. If not or if the valuation is contested, we can allow tax to be paid on profits as an alternative or a cumulative tax to be paid at sale based on average value through the holding period which could be inferred given a standard growth curve.
Real-estate appraisals are imperfect but getting within 20% most of the time is quite achievable. The main problem is for unusual or expensive properties which could be handled similarly to hard-to-value assets.
Your statement doesn't follow unless defining that subset is easy. What should be included or excluded? As we're discussing corporations, we have ample evidence of the ability to game. You could suggest closing loopholes but most of the loopholes also have legitimate uses.
You write that "capital assets are valued at sale for income purposes" is a solution to the difficulty in measuring their value. Why is this the case? Remember that the origin of this discussion is whether it's better to tax corporate income or the wealth of those who own the vast majority of that income. Are you asserting that valuing a person's equity holdings is difficult?
> "What people would pay for it" is a controversial quantity
Yep. A friend thinks we should have a "You bought it!" law for insurance companies that assess the value of your belongs to calculate a premium. Basically once they give you their assessment, you have to right to say, "You bought it!" and they have to take it off your hands at that price. Not that such a law could work in the real world, but it is pretty clever. I bet a lot of people wish they could use such a law for property tax assessments.
The incentives do not necessarily work well there.
But I could imagine a "We The People Buy It" under a system of wealth taxes. That the gov't could choose to buy any asset for a modest premium over what the taxpayers asserts it was worth for purposes of taxes last year. Heck, maybe any citizen should be allowed in on that game?
"Hmmm, you say your restaurant business is worth only $300k? It is your lucky day! I just bought it for $360k."
Income is not simpler, as you can change around how people are compensated, which is exactly what's happened for the better part of a century at least [1]. But if you own a garage full of Ferraris, then you own a garage full of Ferraris. The only problem at that point would be foreign held wealth.
[1] One of the reasons the US got into the health care mess they have now was companies taking over the payment of health insurance instead of giving a salary increase. Workers liked this because it effectively meant they paid less taxes.
> If by "wealth" you mean "net worth", then because that is even harder to administer than income taxes.
That is the standard argument, but countries have been taxing property a lot longer than they have been taxing income. Some even manage to tax property at current market prices (e.g. Canada).
> That is the standard argument, but countries have been taxing property a lot longer than they have been taxing income.
That countries have been taxing selected forms of property longer than they have been taxing income is in no way inconsistent with taxes on net worth being harder to administer than taxes on income (and even if they had been taxing net worth longer than income, it wouldn't be), so that's not even a counterargument.
As you mention, inflation results in people losing real wealth proportionally to the amount of total (nominal) wealth that they have. On the whole, it's a fairly progressive form of redistribution, as long as wages are able to rise with inflation.
It would seem to me that an unconditional basic income could therefore be paid in part through this mechanism, with the inflation caused by simply increasing the amount of money in circulation. That is to say - the money could simply be created by the government. You can frame this as deficit spending (if you'd like) or you can frame it as the equivalent printing of money. This could (by act of Congress) be done without floating bonds to cover the deficit, but that might cause some conservatives to freak out.
Exactly - wages do rise with inflation, but as we know from intro macro, there's always a bit of a delay due to contracts etc. The problem with inflation is it drives people even further up the risk curve to find yield.
The other problem is that while inflation incentivizes moving up the risk curve, capital gains work in the opposite direction, incentivizing idle cash balances. One side of the government wants you find yield, the other punishes you for finding that yield.
At the end of the day, you're just going to make people find that yield (they have to) and you won't increase tax revenue. People can stomach _some_ risk, but not an infinite amount (especially the institutional guys).
As a seller of products or services, what motivation do you have to peg the price of your products or services to such an inflationary measure?
Developing countries frequently switch to USD/EUR in times of financial calamities, as marketplaces there gravitate towards currencies that preserve wealth, not erode it, which is what you're planning to institutionalize.
> After all, if corporate taxes truly fell on the poor, Republicans wouldn't be for cutting them.
That kind of presupposes that Republicans are all about saving big business and not the poor.
What if Republicans favor cutting corporate taxes because they are regressive, and their support of 'family' values means they want to protect the income and lifestyle of the poor to middle class families that make up the majority of the American voting population?
It's not that simple. Of course, the direct effect of corporate taxes is mostly on the wealthy who own most of the stock but that's not necessarily the group who gets most of the wealth--more on that below. Even in terms of direct payments, wealth isn't the only important factor. As significant is a company's willingness to be creative. I have never seen a corporate tax scheme that's ungamable that doesn't involve giving the IRS more discretion post-hoc in applying the law nor is one feasible in practice given the resources a company tends to devote to minimizing a multi-billion dollar tax bill. So we have the perverse situation where, to a significant degree, tax creativity is a productive economic activity and belief in adhering more closely to the spirit of the law of punished with higher taxes.
As for the economic payers. Consider what happens if we eliminate corporate taxes: The company has more money. It can use that money in three general ways: Lower prices, raise pay or return it to shareholders. In a company with little competition, the optimal calculation is fairly simple. Does the additional return enable new entrants at current prices? Do we have employees who could leave and create competition and to what extent does the additional cash-flow make it more likely? In a competitive environment, the right answer is based on the sensitivity of profit to talent, the sensitivity of talent to pay increases, and the sensitivity of consumers to price decreases.
Given this different factors, what's the empirical answer? It varies based on circumstance and no one can say definitively. Here's an example of one attempt to answer based on variation in European tax rates that suggests that 49% of the taxes are paid by workers: http://www.econstor.eu/bitstream/10419/51691/1/66322666X.pdf. You can find many more papers with different points of view through your favorite search engine.
Yes, given executive compensation trends, I wouldn't be surprised if executives would get a disproportionate share. That's largely irrelevant to understanding the aggregate impact. At large corporations, CEO compensation is usually less than 0.1% of profits.
It is somewhat the same as raising pay, except is it not true that the average worker's pay has been flat for many years now (even those employed by corporations" while executive pay has drastically increased?
And I personally don't think the harm is in what percentage of the profits is paid to them per se, I think the more harmful aspect is the perverse incentives that are created when executive compensation is tied to short term corporate performance.
You're absolutely right about where the risk lies. That's why large shareholders have become increasingly concerned about alignment. CEO pay is increasingly in equity and they are subject to minimum equity holding requirements and clawbacks. I'd like to see larger minimums relative to their equity compensation but in the grand scheme of things this is a small issue.
It's also worth noting that short-term investors are a greater threat to long-term focused decisions than pay incentives. Most CEO's aren't actually foolish enough to risk destroying their company for more money in the near-term. They like their jobs so what does terrify them is an investor demanding more leverage or adopting a riskier strategy on pain of advocating removal or a hostile takeover. When Chuck Prince said he couldn't sit down until the music stopped, he wasn't worried about a smaller bonus but about posting lower profits that would have led to calls for his removal. "There was a merchant in Baghdad..."
Increase in corporate taxes will be partially paid by consumers, but also it will reduce corporate profits. If they pass it completely to consumers, it will reduce demand -> reduce revenue -> reduce profits, so the increase will be paid by both parties. If anyone believes in market forces and the invisible hand (also if you took some basic economics courses) you should agree with this.
>> If anything, taxing corporations is regressive -- the taxes ultimately get passed on to consumers through higher product prices
Tax on corporate profit does not need to have this effect, because it only applies to profits, not to revenue.
Sure, if a corporation wants to keep the same amount of profit after a tax hike it has to put its prices up. But because we're only taxing what's happening after deduction of costs, there's room for others to come in and compete with a lower margin (and lower taxes as a result).
It encourages firms to reinvest, to hire more people and to find other productive ways to use the money rather than either sitting on it or passing it directly to shareholders.
But most businesses need those profits to expand and innovate. If they require a certain level of profits to accomplish those goals then the recourse is to raise their prices for the next round of profits in the hopes being to accomplish those goals.
Now, if we're talking about a company that just puts all those profits in the pockets of their upper management then I suppose who cares. But the smaller companies, those that survive on razor thin margins and need every penny they can get to keep going, those are the companies that have to constantly adjust their prices to deal with tax liabilities.
If they don't use profits as part of their expansion plans, then how do they expand year-over-year without spending more money than the year before? If they spend more money than the year before then where did the extra money come from if not from the previous year's profits?
The best policy argument I know of for taxing companies is that it adds a financial incentive to reinvest profits into the company to avoid taxation.
Raising corporate tax rates might or might not result in higher consumer prices. Depending on the company or industry, it might instead result in lower profits (which harms investors not consumers), or different management decisions--for example it might lead companies to invest in more growth abroad than domestically since the tax rate is lower abroad.
I'm not in favor of corporate taxes for practical reasons--I think they're too hard to make work in an international setting. That said, it is not necessarily the case that taxes on corporate profits are passed on to consumers through higher product prices.
At always comes back to prices being the equilibrium of supply and demand. Taxes on corporate profits obviously have no impact on demand, so we must look at supply. Does taxing corporate profits reduce the amount of supply producers are able to put onto the market at a particular price? In a totally competitive market, profits approach a marginal amount and there is very little to tax anyway. So what about not perfectly competitive markets? If you tax Apple 10% of their profits instead of 5%, does that reduce the number of iPhones they are willing to supply at any given price? If taxes are applied uniformly through all industries, so that Apple can't get a lower tax rate by going into a different industry, then not really.
This is of course a very simplistic analysis. You have to consider things like elasticity of demand, etc. But basically, you can't ignore supply and demand. If you raise prices, quantity demanded will go down, and so the profit-maximizing price is not necessarily or even usually one in which the consumer bears the full amount of the tax.
I think Apple would offshore more and more businesses as every other large companies who can afford to has been doing for decades now. And that I think is always the problem with simply raising more corporate taxes in US.
As you raise more corporate tax in US, doing business in US becomes less and less attractive. As business move away from US, there will be less and less jobs in US. This already and undeniably happened with manufacturing sector. Unfortunately, people are now again arguing for increasing more taxes in US which will further lead to more business moving their business to other countries.
Right, I think practical reasons militate towards eliminating corporate taxes and shifting the burden to capital gains taxes. A number of companies have recently reincorporated from the U.S. to high-tax (but low corporate tax) jurisdictions like the U.K. and Switzerland. Companies have shown that they don't care about forcing their executives to move to jurisdictions with high personal income taxes, if they can get the benefit of lower corporate taxes to show higher earnings per share.
Profits are also a cushion for the future years when the sales are not that great, and the company has to dip into its savings account or force layoffs and trim product offerings.
While high corporate taxation environment is great for boom years (unless your corporate constituents relocate), it necessitates bailouts during the bad years. Good example would be some European socialist economies overly reliant on state enterprises.
Not just in an international setting. Even in a closed universe it's a lot more difficult to measure, or even define, profit than revenue. Although they are both called income tax, individuals are largely taxed on income, corporations on profit.
Better would be trying to tax the beneficiaries of the corporation. The best measure of profitability is some benefit to the owner. Usually capital appreciation or dividends, but sometimes outsize cash or non-cash compensation in an employee context, or as a non-arms length counterparty.
Increase the dividend and capital gains* rates substantially, start taxing fringe benefits, transform the corporate income tax into a very small tax on revenue to prevent the multiplication of corporate entities, crack down on people who renounce US citizenship (by for example making them inadmissible) and call it a day.
*Also eliminate the capital gains basis reset when assets are transferred at death. That makes no sense at all.
On a purely logical level, for sovereign nations issuing their own currency, taxation is completely decoupled from spending. You can increase taxes if there's an economic reason for doing so, but it is not a prior constraint on spending.
Not if you think runaway inflation is a problem. With fractional reserve banking, printing $1 adds well more than $1 to the economy (look at charts of M0 vs M1 vs M2). The government only gets to spend that $1. Meanwhile, threat of inflation makes it harder for the government to borrow money, meaning it needs to print more to cover the increased demands for interest.
This is not to say that printing any money ever is a disaster, but simply that there are absolutely constraints imposed by economic realities.
This assumes an erroneous loadable funds model where loans are supply driven; loans have always been demand driven. It's the same reason why QE isn't inflationary, just because there's more reserves in the system doesn't magically make creditworthy borrowers show up.
Doesn't adding dollars to the economy (through payment rather than loan) increase the ability to repay loans of those paid, those paid by those paid, etc, and thus their corresponding creditworthiness? Also, if people have money to spend, companies will borrow to service their needs. It's not about the ability of the banks to loan the money out (which is part of why QE isn't very meaningful).
If it is added where it will directly translate to demand (e.g. eliminating payroll tax) then you will get more spending, which will cause businesses to hire, take on loans to meet the new demand. At some point if you keep adding, you will surpass the ability of the market to absorb the demand and you will get inflation.
If it is added on top of already flush corporate balance sheets (e.g. eliminating corporate taxes), then you most likely won't see much difference in the current environment. They won't use it to hire more people because the demand isn't there.
Loans in and of themselves don't add net dollars to the private sector, as they create a liability for the exact amount of the loan (plus interest). For the domestic private sector to experience a net increase in financial assets, either the sovereign government (whoever's name is on the money) or the foreign sector must increase its deficit.
> If anything, taxing corporations is regressive -- the taxes ultimately get passed on to consumers through higher product prices, regardless of their income levels.
This has never seemed like a strong argument or an accurate description of what actually happens to me.
If it's true that businesses just pass along taxes, then:
1) I'd think businesses wouldn't be so concerned with minimizing/fighting taxes. What we seem to see instead is that businesses seem to be concerned they will be carrying the cost and investors seem to be worried it will cut into profits.
2) I assume that's true for me, too, of course -- presumably, I don't pay income/payroll taxes either, I just pass along the cost of those taxes to my employer. My employer, as given, just passes those costs along to consumers. Consumer just figures in the costs of goods/services and calculates their asking price for their market offerings accordingly...
So nobody pays taxes?
It seems more likely to me that rather than people "just" passing costs along whole is that everybody pays the tax by finding some economic balance between what they can/must pass on and what they can/must absorb. How much is passed along probably depends on how competitive the market for each exchange is along every cascade and how price sensitive buyers are.
> Taxing corporations doesn't produce magic money
I don't think anybody really thinks it does. The idea is to distribute the load, which taxes (passed along or not) do.
On point 1, tax avoidance is more strongly incentivised if the costs are passed on to customers. Higher prices are a huge competitive disadvantage. A single company avoiding their taxes can undercut their competition and dominate the market, forcing all of their competition to follow suit.
You are only a quarter right (or whatever). The incidence of corporate taxation can fall on various entities including the consumers, the employees, and the shareholders. The better argument is that corporate taxation is double (or triple) taxation, as the corporate income gets distributed down to employees and shareholders, which then gets taxed again as personal income and capital gains.
My understanding is that the qualified dividend tax rate is technically a different thing than the capital gains tax rate, and they only happen to have the same value - not that that's very important to this discussion.
More importantly, this is partly incorrect as it applies to employees. Employee wages are an expense deducted before corporate profits are taxed; I believe (though I'm less confident) that in the case of profit sharing money going to employees could face double taxation.
Most importantly, though, "double or triple taxation" is misleading. Every time the money is taxed needs to be taken into consideration, to be sure, but the ultimate question is the overall rate, not the number of passes. (Please, please, please QUINTUPLE TAX me at 0.01% per pass...)
With loopholes and exemptions and deductions and sliding scales and different rates in different jurisdictions and everything, that's not a simple question, unfortunately.
Oversimplifying, though, for a single example...
Consider the following individuals in a State (fictional, if necessary) with no corporate or individual income tax and no tax on dividends, interacting with a corporation in the same State. The corporation turns a profit (income minus expenses) of $2 million/year, some of which it saves year-to-year and the rest of which it pays out in dividends.
1) Middle-class employee of the company.
2) Super-wealthy stockholder in the company.
3) Minimum wage employee of the company.
4) Middle-class stockholder in the company.
1) Makes 75000, takes standard deduction of $6100. Pays $14492 in income taxes, plus $9300 FICA (half of which comes from employer, but it's still a tax on the employee's income) for a total of $23792, or an overall tax rate of about 31.7%
2) Assuming their income is such that they can be reasonably assumed to be paying the top bracket on their average dollar (this person is really making a ton of money, and it's not all coming from this company): A dollar of corporate income that will wind up in this person's hands is taxed at approximately 34%. The $0.66 cents per dollar that he's receiving is then taxed at 20%, meaning a total of 47.2%.
3) $7.25 * 40 * 52 = $15,080 / year. They pay only $901 in income tax, but the $1870 they pay in FICA brings it up to $2771, which is about 18.4%. They may or may not qualify for assistance under one or more of our various current means-tested systems.
4) Profit within the corporation is taxed the same as for the wealthy investor, but now the $0.66 cents per dollar income is taxed at only 15%, for a total of 44% instead. This assumes they are making more than $36,250, which seems fair - but if they are not, the tax rate on the dividend income is 0%, so they are paying in total only the 34%.
I'm not making any particular point regarding what tax policy ought to be, just trying to shift the focus to numbers that are more meaningful.
What I personally don't understand is the reluctance to tax consumption as opposed to production.
From my point of view, it is easier to decide how much to tax a particular good or service e.g. a luxury car vs. a basic car vs. public transport. Another example would be a salon visit vs. a doctor visit. In addition, sales taxes are less personal (maybe even less controversial). As opposed to taxing "me" or "you", tax that "thing". Finally, sales tax seems easier to enforce since it is applied at the point of sale. However, I will admit that it's easy to avoid paying sales tax if transactions are paid for by cash.
It would not be regressive overall. The corporate tax and basic income need to be considered together. You are combining a corporate tax that might be regressive or flat, with a lump sum payment of equal magnitude. The net effect is most certainly progressive.
Taxing corporations may not produce magic money, but it is certainly more efficient than taxing individuals. Look, for example, at the Canadian tax system which offers near full integration for corporate taxes. Corporate taxes be a way of capturing money up front and limiting tax avoidance.
If we had a flat tax with basic income, one could scrap taxes on employment and just tax corporations by denying salary as a deduction. This would be equivalent to the standard approach of writing-off salary expenses and taxing individuals.
What is the advantage of doing this in terms of "income" and "currency" rather than in terms of "rations" and "allotments"? Is it a purely rhetorical difference?
Basic income in the form of currency is fungible and cumulative with other income, rations/allotments, as usually understood, are non-fungible (for specific goods) and usually non-cumulative with other income (that is, a "ration" means you get that much and can get no more, rather than that you get a basic amount and can buy more freely.)
The big issue with UBI entirely replacing the welfare system is that it ignores those who require more money due to disabilities. Person X can subsist on £Y/week, but person Z needs fooprazatine which costs a non-negligable quantity of £Y (there are also other, more nuanced scenarios but drugs come to mind first). Of course there are ways around it and medical benefit fraud is already incredibly low (it's hard to fake that you need a carer or an expensive regimen of drugs (painkillers notwithstanding)).
The author of this is article is more than a little bit out of touch. To be honest, HN is the only place I have ever even heard people discuss the concept of an Unconditional Basic Income or call Bitcoin a "radical economic ideology". Most people in the US have never even heard of Bitcoin or an Unconditional Basic Income.
The author is so far removed from reality that it's almost humorous. He cites an example where Instagram has apparently replaced Kodak, an example as ignorant as it is misguided. Having known one of Kodak's chief inventors from before the company began its steep decline, it is evident that Kodak collapsed from a series of bad decisions and a failure to secure its territory in IP space. Comparing that to Instagram isn't a comparison of apples to oranges, it's a comparison of oranges to a desk lamp.
I could go on, but there's no need. This article is crap factually, logically, and intellectually. I understand that the title panders to the closely held ideologies of many on these boards, but if you have to look this hard to find arguments for why we're moving toward a UBI, then we're probably not moving toward it at all.
Agreed... he lost me as soon as he cited that idiotic Kodak to Instagram concept. The idea that the 13 people at Instagram are the effective replacement for all of Kodak's business (while ignoring the 500K-odd people involved in building the phones instagram runs on) is so dumb it's galling.
> Most people in the US have never even heard of Bitcoin or an Unconditional Basic Income.
Most people also don't understand technology and what it means that, to quote a Portal poster, "Robots are SMARTER than you, Robots work HARDER than you" [0]. Those people who have never heard of UBI will also, in 30 years, never hear of their jobs again.
However, Bitcoin is a radical economic ideology, and UBI is certainly not limited to HN -- it's been discussed all over the world for decades. Most people might not have heard of it, but they have not heard of most political ideas in general.
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[ 2.8 ms ] story [ 338 ms ] threadI've heard talk of the government being the employer of last resort, which has its own problems. But just paying people to breath has problems as well.
I'd just like to avoid having the government pay people to, say, drink and party. I think there does need to be some external social pressure / structure to motivate people. Otherwise, you wind up with the same political problems what current welfare programs have.
The best solution I can think of is that the government hires and trains people to do some form of public service if they can't find anything else they would rather do. Limit it to 20 hours per week. If people are really useless, give them a disability wavier. If not, have them plant free or clean up parks.
I've seen the impact of people living on the dole in Britain. It's not good for them or the society. It just abandoning them to lead a mediocre life.
Your proposal would create a poverty trap in exactly the same way as the dole (in fact this is how the dole currently works in Britain -- you've just described something quite akin to the Workfare program, aka slavery for the wageless). Unconditional basic income is not like this at all. It isn't paying people to be idle: it's paying people no matter how much they earn. Because you can never lose your basic income, you are never disincentivised from working. Thus people can volunteer, raise children, care for elderly parents -- or work part-time, or full-time, or in whatever situation they prefer -- without ever losing their safety net. This allows for nire diverse forms of value-creation to be created than in the kind of micro-managed nanny-state that you describe.
It really comes down to how much you trust people to find their own path.
That clearly depends on how old they are. Below 18, you are required to be in school and you are not allowed to work. After 65, you get to live off our national pension plan and get free health care.
The other thing that makes me cautious about the unconditional income approach is the handful of rich kids that I knew in High School in Austin, TX. They had everything they could possible want handed to them and were miserable. It was puzzling as hell.
FDR had a really big internal debate over this during the Great Depression. Read a little of the history of that era -- it is not an easy tradeoff.
Basically, I think that people are really good at finding their own paths. It's what people naturally do, providing that they aren't structurally prevented or disincentivised from doing so.
And yes, I've seen the miserable rich-kid phenomena first-hand, and agree with you that too much privilege can be a real handicap. That's why I think it's quite important that an unconditional basic income be genuinely basic: enough to survive on without any privation, but not enough to be decadent on.
I've found a neat mechanism for appropriately setting the level of a basic income: 50% of the mean individual income. Here in the UK, that would produce a basic income of roughly £12k/year -- a bit less than working a full-time job at minimum wage. Enough to live a fairly decent life in a (now) impoverished Welsh ex-mining village, or enough to barely scrape by with a bunch of flatmates in London. But not enough to be extravagant on, in either case.
The nice thing about pegging the amount of Unconditional Basic Income to the mean earned income is that it builds in an automatic self-correction mechanism. If too many people exit the workforce, the mean earned income would fall, and the UBI would fall exactly in sync with it. As the UBI falls, people would be increasingly incentivised to re-enter the workforce. As people re-enter the workforce and the mean income rises, UBI would increase along with the inevitable increases in inflation.
1: http://www.givedirectly.org/evidence.php
Basic income is not against working, it's point is to let people work in all kinds of situations. Old-fashion social security usually makes the tax rate for certain part-time / freelancing work 100% (e.g. $100 increase in pay can reduce benefits $100, therefore the actual marginal tax rate is 100% and most people won't do that work).
> But just paying people to breath has problems as well.
You can do that in most Nordic countries, and it has many more benefits than disadvantages. For example, you can walk safely everywhere because everyone has sufficient social security. Street robberies and whatnot are practically non-existent.
2) About the "Nordic countries". WTF ? Have you looked at the crime stats for Malmo ?
Please note that the nordic countries are in a somewhat special situation just because of their location. They also have very few homeless. Of course, homelessness is a death penalty there, merely because of the weather. That means that in Nordic countries everybody has a house, and not made from wood, double glazing, brick, generally solid and everybody's inside before the sun is down. Breaking and entering after dark is insane.
Yeah, well immigration can create major problems with crime.
>They also have very few homeless. Of course, homelessness is a death penalty there, merely because of the weather. That means that in Nordic countries everybody has a house, and not made from wood, double glazing, brick, generally solid and everybody's inside before the sun is down. Breaking and entering after dark is insane.
Yeah, because we have a good social security and everyone can get an apartment.
How is this a problem, when all the essencial work is done by machines and people who do like to do those particular types of work?
"Work is fulfilling" is one of many illusions the society created to shield itself from the fact that we are still, as we have been for the entire history, slaves who can only either work or starve. We are used to this state of the world so much that we've invented many cultural memes so that we can feel good about it.
It is very similar to how people invent 1001 reasons why death is good and gives meaning for life. It doesn't. It's just we can't bear the sadness of our situation, so we invent excuses and stockholm-syndrome ourselves to avoid the pain.
To me that sounds like an argument against BI. You're basically saying that we can have the social safety benefits of BI for only 10% of the cost by using means-tested programs . Since that's what the Nordic countries are doing, and according to you it works really well.
No, BI can cost the same amount as Nordic social security, while increasing motivation to work and helping people more. (Source in Finnish: http://www.vihreat.fi/files/liitto/Perustulolinjapaperi.pdf ).
Nordic social security works better than American social security, that's fore sure, but it can be improved on. The main problem currently is that social security assumes that people are either unemployed or employed full-time. This assumption is increasingly false. There's more and more part-time (and 'part-period', e.g. full-time for 3 days only etc.) and freelancing work.
Basic income really means social security without that assumption. If you work 0h/month, you get 100% social security. If you work 120h/month, you don't get anything (because you'll pay for the basic income through taxes). If you work 60h, you'll get someting in-between.
And there's no paper work or bureaucracy.
There are all kinds of work that people undertake today that are not paid for or economically rewarded. Providing a basic income allows those people to continue to do that work or explore new kinds of work that aren't paid for at this time.
No, it doesn't, instead, it leverages it. Basic income increases labor mobility and increases the ability of people to find the most fulfilling work (which may not be the most financially rewarding, especially in short term analysis.)
Fund basic income with a large tax on various CO2 producing activities. With the idea that - on average - people can pay this tax out of the basic income received from it. And people will have direct incentives to find ways to reduce CO2 consumption. Then get rid of silly specific legislation that tries to achieve the same goal in less successful ways. Thus fuel efficiency, California's attempts at cap-and-trade, incentives for renewable energy - all should become unnecessary.
It's a real pity that many good legislative ideas seem to be susceptible to simplistic populist attack if you yell loud enough.
I'm having trouble finding it now (so please take it with a grain of salt), but I remember once reading a quote by a southern US politician in the 1950s that went something like: "I used to talk about paving roads and better schools and no one listened. Then I started pounding tables about [black people] and suddenly everyone supported me."
Similarly, Joe McCarthy (of McCarthyism fame) was a pretty unremarkable Senator for his first three years in office. Then one day, he claimed he had a list of known Communists working in the State department, and the next day he was a household name.
Populism has always been a really easy way for politicians to drum up fervent support. A shame that it rarely ever solves any problems.
I still don't know the answer but realising that the media were actually part of the effective bureaucracy was a revelation.
We've been lucky, for a long time, that the media has basically done the right thing for the good of the country. Collectively, they are in charge. They slip up every now and again, giving air time to toxic memes like the carbon tax thing, and of course the example you raised - McCarthy suddenly got traction because he comes bearing gifts of news. But generally it's been not too bad.
I hope we remain lucky.
One selling point of basic income is that there's no loopholes and there's very little bureaucracy costs, therefore a larger portion of the money is actually used for consumption instead of doing unnecessary (for society) work.
If you create a significant CO2 tax separately from some specific program, like basic income, the fear is that it will be (and will seen to be) just a general supplement on government spending. Which has a tendency to grow until it cannot, so you're just putting off an inevitable crunch that we're already bumping up against.
But if you tie them together, the pain of the tax is balanced by the pleasure of the income. And people have been shown to enjoy that sort of thing. Witness the popularity of tax refunds, even though getting one is strictly worse for you than not getting one.
You can then offer tax credits for CO2 capturing (with the burden of proof on the claimant).
1) The numbers don't work out. Even a very steep CO2 tax will produce too little revenue for any form of meaningful BI.
2) The money collected on the CO2 tax could also be used for a general tax cut. So you still have the political problem of explaining to working middle class why their money is being handed out to lazy bums.
2) Very few poor people are lazy bums, in my experience. There "lazy bums" are also sometimes the people creating amazing music, Wikipedia, or other valuable (and un-monetized) cultural products
3) The author didn't specify a time period, simply that given the capital > labor trend, a BI will be necessary if we don't want absolute and complete inequality
The USA currently consumes about 450 billion gallons of petroleum products per year, which is about 1.5 trillion pounds. We also mine about a billion short tons of coal per year, which is 2 trillion pounds. We have about 300 million people.
Taxing $0.75/pound on carbon fuels would generate a bit over $6k/year per man, woman and child. That's $4.5/gallon. This is enough to put a family of 4 at about $25K/year in basic income, which is just above the poverty line this year.
There is enough revenue. You just have to accept a higher tax.
2) The money collected on the CO2 tax could also be used for a general tax cut. So you still have the political problem of explaining to working middle class why their money is being handed out to lazy bums.
The middle class receives the money as well. This kind of program - where everyone pays and everyone receives - has proven very popular in the past. See social security for a demonstration.
Consider a tower of blocks with two legs, of equal height, and a problem that the tower is too short. If you lengthen one of the legs and not the other, the tower tips over. But that's not a necessary result of the tower being taller; it's a result of the tower being off balance. If you lengthen both legs by the same amount, the tower stands.
You can of course argue that tower height and tower balance are the systemic variables, with length of tower legs being incidental - and this is a perfectly reasonable point of view, but how would you propose we determine how to draw those lines in public policy? If we're free to draw them wherever we please, discussion by discussion, this seems like a fully general counterargument (http://wiki.lesswrong.com/wiki/Fully_general_counterargument) against any potential change: we can't raise the height of the tower, because that involves lengthening both legs, and I prefer to change one thing at a time; we can't lengthen one of the legs, because that changes height and balance and I prefer to change one thing at a time.
Apparently corporations will be subsidizing this:
"How would we pay for it? We could start by getting corporations to pay their taxes. As I mentioned above, corporate profit margins have hit an all time high, and that money will circulate far faster if it’s placed in the hands of consumers."
There are various income models, and that's just one example.
The reason people can't find work now is due to the failures of central planning, not the lack of it. Communist and hard-socialist countries all have tried the basic income idea and failed. The only exceptions are where the basic income is funded through resources, not confiscation of wealth - and even this takes wise, benevolent leadership.
When you confiscate wealth to provide a basic income, you create a disincentive to create wealth and an incentive to not work in exchange for basic income. This creates a rapid increase in both, which backfires because you have more people to support with basic income and less revenue because business owners scale back.
It all sounds good in theory, but in practice...
Edit: Interesting on the downvotes without the explanations. Do any of you live in the real world?
I know of a few short lived experiments, but I'm not aware of any country that has implemented a basic income, let alone failed at it. Could you let me know where you're thinking of?
> It all sounds good in theory, but in practice...
... where has it failed in practice?
1.) Cheap money via gov't Fed Policy (created the artificial boom) 2.) Government mandates in mortgage lending (caused a lot of people to buy homes when they weren't in a realistic position to do so)
I need to get back to work so that others don't have to.
At least that's what my USSR-born wife explains.
However, I don't believe in your analysis of the banking crisis, either. You seem to have missed out a lot of other reasons. From wikipedia:
> In its "Declaration of the Summit on Financial Markets and the World Economy," dated 15 November 2008, leaders of the Group of 20 cited the following causes:
During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions.
i.e. Though it was also a failure of other things, it was by large part a failure of corporate risk assessment and lack of regulation.
Communism didn't offer a basic income. People were paid for doing works at jobs. Which everyone had. The constituion of communist Poland even listed having a job as a citizens duty.
How can you ignore globalization and automation? Even if you think those things have had no impact to date, they undoubtedly will in the future, right? Particularly the latter.
Also, keep in mind that nobody is proposing communism. Milton Friedman advocated a basic income.
The Mincome experiment (http://en.wikipedia.org/wiki/Mincome) dabbled with this idea and the results were rather surprising. Most people seemed to want to work rather than loaf around and collect benefits.
Don't think you'd have to "tax the rich like crazy". Would returning to the tax rates of the 1990s be "crazy"? Would closing corporate loopholes be "crazy"? Would investigating why trillions of dollars in tax havens have somehow escaped oversight be "crazy"?
This idea does not stand up to any scrutiny at all. The cost of administering a welfare bureaucracy is minuscule compared to the cost of a BI program.
> Don't think you'd have to "tax the rich like crazy". Would returning to the tax rates of the 1990s be "crazy"? Would closing corporate loopholes be "crazy"? Would investigating why trillions of dollars in tax havens have somehow escaped oversight be "crazy"?
None of those suggestions would come anywhere near the amount of money needed for a BI program.
Most of the cost of administering a welfare bureaucracy is in validating and enforcing the conditions on beneficiaries. Unconditional Basic Income avoids these costs quite directly.
Quite the contrary! The "Basic Income" idea stems from the rich. They would simply cut all welfare expenses, including medical.
Also, these kinds of ideas should be tested on a smaller scale - may be a town of 25,000 people? That would be really interesting.
I know it's hard to fathom, but people purchased real estate, and will continue to do so with, or without, central planning.
Central planning (expanding the monetary supply and forcing banks to lend) has little effect on my business.
The problem that BI advocates see with that is that there is much greater overhead in managing a default shelter program, food plan, non-food-non-shelter-necessities-of-life-plan, etc., than just establishing and managing a single universal cash allowance plan.
Also you can always increase BI (and if everybody gets it, that is going to be a fairly popular campaing promise), but people can only eat so much food.
It has a higher overhead even with a much smaller number of people using it, because the overhead is involved in enforcing the conditions which don't exist for unconditional basic income. (That is, the overhead in existing social welfare programs is largely costs expended to prevent people from using them, either at all or in the incorrect amounts for their particular qualifications. A fixed universal unconditional entitlement doesn't have that overhead because it doesn't have that function.)
> Also you can always increase BI (and if everybody gets it, that is going to be a fairly popular campaing promise), but people can only eat so much food.
People can recieve and derive utility from virtually unlimited amounts of food (just like money), even if they can only eat a limited amount, as food is a commodity.
And as much as the point you make about the politics of raising BI is frequently made about any social benefit, I don't think there's much reason to believe its true of BI. There are quite a lot of people who are already aware that benefits have costs (both personal and social), and the people who have the most interest in focussing on the personal cost also have the most resources to bring the social costs to the public eye.
That being said, there's no reason BI levels couldn't be managed by a politically insulated group (something like the Federal Reserve), and plenty of reasons why a legislature might prefer to leave those kinds of decisions to such a body.
Food: who decides who gets what? Vegan options OK? Food allergies? Only organic?
Whenever personal decisions are left to the government, things get bad.
You can go look up economics papers on Google Scholar or SSRN about the benefits of direct payments versus in-kind payments. You might worry that someone will use their direct payment and spend it on hooch, but you can't stop that: if you give them food stamps they will trade that for money and then spend it on hooch.
Not entirely sure the system would work, but it seems more viable than the current efforts ("Let's do X again, but this time we'll call it Y!"). Great article.
If people are working for a combination of extra cash and personal satisfaction (as opposed to "not eating catfood under a bridge"), you could safely eliminate minimum wage and some jobs would probably be priced at close to or near $0. I can't tell you how many times I've gone to a bookstore or even library and had to fight my brain telling me to rearrange all the books in the correct order. Given unlimited free time, you'd have to pay someone to stop me.
On the other hand, I'd expect unsatisfying or unpleasant jobs to pay more, since people could fearlessly tell their bosses where to put it.
If I had to guess, though, you'd also have an uptick in part-time jobs, especially the shitty ones. Maybe most people don't want to be a garbage man 5+ days a week, but if the pay is good you might find quite a few people who are willing to be garbage man once a week or once a month.
It's basically a way of making sure that people don't starve to death while unemployed, but without having to put any kind of bureaucracy in place.
EDIT: Fixed parens
But if we could trade B.I. for Social Security, Medicare, Medicaid, SNAP, and other social progams-- it would probably be more cost efficient as individuals look after their money better than other people do.
Here's a video from Milton Friedman (not Tom Friedman!) who is advocating for a negative income tax-- a variation of basic income.
http://www.youtube.com/watch?v=xtpgkX588nM
> The welfare bureaucracy is largely dismantled. No means testing, no signing on, no bullying young people into stacking shelves for free, no separate state pension.
For the record, you have zero ownership rights in your SS benefits. They can be changed at will.
Yes, you can.
> It operates similarly to a pension fund
It presents itself as one, but it really operates as a general-tax-supported social-benefit program with a variety of eligibility criteria.
> so it would be equivalent to confiscate peoples lifetime savings.
Sure, some people would politically attack it that way, particularly if the general BI reduced the SS benefits to which people already qualified would receive. Its less subject to this political attack, however, if SS is merged into BI in such a way that no one currently paid into SS ends up with less BI at any point than they would have received from SS.
Good analogy is car maintenance. Most people are very diligent about oil changes because they (inherently, I would argue) recognize the cost structure.
And I would say people don't change their oil because they know their engine will die if they go too long. They do it because it's been ingrained in their head as required maintenance, and that sort of thing is normally taken care of nowadays in a much larger package that includes filters and belts (because people vaguely remember about oil, but they're clueless about the other things.)
I'm not the one you were responding to, but my point here is that people aren't going to ensure prevention without a ton of conditioning or some greater authority forcing them to do so. The voter turnout for Australia, where people are forced by law to vote, was 93% in 2010.[0] In the USA? 41%.[1] People can't be asked to run over to their local elementary school for 20 minutes and pick the first name that pops into their head once every four years, so I doubt any sort of repercussion not mandated by law will have an effect.
[0]: http://www.idea.int/vt/countryview.cfm?id=15
[1]: http://www.idea.int/vt/countryview.cfm?id=231
In your case I am wondering why exactly is that we can't turn people away - in aggregate it is likely to save more lives since seeing people dying would be an excellent motivating factor for others to make sure they pay their health care insurance -- and since they would therefore have it and would be able to get treatment earlier, which is cheaper, thereby causing the price of health care to be pushed down (treating people in ERs is frighteningly inefficient).
How exactly does this help people in emergency situations? Or those who go undiagnosed with a condition despite having a primary care physician? What about those folks with a disability that makes it difficult for them to access health care? What about people who are discouraged from getting health care because of discrimination? What about people who live in rural areas far from some kinds of medical treatment?
Bottom line is that death is not a motivator for people in the way you think it is. Even if it was, what kind of society threatens its members with death for failing to participate in your model vision of capitalism?
"You can always count on Americans to do the right thing - after they've tried everything else." - Winston Churchill
Go to work as an inner city teacher? Here's an extra 20% in your BI.
Live in an area damaged by a hurricane? We'll bump your BI for a year or two.
I don't think a "simpler" tax code would last much longer for the same reason.
The only way I think it could actually work is if we turned over the whole thing to a bunch of unelected technocrats like the Fed (which might not be a terrible idea since it gives them another lever on economic policy...)
So ... politicians would suddenly start to pay people to teach in the inner city? Those scoundrels! I can see why you're opposed to this concept.
In fact you support that point. Many of the complexities we have now come from adding "just one more feature" to the tax code, until we end up with something so complex that there is an entire industry built up around paying taxes.
If he said "In exchange for supporting inner-city teachers, we will be indirectly subsidizing H&R Block to the tune of $2B" you might ponder whether or not it's worth it.
It is true that over the entire history of the United States, the American public has proven itself apathetic to the abuses of their politicians, but that is a cultural problem that needs to be solved regardless of having a basic income or not.
If the basic income is set at a basic enough level, work should remain an attractive option.
"Every single adult member receives a weekly payment from the state, which is enough to live comfortably on"
would mean a different value in San Francisco than in Grover, NC.
If the government adjusted the basic income to account for regional cost-of-living, I imagine it would be popular to maintain a fake residency in an expensive area while actually living somewhere cheaper.
If the basic income wasn't adjusted for different areas, you would probably see some areas become rich elite enclaves while other areas become basic income ghettos.
Good hack.
>> some areas become rich elite enclaves while other areas become basic income ghettos.
This is basically the direction we're already headed in already.
> This is basically the direction we're already headed in already.
A flat basic income would make this better not worse, as there would be more money available serving the needs of people in these poorer areas.
The people living primarily off BI (that is "the poor") would likely continue to be segregated, to a certain degree, both physically and socially from those more well-off. But that's not an effect of BI, that's true of the poor now and basically for all of human history.
People move to cheaper parts of the country all the time, to fit their budget. I don't know why this would be any different.
If you want to live some place forever, buy the property. Buying and renting each have risks. Buying risks that you will lose your initial capital, but you get to live there. Renting risks that you might have to leave the property, but the landlord absorbs the risks of the property value declining.
We can't really have effective policy if someone experiencing some kind of risk vetoes it.
Some places have been rich elite enclaves and other places ghettoes for pretty much the whole history of human civilization; its pretty clearly already the case now (and not just between widely geographically separated areas like San Francisco and Grover, NC; its true within cities like San Francisco -- or any other city of substantial size anywhere in the world.)
A flat national BI doesn't create that problem, it just fails to completely eradicate it (it likely does reduce it by reducing overall income inequality, so, as far as the issue is even relevant, its one in favor of adopting BI, not against it.)
If I live in a mansion in that Grover, NC, would you say that my expenses were high so I deserve more basic income?
High prices are the market telling you to consider looking someplace else to live.
This is how the good ideas of progressive intellectuals get destroyed: other progressives want to weigh them down with all sorts of other social engineering baggage. (Conservative intellectuals have good ideas that get destroyed by other conservatives, too.)
Those kinds of decisions alienate voters and, as a result, are desperately avoided by congress critters.
The net result will probably be higher costs of living everywhere, but in the US there is so much space that the effect is diluted.
Add to that the ability to grow food for oneself, and I bet we see lots of people move somewhere they can rent a home with a large garden, and turn their basic income into a small scale farm with extra earned income at local farmers markets. As that money moves around in a community, even if %40 of every pay cycle is extracted by walmart, the local economy has people who have time to build small bussinesses. Now a mom and pop store doesn't have to support the family, it just has to pay the rent on the store and bring in enough extra money and or good will/personal satisfaction that mom and pop keep it running.
What the blog post describes is, basically, communism. The official communist party line in USSR (correctly) identified the lack of automation (advanced technology) to make it a reality. Basically the official state goal of the Soviet Union was to advance the science and technology towards achieving that goal, hence the repressions against religion, endless attempts to identify and focus "more important" sciences and skip "less important" ones, introduction of pyatiletkas (5 year plans), etc.
The question is whether there's (1) something they can do that's more valuable than watching TV and (2) some reasonable way we can motivate them to do so.
If (1) and if a lower BI is an effective way of motivating that behavior, then that's a good argument for a lower BI. It doesn't follow that the optimal level is zero. I don't expect the number that would stay home and collect their $1 of basic income would be substantially greater than the number that currently stay home and collect their $0.
Say a policy makes 200 million people better off in some virtuous manner but creates 10 million free loaders. Is that a horrible policy? Say the value of the virtuous benefit is 10x the cost of the free loading?
However, the point of the article here is to assume that millions will be "free loaders" no matter what we do because their labor is unnecessary.
Not if we kill them.
Which one of us is wrong? Which one of us will be wrong in the future, as more and more jobs can be automated and thus disappear while the amount of people on this planet keeps increasing?
Just remember that the future is now.
Everyone qualifies, forever, irrelevant of past job history, education, family status, etc. etc. There is no time limit for the payments.
The only difference between this and the article, is that if you get a job, whatever you earn is deducted from your payments.
I personally think it does a fantastic job of making sure there is no poverty in the country, and it means Australia has an enormous middle class.
(Link updated) [1] http://www.crikey.com.au/2013/01/16/dole-around-the-world-ho...
The interesting part in the article is that in order to receive this payment, you have to be actively looking for work. Not sure how this is measured, but the qualification makes it philosophically different from the unconditional wage being advocated.
You are right, you must apply for x jobs per month, and keep a logbook of that activity.
In that sense, yes, it's philosophically different from the unconditional wage, but it's a good example of the effect on society (no extreme poverty, huge middle class, higher taxes, etc.)
From Wikipedia:
"The Report, Poverty In Australia, shows that in 2010, after taking account of housing costs, an estimated 2,265,000 people or 12.8% of all people, including 575,000 children (17.3% of all children), lived in households below the most austere poverty line widely used in international research."
[1]http://en.wikipedia.org/wiki/Poverty_in_Australia
What you described is a 100% marginal income tax on your first $12,800 of income.
We don't want people at the bottom end of the earnings ladder completely discouraged from trying to move up it.
That's a pretty significant difference considering that the major selling point of a UBI is that (relative to traditional welfare) it doesn't have the problem of penalizing people for earning money on top of the transfer payments.
The basic idea is on track, though. You know that no matter what happens, you'll be able to eat and put some sort of roof over your head. I'm curious to see if the social welfare programs continue to remain generous as Australia's government deficits increase and non-white immigrants continue to flood into the country.
When I get home, their TV is still on and the other people in my building and I are exhausted from working and finally get some time for recreation, usually in the dark. The other neighbors say the across-the-street people are selling opiates. They should be made to do something in return for their government money: anything useful around town like cleaning up, repainting signs, babysitting- not just getting free government money to capitalize their opiate sales.
I love my job, but not enough that I would come here everyday first thing in the morning if I weren't being paid. That's why the Wikipedia example mentioned in the article is a _terrible_ counterexample for OP's point. First, Wikipedia is a _clone_, not an original work. Second, it's billions of micro-contributions, not people working 40-45 hours per week like the others in my building and myself. No one is that motivated. As posted yesterday, the theory of the Tyranny of Structurelessness is real. Only a small portion of society functions without leaders. And I admit that I am not one of its leaders (yet!), but I am comfortable for the most getting led toward productive efforts.
That's why I believe poverty is a failure of leadership. It's the inability or disinclination of leaders to herd those people into something useful. It's cheaper to pay them to stay home. It's got nothing to do with them being lazy, as someone else wrote. MOST of us are lazy, not merely the unemployed.
Sounds like you're just envious that the entrepreneurs across the street are more successful than you.
Would you prefer they die? You do realize automation will soon ensure there simply isn't enough work to go around?
> Why make sure that every non-worker in society has enough money to eat McDonalds and watch cable TV
Because it'll keep society from crumbling.
To turn this question around, why do we want only slaves to live comfortably, while denying this right to people who are free?
Yes, slaves. Our culture, out of necessity, managed to successfully hide this fact from most of the people, that we are all slaves. We need to work, or else we starve. Some of us are lucky and do the things they would have done anyway living free, but for most of us, it's just global slavery we're in denial with.
Automation may finally free us all, and this is the point most people (suprisingly, even here on HN) seem to fail to understand.
A certain percentage of the population would stop working entirely since they no longer need to. (Particularly when politicians push the basic income amount up to placate constituencies)
Because workers bow out of the system certain industries lose productive capacity. Maybe we stop producing enough food, or enough fuel.
Prices rise (assuming a moderately free market), which causes the basic income amount to rise and it spirals out of control from there.
The state is forced to intervene. Either by forcing people to work certain jobs (ala https://en.wikipedia.org/wiki/Professional_Air_Traffic_Contr...) or by capping the basic income and reincentivizing work.
Hayek: The curious task of economics is to demonstrate to men how little they know about what they imagine they can design.
A certain % stop working for existing businesses. However, since there is greater money velocity in the system (vs. investments), there's still high demand (likely _higher_ demand). Businesses which had been slow to automate their production do so, spending more money on high-skill positions.
Prices temporarily increase to pay for this capital investment, but within a few years drop to below prices pre-BI.
Note that the author DOESN'T advocate necessarily doing this today, but that this is somewhat inevitable. I think I agree — eventually, the vast majority of jobs in our society will be automated / done by machines. Either we give these people a BI, or a very large segment of our population falls into poverty, which has other damaging political ramifications (revolution?).
Everyone I've ever seen argue this has had strong opinions about how other (more greedy and venal) people would act. They, of course, would still work, but the great unwashed masses would sit on their backsides and take the money.
I suggest, instead, we try specifics. Given a basic income, I wouldn't be lazy. Nor would anyone I know, which includes some very poor people who would love to work if they could only do better than on benefits.
I suspect (though I don't know), that you wouldn't be lazy, either.
Also, the evidence of limited trials is that this increases work, not idle people:
eg http://www.bignam.org/BIG_pilot.html
> The BIG is a form of social protection, which reduces poverty and supports pro-poor economic growth.
For example Italy has a 38.5% youth unemployment rate. It also can't get enough workers for the garment industry. So why don't the youth of Italy want these jobs? Maybe the work is seen as menial (so a cultural condition) or maybe the wages are too low (they think they deserve more) or maybe Italy has made hiring citizens too difficult (so they shift to the black economy), but either way their reluctance is sustained by a welfare state that allows them to not work.
The same can be said in this country with the absurdly low unemployment rate in North Dakota while the disability rate has shot through the roof. Unless you think people have suddenly and inexplicably become disabled this is clear evidence that people are willing to go on the Government dole rather than get a job in North Dakota.
I'm not even saying these people are evil or irrational. (It actually seems entirely rational to me) In a similar situation I'd probably do the same thing.
The question is: how many people currently working would stop working if they didn't need to? (particularly in the areas vital for the basic functioning of society) That question is so impossibly difficult to answer that I don't think any system we come up with won't have potentially disastrous consequences.
I agree, which is why I think we should not implement a basic income immediately, but that we should proceed with further trials and examine the evidence on the ground.
Or, people who are able-bodied and unemployed have chosen to move out of North Dakota (perhaps due to work available elsewhere), and/or people who are disabled have chosen to move to North Dakota for financial or environmental or other reasons. Either of these would both reduce the rate of unemployment and increase the rate of disability without people "choosing to go on the Government dole".
> The question is: how many people currently working would stop working if they didn't need to?
The price consequences of BI are such that this is self-limiting. Once you set a level of BI, the more people choose to opt out of work, the less affordable it is for people to choose to opt out of work. Less people working -> higher market clearing cost of labor -> higher market clearing cost of all goods and services -> reduced standard of living for people on fixed incomes (including whatever point the BI is set at.)
Compounding the issue are a lack of housing, and the fact that over half of those positions are low paying dead end jobs like fast food, walmart, etc. It's also very far away from almost everywhere - a four to nine hour drive from the closest major airport.
I don't think it's all that difficult to answer. When I leave the office building I work at the end of my day, the janitors are just showing up. They probably already only get paid the basic livable wage (probably less), so why would they show up to work if they were getting the paycheck anyways? I can think of 100s of other jobs that someone wouldn't show up for because they aren't worth the time, they aren't fun, or even remotely interesting.
0 hours of janitoring = small comfortable house and enough food
5 hours of janitoring = small comfortable hosue and enough food and cable televsion
If people simply stopped working when they could live "comfortably" why would they buy iPads, cable television, new cars? Employment history and reputation aren't going out the window with this plan either. A janitor will be good at his job because he knows if he gets fired he won't get reccomended for other janitorial jobs - and his chance of getting an iPad in the future goes way down.
I know janitors who buy lottery tickets, eat out at restaurants and have cable television - according to you those wouldn't exist because they could "janitor" less and live without those.
Here's the thing. Let's say you made $100k per year working 40 hours/week with benefits. If I were to pay you to not work but get a smaller wage (keeping your benefits), what percentage would be acceptable to you? 90%? 80%? 50%? What is it worth to you to not have to work?
There is a number that most janitors would probably accept. I think a fair number of retail employees too.
There's something that deeply bothers me about the notion that the above is a bad thing. Yes, you would no longer have access to low-wage janitorial services. But that's your problem, not your janitor's. Do you think he wants to be scrubbing toilets for a subsistence wage?
The world will not fall apart for want of janitors, or garbagemen, or baristas.
Imagine a world where, at some time t=0, there are zero people filling these jobs because of a basic income. It truly doesn't take all that much enterprise to see an opportunity in a world with no janitors. At t=1, there would still be janitors, but there would be fewer of them, the ones that exist would be better-paid, because they're now working for something approaching the wage that you might demand if someone asked you how much it would cost to clean their office.
Thanks for proving my point. No, I highly doubt he wants to scrub a toilet for a subsistence wage. I think a janitorial job would go empty for a long, long time. So now, instead of me focusing on my job, I have to take time out of my day to do something I'd pay someone for.
It would be better if you get your basic livable wage but still have to work (exceptions made for childcare, students, disability, etc.) and depending on the job you get what the market deems as extra. So, if you get $20k per year as a livable wage (figure just chosen for easier math) and a job would've paid $25k, you get the $5k difference in your paycheck. This would help keep the low-interest, but easy, jobs staffed.
But apparently you wouldn't pay enough to have them do it, so it's more valuable to you to use your time to do that job.
If you paid more, you could more effectively utilize your time.
"So, if you get $20k per year as a livable wage (figure just chosen for easier math) and a job would've paid $25k, you get the $5k difference in your paycheck. This would help keep the low-interest, but easy, jobs staffed."
So you would only be getting paid 5k then. If I don't work at all, I get 20k. If I work, I get 25k.
I think that's what you're suggesting. Unless you're suggesting you get nothing if you don't work, at which point we don't have a basic income anymore, and this idea is moronic.
He does not need to work anymore, but it might still be worth it.
If you can't make a living wage at these jobs, then by taking the job you are hastening your own demise. If you already have a living wage, then taking a low-paying job will give you a supplemental income. If you can work part-time at a low-paying job, then you can still spend your other time educating yourself or looking for a better job.
Also, if you can't fill your factories with the wage that you're offering, then the free market is telling you that you need to either increase the wage, or learn to make do with less, i.e. decrease output.
I'd also like to travel, and would be more than willing to work a sane amount of hours to contribute to the basic functioning of society in exchange for the means to do so. With respect to the Italy example -- raise wages enough and I'd bet the shortage would disappear. If the societal need is great enough, the prices will reflect that (maybe we don't actually need more garments?).
The basic functioning of society would need to be redefined a bit -- perpetual economic growth is neither sustainable nor desirable at least while it comes at the expense of the environment, or social and medical well-being (obesity, depression, etc).
I'd also like to travel, and would be more than willing to work a sane amount of hours to contribute to the basic functioning of society in exchange for the means to do so. With respect to the Italy example -- raise wages enough and I'd bet the shortage would disappear. If the societal need is great enough, the prices will reflect that (maybe we don't actually need more garments?).
The basic functioning of society would need to be redefined a bit -- perpetual economic growth is neither sustainable nor desirable at least while it comes at the expense of the environment, or social and medical well-being (obesity, depression, etc).
Today, that is called idleness. But in that future world, perhaps it would not.
The difference between a socialist and an individualist is in how they think the physical force equation (applied to the society in which they live) will work out for them.
I don't think it's compatible with universal suffrage, though. It ends up a lot like an aristocracy, albeit an aristocracy that people can join at will. Is that acceptable? I dunno.
Why the hell should I pay even more and subsidize those who have more than two kids?
Strong social safety nets seem to be pretty strong contributors to reduced family size (which is why the developed world has low natural population growth and many of the places with the strongest safety nets have negative natural population growth) because people don't need children as a form of old-age insurance.
> Why the hell should I pay even more and subsidize those who have more than two kids?
A fixed basic income per adult is self-evidently not a subsidy for having more kids. In fact, compared to existing welfare policy (where the principal basis for cash benefits is number of dependent children), its a disincentive for that.
Social engineering like this is fraught with huge risks.
Your response is simplistic and doesn't even outline any of your concerns about what I've posted.
Hello there, person I'm very glad entered this conversation as you did.
You're talking about a great taboo. No one wants to admit that not every precious snowflake can do exactly what they want to be a shining star. Saying that we have too many precious snowflakes, or that we shortly will, is akin to saying that and it makes people nervous.
But there are a lot of us, aren't there?
And our population plan seems to be "Reproduce however you want until nature starts killing us off."
It could be that our coming jobs shortage is the result of too many people. Our geographic area is big enough that there will always be a certain number of jobs because of the different specialized tasks necessary in each locality.
But everyone wants a kid, and it seems the people who don't plan for those kids, whether rich or poor, have the most.
This worries me more than global warming, nuclear proliferation and synthetic marijuana (mostly jk) combined.
True. The problem is, as things are now, a certain percentage of the population will be forced to stop working as they are made obsolete by increasingly efficient globalization and automation. As that percentage increases, eventually either society will collapse or something fundamental will have to change (such as implementing a basic income).
But it is a bit presumptuous to believe that all future inventions will destroy jobs. A great example of the reverse is the compiler industry.
As compiler technology / programming languages have become easier and easier... smaller and smaller teams of programmers have been able to get more things done. This hasn't destroyed programmers... it has instead increased the demand of programmers.
Nor has invention of internal combustion engine decreased the demand for cars. Programming today is far from its full potential, just like transportation was 100 years ago. Software is a very young technology and it is just beginning to take over the world, but keep in mind that developing it is a) high-skill job, and b) mostly aimed toward automating other people out of their jobs.
Or, assuming you are right and delivery men are unemployed in great numbers which I agree is likely, then (as transportation prices plummet) there will be more jobs for packaging. Imagine that instead of having to collect your kids in day care, go shopping and the go home and cook you can instead preorder your groceries, have your Google Car pick up your kids, spend the time talking with them in the car, go to the shop and pick up your package (which will take 10 minutes at most, since you have likely already been charged when you made the order) and then home to cook, which kids you actually get to talk to and who are now a lot less stressed.
Even then self-driving cars will also create other oppertunities, because there is no reason the car has to stay in the lot until you get home. It might as well drive to the nearby car cleaner (which can be out-of the way since the time is essentially free, although the gas used is not) for a cleaning. That is more business (and it is low skilled) and better, nicer cars.
Until next year a new type of window will come that doesn't have to be washed.
> there will be more jobs for packaging
There won't. Humans are already being optimized-out of packaging by automated, self-adjusting warehouses and package machines.
> you can instead preorder your groceries
Being produced, packed and delivered by machines.
> It might as well drive to the nearby car cleaner
Which has been automated-out of his work years ago because how this job requires any skills cheap machines don't have right now?
Rest of the things you write about are things people will be able to do instead of working.
The point is, computers are not replacing particular jobs and creating new ones (of similar skill levels). They are replacing whole classes of skills humans have with jobs that have significantly higher requirements and significantly less open positions.
This has been happening in China too -- recently(late last year) there was news about Foxconn replacing over a million jobs with robots in China. What this means is cheaper products which are also accessible to those who don't work. It narrows the purchasing power gap between those who work and those who don't.
Then why don't we have 80% unemployment? Because we found other jobs for those people, the economy is much, much bigger, life is much, much better and everybody is better of.
And it isn't like that hasn't happened again and again and again through history.
So I ask you, what proof do you have that this time it is really different? As opposed to every other time we thought it was different through history?
This last point is the difference that this new wave of automation has compared to the waves of past. It is unprecedented in human history to be facing a future where human effort can be multiplied by such enormous multiples that the value of labor approaches zero. This coming automation revolution would have to simultaneously grow the economy to greater proportions that automation reduces the cost of labor. I don't believe this will ever be possible, but definitely not in the time period that a properly developed AI and robotic technology could corner the market in labor (once developed, less than a decade). Society is not prepared for what is coming, and it will be disastrous.
Another example I like http://blogs.law.harvard.edu/philg/2010/08/08/unemployed-21s...
there was a type of employee at the beginning of the Industrial Revolution whose job and livelihood largely vanished in the early twentieth century. This was the horse. The population of working horses actually peaked in England long after the Industrial Revolution, in 1901, when 3.25 million were at work. Though they had been replaced by rail for long-distance haulage and by steam engines for driving machinery, they still plowed fields, hauled wagons and carriages short distances, pulled boats on the canals, toiled in the pits, and carried armies into battle. But the arrival of the internal combustion engine in the late nineteenth century rapidly displaced these workers, so that by 1924 there were fewer than two million. There was always a wage at which all these horses could have remained employed. But that wage was so low that it did not pay for their feed.
The arguments people make against this are that humans aren't horses. Humans can learn and adapt much better. But they can't do that infinitely, and some will reach their limits faster than others.
What a basic income will tend to do however is reduce the need for a minimum wage. Currently the minimum wage exists to solve a problem: People need to survive, and to do that they need to work enough to enable that. The problem is with workforce participation being compulsory, absent a minimum wage the price for labor in unskilled work rapidly drops. Where you can find someone desperate for 7.00 an hour, you'll find someone else equally desperate willing to take 6.90 an hour. There will be yet another person willing to take 6.80, and this trend continues until you reach a point where you're better off scraping whatever you can do to survive.
So it's actually preferential for the labor force to shrink some; instead of everyone competing for the tiniest slice of a paycheck just for survival, you'd have a labor force with much more power, ensuring that you don't have to settle for work at 7.50 an hour just to eat. On the contrary: You'll stand on a corner and flip a signboard around in the air for 20 bucks a day only if it's worth your time, and to buy the extra 6-pack or whatever you desire, but don't need to survive.
In the US, the weaker economy has hurt the US Dollar, making manufacturing cheaper again in the US. So for the first time in over a decade, Apple Computers is building a US Factory.
Rising fuel costs threaten global supply chains. Especially in areas that have a less-than-cordial relationship with the US such as China, there is some uncertainty that things will stay as they are.
Another powerful trend that is reinvigorating the US manufacturing industry is the re-evaluation of the spoils of offshoring. Companies such as GE are discovering that there are many side benefits to bringing production back to the US: Shorter supply chains from manufacturing to retail, better quality from production, and greater feedback from shop floor to engineering.
http://www.theatlantic.com/magazine/archive/2012/12/the-inso...
One of the biggest unaccounted costs of offshoring was the effects it had on the lifecycle of a product. That article points out how GE was able to take a $1600 water-heater from China and sell it for a profit $1300, just by manufacturing it from the US. It turns out that in off-shoring the production, they lost most of the feedback in the product's lifecycle that enabled them to refine the design far beyond what they thought was 'final'.
This is key here. Plenty of people are willing to work beyond survival for luxury goods.
OP misses the point that even though I am listening to free electronica on youtube right now...
1. It was once sold for money by its creators 2. Its creators tolerate it being given away for free in order to develop their reputations and bring in an income through performance and sales. This an example of symbiotic capitalism, not volunteer work. 3. My listening is driving ad revenue for google.
So it's not really free out of the goodness of the creator's heart. It's free +to me right now+, b/c atm I'm not currently in its "for-pay whirlpool." Advertisers, clubs and music afficiandos are in its for-pay whirlpool.
Finally. OP claims "we are motivated by autonomy, mastery, and purpose, but not money." This is only true for a small cluster of artisans.
Basic Income probably shouldn't cover much beyond rent in cheap, shared accommodation, heat and some electric, and groceries, and healthcare, if that is provided separately.
Its seems to me to be self-evidentally economically impossible for universal BI to do this (which, incidentally, means it probably can't replace all existing social benefit programs, because you probably still want to have some programs that people can live on without a drain on savings, though these would need to be time limited and almost certainly have other qualifications) unless we've reached that point of labor-irrelevance.
If you set the level of BI such that it would allow such comfortable living given pre-BI prices, the resulting effect on prices would quickly drive such comfortable living back out of reach for those relying solely on BI.
You can mitigate poverty and economic inequality with BI, because the inflationary effects will be no greater than the income boost given at the low end of the scale, but there is a declining marginal benefit of each additional dollar of BI.
That said, I'm not hugely stressed about determining precisely how impossible a policy is when I don't support it anyway.
Why is it economically impossible? It seems quite possible to me.
For example, suppose that 20% of the population _must_ be engineers for society to survive. But the other 80% of the population is irrelevant to production. The 80% could be given a BI of $40k, while the 20% could be given a salary of $200k (or $2M if you like).
(The 20% and 80% figures could just as easily be reversed, if you consider 20% to be "labor-irrelevance" -- although it is not irrelevant if it is necessary to the survival of society to ensure it's done.)
Why is that economically impossible?
I don't know why people keep harping on corporate taxes. If anything, taxing corporations is regressive -- the taxes ultimately get passed on to consumers through higher product prices, regardless of their income levels.
Taxing corporations doesn't produce magic money -- it's still taxing people in the end, but it's the consumers. Far better is higher tax rates on investments, and higher taxes on the rich. We should be taxing the people who own the corporations, or are paid huge salaries by them -- that is, if you believe in progressive taxation.
No, its not.
> the taxes ultimately get passed on to consumers through higher product prices, regardless of their income levels.
It increases producer prices which shifts the supply curve to the right, but its pretty self-evident that the effect on actual prices is dependent on price elasticity of demand in the markets for particular products, and that price elasticity of demand is not independent of the income of the people in the market for the product.
> Taxing corporations doesn't produce magic money -- it's still taxing people in the end, but it's the consumers.
No more than taxing labor income (which the US does disproportionately, as much capital income faces lower income tax rates and labor income is subject to additional, non-income taxes) is really taxing corporate stockholders, because it shifts the supply curve for labor increasing market clearing prices of labor and eating into corporate profit margins.
> We should be taxing the people who own the corporations, or are paid huge salaries by them -- that is, if you believe in progressive taxation.
But taxing high salaries is "regressive", just as much as taxing corporations, taxing consumers -- after all, if you shift the supply curve for management work and increase the market clearing price of that good, you are increasing producer costs and, therefore, shifting the supply curve for the good produced in a way which increases the market clearing cost, resulting in price increases to the consumer to pay the taxes. If you are going to make this argument for corporate taxes, you have to apply it to whatever you present as the alternative to corporate taxes, as well.
Of course, but there's still the "minimum profitability" that a business seeks to have. Suppose three firms compete to sell widget X, and consumers are willing to pay up to $10 for it, but the companies sell it at $5 due to competition (it costs $4 to make and distribute). Then the price is determined by supply cost + reasonable profit, determined by competition. If the government removes part of that profit, they'll raise prices accordingly, and sell for $6 instead, since that's still within the demand price elasticity -- otherwise the firms would decide there wasn't enough profit and get out of the business entirely.
> No more than taxing labor income... is really taxing corporate stockholders
The difference is that taxing labor income can be intentionally progressive, which is widely believed to be a good thing.
> But taxing high salaries is "regressive"
That just doesn't make any sense -- words can't be redefined like that. The very definition of progressive taxation is taxing high salaries (EDIT: incomes) of individuals at a higher rate than lower ones.
I understand your overall argument -- it's certainly debatable to what extent you believe corporate taxes to affect prices, vs to what extent you believe personal income tax to affect market salaries. But that doesn't affect the point I was making, which is that corporate taxes are ultimately passed onto people, and that this is not done in a progressive way. But by taxing people directly instead, this can be done progressively.
I used the quotes and the "just as much as..." reference because I was applying your logic about corporate taxes to the alternative you proposed. I don't agree that either is regressive, obviously, and I laid out exactly why that logic was wrong earlier in the post, before showing how if you ignored the fact that the logic was wrong and applied it consistently, it would say the same thing about your alternative as it said about the thing you proposed the alternative to.
> The very definition of progressive taxation is taxing high salaries of individuals at a higher rate than lower ones.
Actually, the usual definition is about taxing higher incomes at a higher rate. Confusing income with wages or salaries , so that one ignores non-labor (and, particularly, capital) income in considering the progressivity of taxes, is a pretty serious error.
In your example, if taxes of $0.50 are added, the firm may still sell widgets at the post-tax price of $5 and accept the reduction in margin from $1 to $0.50.
I don't really get this argument. It's always made as if the taxes are applied in a vacuum where market forces no longer exist.
If corporations are operating in a competitive market, they will seek cost advantages and continue to compete for market share. Raised taxes represent an additional expense (for the purposes of this discussion), much like raised energy prices. It is not always the case that these costs are passed on to consumers. Rather, smart companies seek to become more efficient, reduce costs elsewhere, or even realize a slightly lower profit margin per unit in order to maintain or increase market share vs. other competitors.
There's also the option to reduce executive compensation, decrease shareholder dividends, and a host of other options available in the interest of remaining competitive. A smart company could actually outmaneuver other competitors, wind up with more volume, realize the same net profit after taxes, and pass lower prices on to consumers.
I mean, there are just a ton of other variables here. And, those who advocate low or no corporate taxes are frequently free marketers. So, it's very interesting to me that they all but completely ignore very relevant free market mechanisms that can countervail the effects of raised corporate taxes.
IMO, it's just an oft-repeated meme that "higher corporate taxes are automatically regressive because they automatically create higher prices for consumers".
Like by hiring less employees.
In any case, one of the big premises of the article is that hiring less is happening anyway and contributing to the need for a basic livable income. So, that's a bit circular.
And, of course, that's just one of many potential cost-cutting measures.
Raised income taxes aren't really an additional expense, because they are taken out of after-tax net income, not gross income. That complicates the analysis substantially.
Perhaps you can provide more detail as to how you think it changes the analysis in the context of this discussion.
I'll try an example, although that might not be totally valid (I'm not really up on current tax laws). These are all made-up numbers and rates: Say you sell a widget for $100, and it costs you $70 to make. Your profit on that is $30, of which let's say you pay $5 in taxes, so let's say you walk away with $25 per widget.
If the government bumps up the taxes by a percentage that makes the tax be $6. As a corporate policy, the easiest way to keep the same returns to investors is to tack on another dollar to the price and sell it for $101. Profit is $31, pay $6 in taxes, still walk away with $25/widget.
Your competitors are in the same boat as you are, regardless of what the tax rate was/is. Theoretically, if they weren't stealing your business at the lower tax rate, they won't steal it any more or less at the higher tax rate.
Sure maybe you consider some other areas to cut costs, but haven't you done that already? I know it's a silly over-simplified example, but if I own a company and I don't want to give back my profit, I raise my prices to compensate, and so do all competitors. The people that lose are the customers.
Smart companies may hold their prices constant and take a per unit profit hit to capture more share, allowing them to maintain or even increase overall profit. They may introduce higher margin products and/or develop entirely new strategies or lines of business.
And that is the free market mechanism that I mentioned: each company must adjust to the new reality and try to use it to gain an edge over its competitors. They do this all the time.
And, given this new incentive to maintain profits, they may be more aggresive in finding cost reduction elsewhere. One might argue that companies are doing all they can now, but you might be surprised at how new realities create new incentives.
The other important thing with returning shareholder value is how Wall Street works. It is very much a time-relative game. For example, how did the company do vs. last quarter or same quarter last fiscal year? Viewed this way, you can see why some companies pump the brakes on all out profit-maximization over a given timeframe, instead opting to ensure that the line keeps moving up and to the right over a longer period. So, it's more complicated than all companies are always maximizing profit at all times.
Finally, your example that the easiest thing to do is to raise the price by, say, $1 doesn't really hold, irrespective of what direct competitors do with their pricing. They must still keep prices in line with what the market will bear. If not, consumers may begin looking for substitutes or go without (depending on the product). So, while it might be the simplest thing for a company to try, it might not be accepted by the market.
This is all part of the free market at work. So, your simplification is tempting, but I think it goes back to creating that vacuum I mentioned, ignoring all of the many market variables that countervail the assumption that $1 in increased "cost" equals $1 in increased price.
I get what you're saying regarding only pricing what the market will bear, but on the flip side of all this, consumers suddenly have more money, so I could make the argument that the consumers are willing to pay more because they suddenly have more in their pockets, and around the mulberry bush we go...
Any variable can change competitiveness, as companies may differ in their responses to it.
For example, look at fuel prices for airlines. When they increase across the board, some airlines may raise prices, others may cut back on services offered, still others may add baggage fees, some may focus on increasing volume on more profitable routes, some may lower prices and heavily promote their lower fares to gain market share, while others may risk prepaying for fuel at current prices or hedging with shorts, etc.
Point being, of course, that the same change that hits every competitor will produce different responses and effects. This can completely alter the competitive landscape. And, it's virtually a guarantee that you won't simply get some uniform, across the board price increase.
If we don't acknowledge this, then we are looking at the change in a vacuum, completely insulated from the realities of free market behavior.
>I could make the argument that the consumers are willing to pay more because they suddenly have more in their pockets
Yeah, I think I actually mentioned that in another post (too much risk/work to view another post mid-reply on this tablet). Anyway, it could definitely be the case that consumers can bear more, however, it is not neccesarily 1:1. That is, there are a lot of variables that might impact whether they'd be willing to spend that extra money on that product. Also, there is still some price that the market simply won't bear for a given product, irrespective of the extra money in consumer pockets. In any case, there is certainly no guarantee that companies can simply pass on the additional cost.
And, it can also be the case that some companies can, but others cannot, given their prior prices.
Just too many variables.
If you have a point to make, please try doing it without blatantly lying. It's common knowledge that the US has substantially higher corporate tax rates than almost anywhere else:
http://www.guardian.co.uk/news/datablog/2011/feb/21/corporat...
I'm not blatantly lying. US taxes on labor income are disproportionate to taxes on other income sources, both because of the favorable rates applied in the income tax system to capital income, and because labor income is subject to additional taxes.
> It's common knowledge that the US has substantially higher corporate tax rates than almost anywhere else
Whether that's true or not, its entirely irrelevant the claim I was making.
However I believe the parent's point was just that taxes on personal earned income represent a much larger share of total U.S. tax receipts than taxes on corporate income do, i.e. the U.S. mainly taxes labor income. And that is true; the corporate income tax accounts for only 10% of federal tax receipts: http://www.cbpp.org/cms/?fa=view&id=3822
Do you have other evidence that shows that investment income is in-fact taxed higher than labor income in the US?
Your employer makes money and is taxed. Some of the resulting money is given to you as payroll and is taxed.
Ok, granted, not all the money that the company has on hand that is paid into your salary is taxed as corporate income, but the idea is valid. I agree not at the same level as taxing profits and then taxing dividends which is essentially the same money.
I'm just going with the notion that it is not uncommon for money to be taxed as it is exchanged from one entity to another.
"Most people are taxed roughly 36% (28% income tax, 2% medicare, 6% social security) on their labor, however investments are only taxed at a flat 15%."
"Double taxation" may not be an entirely accurate label (more like "an additional pass of taxation"), but the fact that dividends (in particular) are taxed as corporate profit before being taxed as individual profit makes that 15% figure misleading for dividends, which is what the child comment brought up: "Arguably, you get double-taxed if you own stocks."
Really, the number of times the money is taxed is irrelevant (except wrt paperwork) and we should be looking at the total tax level, but the point is that it's more than the nominal tax rate on qualified dividends if we're going to be comparing tax rate on labor income to tax rate on non-labor income, apples to apples.
Of course, that's specifically for dividends; bond premium payments and capital gains are a different discussion.
> it reduces or eliminates the tax disadvantages of distributing dividends to shareholders by only requiring them to pay the difference between the corporate rate and their marginal rate.
http://en.wikipedia.org/wiki/Dividend_imputation
This year, the 28% tax bracket for a single individual stars at $87,850 taxable income. The Social Security cap is $113,700, and the Social Security tax is levied on all income below this. The individual standard deduction is $6100 and the personal exemption is $3900.
That means that for an individual, a 28% income tax rate means income is above $97,850 while paying Social security taxes means income is below $113,700. I sort of doubt this covers "most people".
For a couple, the 28% bracket starts at $146,400 taxable, the standard deduction is $12,200, and personal exemptions are $7,800. So in this case the rate you quote applies to income over $166,400 and below $227,400 if both members of the couple have equal salaries. Again, hardly "most people".
Finding good numbers on this is hard, but http://answers.yahoo.com/question/index?qid=20101119053457AA... suggest that somewhere around 46% of taxpayers fall in the 10% or 15% brackets, and that's ignoring the effects of EITC and whatnot....
Of course the 15% bracket definitely has a marginal rate of 23% or so, again ignoring EITC and various other tax credits you can claim at those income levels that phase out with income, since they're certainly paying FICA at that point.
> investments are only taxed at a flat 15%
It really depends. Dividends are sometimes taxed at this rate and sometimes at your normal income rate, depending on whether they're qualified or not. Capital gains are, if you hold long enough. And capital gains can, of course, still affect your AMT exemption, meaning that if you're in the the AMT phaseout range your marginal rate on even long-term capital gains is about 22% (15% + 25%*28%, since the phaseout applies to normal income).
Of course once you make so much money that the AMT becomes irrelevant your marginal rate on capital gains drops back down to 15%.
Actually, its a lot higher than that, because marginal rates aren't overall rates.
So let's say your stocks in aggregate rose 4% that year, and the inflation was 3%. You made 1% profit (in purchasing power). You pay 4% * 0.15 = 0.6% which is 60% of your profits and only 38% of your income.
If you're taxing corporate income, it's pretty clear that Apple's and Google's supply curve will shift to the right. Not so much Samsung's or Nokia's. Taxing corporate income harms exports. Trying to tax only the corporate income from products and services sold in the US is in essence a VAT and then we're not talking about corporate income tax.
I disagree here. For this to hold, executives would have to strive to keep their pay where it is. But this simply isn't realistic. Executive pay has exploded beyond belief in the last half century, it's completely unprecedented.
There is no reason to allow individuals to siphon off so much capital, and no benefit to it. Standard of living with $1B is no different than $10B (which is why after Steve Jobs hit $6B he stopped bothering with making any more money).
Granted, you still have capital gains from stock trading, etc. But if corporate profits not taxed, the company can simply sit on the money. They don't have to spend it on R&D, or anything else, as they do not need a tax write off.
It's a double-edge sword and there really isn't a silver bullet.
That's the whole point -- without corporate taxation, shares in corporations are more valuable, and the taxation is drawn from capital gains instead -- and capital gains tax should be far higher, of course (and ideally progressive as well, based on your total income).
Sure, companies can "sit on their money", but they already can. And that money is presumably invested anyways, so it's still being productive (on R&D in other companies, for example), and it certainly gets spent eventually.
Not entirely, it is taxed at least once when earned (corp earnings tax).
Personally, high capital gains tax gives me a lot of hesitation, as you actually want to encourage people to invest and not dissuade them from doing it.
Not sure exactly how this works, but Switzerland appears to be taxing total networth. http://en.wikipedia.org/wiki/Taxation_in_Switzerland#Propert...
A very low rate would still amount to a huge sum if you consider the total networth of all US "natural persons".
Interesting. I hold the opposite position as I would rather make company re-investments more attractive.
> ...Switzerland appears to be taxing total networth.
This is a wonderful idea! Though I could imagine the games that could be played with valuations.
Rather all ways of extracting money from corporations should be taxed at a high income tax level (rather than the low dividend and capital gains levels).
Corporate taxes are not a disincentive to make money. They are (since the structure of deductions applying to them makes them a tax on retained profits more than income) a disincentive to retaining profits within the corporation to avoid the taxation the stockholders would pay were the profits distributed (or earned by a business subject to personal rather than corporate taxes in the first place.)
Actually, the studies show that corporate taxes are essentially a proxy for the taxing the ultra-wealthy - a cut in the corporate tax rate is very similar to cutting the highest marginal income tax rate.
After all, if corporate taxes truly fell on the poor, Republicans wouldn't be for cutting them.
It's no secret that Republicans largely support "base broadening", as well as less-overt attacks on the finances of the poor like their CURRENT attempts to divorce the farm bill from food stamps, to further cut food stamps.
You're trying to enforce some politically correct echo chamber where a national political party isn't responsible for their votes and their policy.
Republicans are openly for raising taxes on the bottom 50% of Americans, are openly for decreasing wealth transfer like foodstamps, welfare and unemployment, and are openly for lowering (and abolishing) corporate taxes.
Those are their policies and it is utterly and totally fair to state that and reference it.
Your comment and jellicle's comment are not quite the same thing.
Even then, you are painting some of the party's platform in a negative light without showing why exactly that is their platform to begin with nor why you consider them terrible ideas. Some of their reasons may be bad, but that doesn't mean all of their reasons are.
Disagreeing with someone's idea doesn't inherently make that idea bad. People who have the notion that another person's idea is bad solely because they disagree with them with no other evidence is simply a shallow person.
Yeah, this line of discussion is going to get us far.
Who is blocking comprehensive reform of the banking sector (which arguably drove not only the US into a recession, but the world as a whole)? Republicans
Draconian anti-abortion laws? Republics
Raising student loan interest rates while keeping lending rates to banks near zero? Republicans
Supporting egregious amounts of defense department spending (The US spends more on defense then the next 10 countries COMBINED; http://en.wikipedia.org/wiki/List_of_countries_by_military_e...)? Republicans
Blocking immigration reform? Republicans
Trying to prevent the implementation of universal healthcare? Republicans.
I could go on, but it would be pointless.
There is plenty of evidence that the risky loans associated with the home mortgage crisis were motivated by federal policies advocated by Democrats such as the implicit guarantees associated with Fannie Mae and Freddie Mac.
The student loan debacle is another example of unintended consequences of government loan subsidies and there is considerable evidence that those subsidies are simply captured by the colleges and universities when they raise their rates.
Regarding defense spending, it isn't a surprise that the US spends lots of defense since the US basically provides a national defense capability for itself and most of its close allies. There is certainly plenty of ways to be more efficient on defense spending but Congressional support for inefficient defense spending is hardly a Republican phenomena. It is a systemic problem.
Anyone who thinks that the ACA is the be-all-and-end-all of healthcare systems is delusional. It is a bureaucratic nightmare riddled with stupid incentives, accounting flim-flam, and ridiculous complexity. Add to that the completely reasonable thought that the more appropriate location for these services, if they are going to be provided, is the states.
Immigration reform: Unending posturing from Democrats who seem to want no limits to immigration and Republicans who seem to want no immigration at all. On top of that, I don't think the public knows what it wants (i.e. no real grassroots consensus)
Abortion: I'm not going there other than to say neither Republicans nor Democrats are uniform in their opinions on this topic.
My basic philosophy is that neither party is acquitting itself with much distinction these days. It is foolish to think that the flaws in our public policy are the fault of either party alone -- they are both complicit.
Maybe the reason they oppose abortion laws is because they feel they are saving human lives who have no say in the matter?
Maybe the reason they support such amounts of military spending is because they feel it is the nation's responsibility to do its best to provide for a safe and secure world, including using the military for life-saving operations?
Maybe the reason they are blocking current immigration reform is because they disagree with the methodology being proposed that is possibly unfair to current citizens including the ones who immigrated here legally and followed the law to become citizens?
Maybe the reason they are trying to prevent implementation of universal healthcare is because they feel the current law is ripe with corruption, waste, fraud, eventual failure, and will in the end actually make things worse?
You are again one of these people going with the notion that since you disagree with the other people's ideas you get to assume that the ideas are somehow bad. Notice that in no way did you explain why these ideas are inherently bad, you simply disagree with them. You are perpetuating the fallacy that they are bad simply because you say they are while ignoring the possibilities that they have good reasons to think that way. Next thing on your agenda will be to ridicule them in some way to show your superiority over such backward-thinking people in a feeble attempt to convince us you are right without actually having to prove anything nor support your accusations.
Not at all. Being young, I will simply wait until the older majority dies off. It happened with black rights. Its happening with gay marriage, and it will happen with other socials issues.
I've got nothing but time.
If your ability to win a debate that involves deciding how society should function is based around outliving the people you simply disagree with then I foresee a sad future. Because one day the younger generation will follow your example to disagree with you and put your older self out to pasture as that stupid old person who doesn't know anything.
But I suppose they may be right.
By the way, read your history. Black rights didn't happen in the US because the older generation died off; a few brave souls of the generation that was in charge stepped up to make it happen. Some of them died for it so you should at least have some respect. At least they were able to make a valid argument as to why they were right and not fall back on meaningless talking points that made them feel smart.
Currently, I see gay rights moving forward without anyone waiting on people to die off. Your argument is not only comical, it doesn't exist.
I don't post here to stroke my ego. I could not care less what someone on Hacker News thinks of my ideas or perceptions, although I do enjoy quality discourse.
Go take a look at historical trends with regards to polling on gay marriage: http://www.gallup.com/poll/117328/marriage.aspx
You can CLEARLY see how public sentiment towards gay marriage has changed over the last 10-15 years. Either this occurred because of people changing their belief structure (doubtful) or because people with one mindset aged out of the population.
Totally not fair to present only the allegedly "bad" parts of a position without the good goals that necessitates it. Opening the paths to hiring more people is quite fairly coupled with telling the capable to stop sitting around collecting checks; if you're going to socialize health care payment, you'll need to stop giving companies reason to not have more than 49 employees.
Wow, you really do drink the trickle-down effect Kool-Aid.
The burden on wealth producers is very low, one of the lowest points in the modern era.
You would expect in this era of hyper-rich and low-taxation that the wealth would be spreading around.
But it's not. Record profits for corporations (read: wealth producers) is turning into record stock highs, record numbers of billionaires and record lows for the middle class.
I refuse your argument because the world around me clearly shows that our "wealth producers" have figured out how to depress labor costs and increase investor returns. Great for them, but that concept is 100% contrary to your "wealth producers spread wealth".
No, wealth producers rightfully squeeze labor costs and rightfully return the biggest amount of money to themselves, their boards, and their investors. That's not spreading wealth downwards, it's spreading laterally only.
It's a pretty well supported fact that lessening the tax burden on the mega rich doesn't cause them to go opening businesses and it's surprising people ever believed such nonsense. Why would a rich person take a risk on a new business venture when the a fund can provide a steady, predictable return year after year with very little downside?
A businessman doesn't open more businesses when he has more money.
A businessman opens businesses when investors will pay and the market will support it.
Turns out, a businessman doesn't need his own money to start businesses, because without a market, there's no point of starting the business, and with a market, there is investment available to seize it.
[1] http://www.nytimes.com/2007/04/12/business/12scene.html?_r=0
Your assertion that my comment was the political one is nonsensical.
We've got serious long-term and structural problems in this country. We've got to find a way to discuss them that rises above trite generalizations.
I didn't take potshots at Democrats, I just pointed out that taking potshots at Republicans wasn't furthering the discussion.
So why tax by proxy and not wealth directly?
If by "wealth" you mean "net worth", then because that is even harder to administer than income taxes.
If by "wealth" you mean "income", we do that, but earning income through an entity with separate legal entity whose income is not taxed and retaining it in that entity becomes an effective tax dodge if it is permitted. Which is why corporate "income" tax (which is effectively a tax on retained profits) is included as part of the income tax system.
There will be some complicated edge cases but there will be relatively few and the ability to game them is less because wealth is a simpler concept than income.
Source?
> There will be some complicated edge cases but there will be relatively few and the ability to game them is less because wealth is a simpler concept than income.
How is wealth a "simpler concept" than income. AFAICT, income is far simpler (and, in fact, involves a strict subset of the assessments necessary in assessing wealth.)
Wealth is the value of everything you have less what you owe. Every item can be valued by seeing what people would pay for it, which is usually just its current market price. How do you determine income objectively? You could merely take wealth at two points in time but our society has declined to define it that way because much of the money coming in might go to some sort of expense which ought to be excluded, which is neither objective or simple, and because some changes (such as fluctuations in asset prices) are assumed to be transitory and therefore impractical to tax. The latter is actually the source of most of the perfectly legal tax evasion in this country: Hold stocks, generate value, pay nothing until you sell which needn't be ever.
"What people would pay for it" is a controversial quantity that can only be speculatively and uncertainly answered unless you are actually selling it in an open, unrestricted auction (even actual sale under real-world conditions often doesn't answer this, since its possible that both buyer and seller have non-financial interests which motivate the sale decision such that the purchase price does not represent the market value.) For pure interchangeable commodities with robust markets, this is less of a problem, but for many real world assets (including real estate) this is not the case.
Note that while real estate is already subject to ad valorem taxes (and other value-based policies, such as eminent domain), valuation is not at all free from contention even with those taxes as just one piece of the overall tax picture; if wealth-based taxes were the primary tax system, that problem would be magnified.
> How do you determine income objectively?
If you can value wealth objectively, you can value income objectively, since income is just a subset of the changes in wealth. The problems in income valuation are problems in wealth valuation (which is why, e.g., capital assets are valued at sale for income purposes, which becomes less viable of a solution to the problem of valuation if you aren't taxing the change in wealth but taxing the wealth in each year it was held.)
Real-estate appraisals are imperfect but getting within 20% most of the time is quite achievable. The main problem is for unusual or expensive properties which could be handled similarly to hard-to-value assets.
Your statement doesn't follow unless defining that subset is easy. What should be included or excluded? As we're discussing corporations, we have ample evidence of the ability to game. You could suggest closing loopholes but most of the loopholes also have legitimate uses.
You write that "capital assets are valued at sale for income purposes" is a solution to the difficulty in measuring their value. Why is this the case? Remember that the origin of this discussion is whether it's better to tax corporate income or the wealth of those who own the vast majority of that income. Are you asserting that valuing a person's equity holdings is difficult?
Yep. A friend thinks we should have a "You bought it!" law for insurance companies that assess the value of your belongs to calculate a premium. Basically once they give you their assessment, you have to right to say, "You bought it!" and they have to take it off your hands at that price. Not that such a law could work in the real world, but it is pretty clever. I bet a lot of people wish they could use such a law for property tax assessments.
But I could imagine a "We The People Buy It" under a system of wealth taxes. That the gov't could choose to buy any asset for a modest premium over what the taxpayers asserts it was worth for purposes of taxes last year. Heck, maybe any citizen should be allowed in on that game?
"Hmmm, you say your restaurant business is worth only $300k? It is your lucky day! I just bought it for $360k."
If we don't ignore non-financial, non-real estate assets, then difficulty of estimating their value becomes a significant issue.
[1] One of the reasons the US got into the health care mess they have now was companies taking over the payment of health insurance instead of giving a salary increase. Workers liked this because it effectively meant they paid less taxes.
That is the standard argument, but countries have been taxing property a lot longer than they have been taxing income. Some even manage to tax property at current market prices (e.g. Canada).
That countries have been taxing selected forms of property longer than they have been taxing income is in no way inconsistent with taxes on net worth being harder to administer than taxes on income (and even if they had been taxing net worth longer than income, it wouldn't be), so that's not even a counterargument.
It would seem to me that an unconditional basic income could therefore be paid in part through this mechanism, with the inflation caused by simply increasing the amount of money in circulation. That is to say - the money could simply be created by the government. You can frame this as deficit spending (if you'd like) or you can frame it as the equivalent printing of money. This could (by act of Congress) be done without floating bonds to cover the deficit, but that might cause some conservatives to freak out.
The other problem is that while inflation incentivizes moving up the risk curve, capital gains work in the opposite direction, incentivizing idle cash balances. One side of the government wants you find yield, the other punishes you for finding that yield.
At the end of the day, you're just going to make people find that yield (they have to) and you won't increase tax revenue. People can stomach _some_ risk, but not an infinite amount (especially the institutional guys).
Developing countries frequently switch to USD/EUR in times of financial calamities, as marketplaces there gravitate towards currencies that preserve wealth, not erode it, which is what you're planning to institutionalize.
That kind of presupposes that Republicans are all about saving big business and not the poor.
What if Republicans favor cutting corporate taxes because they are regressive, and their support of 'family' values means they want to protect the income and lifestyle of the poor to middle class families that make up the majority of the American voting population?
[1] http://edition.cnn.com/2012/01/23/politics/weflare-queen
As for the economic payers. Consider what happens if we eliminate corporate taxes: The company has more money. It can use that money in three general ways: Lower prices, raise pay or return it to shareholders. In a company with little competition, the optimal calculation is fairly simple. Does the additional return enable new entrants at current prices? Do we have employees who could leave and create competition and to what extent does the additional cash-flow make it more likely? In a competitive environment, the right answer is based on the sensitivity of profit to talent, the sensitivity of talent to pay increases, and the sensitivity of consumers to price decreases.
Given this different factors, what's the empirical answer? It varies based on circumstance and no one can say definitively. Here's an example of one attempt to answer based on variation in European tax rates that suggests that 49% of the taxes are paid by workers: http://www.econstor.eu/bitstream/10419/51691/1/66322666X.pdf. You can find many more papers with different points of view through your favorite search engine.
Or, paid out to executives as bonus.
And I'm honestly wondering - what percent of payroll is the typical CEO or CEO bonus?
And I personally don't think the harm is in what percentage of the profits is paid to them per se, I think the more harmful aspect is the perverse incentives that are created when executive compensation is tied to short term corporate performance.
It's also worth noting that short-term investors are a greater threat to long-term focused decisions than pay incentives. Most CEO's aren't actually foolish enough to risk destroying their company for more money in the near-term. They like their jobs so what does terrify them is an investor demanding more leverage or adopting a riskier strategy on pain of advocating removal or a hostile takeover. When Chuck Prince said he couldn't sit down until the music stopped, he wasn't worried about a smaller bonus but about posting lower profits that would have led to calls for his removal. "There was a merchant in Baghdad..."
I don't understand the fuss over corporate taxes
Tax on corporate profit does not need to have this effect, because it only applies to profits, not to revenue.
Sure, if a corporation wants to keep the same amount of profit after a tax hike it has to put its prices up. But because we're only taxing what's happening after deduction of costs, there's room for others to come in and compete with a lower margin (and lower taxes as a result).
It encourages firms to reinvest, to hire more people and to find other productive ways to use the money rather than either sitting on it or passing it directly to shareholders.
Now, if we're talking about a company that just puts all those profits in the pockets of their upper management then I suppose who cares. But the smaller companies, those that survive on razor thin margins and need every penny they can get to keep going, those are the companies that have to constantly adjust their prices to deal with tax liabilities.
--edit-- this is exactly how amazon operated for a long time. They paid next to no tax because they reinvested everything.
Tax on profit does not tax business expansion, it taxes retained profit at the end of the tax period.
Raising corporate tax rates might or might not result in higher consumer prices. Depending on the company or industry, it might instead result in lower profits (which harms investors not consumers), or different management decisions--for example it might lead companies to invest in more growth abroad than domestically since the tax rate is lower abroad.
Couldn't that cause corporations to become bloated monsters?
At always comes back to prices being the equilibrium of supply and demand. Taxes on corporate profits obviously have no impact on demand, so we must look at supply. Does taxing corporate profits reduce the amount of supply producers are able to put onto the market at a particular price? In a totally competitive market, profits approach a marginal amount and there is very little to tax anyway. So what about not perfectly competitive markets? If you tax Apple 10% of their profits instead of 5%, does that reduce the number of iPhones they are willing to supply at any given price? If taxes are applied uniformly through all industries, so that Apple can't get a lower tax rate by going into a different industry, then not really.
This is of course a very simplistic analysis. You have to consider things like elasticity of demand, etc. But basically, you can't ignore supply and demand. If you raise prices, quantity demanded will go down, and so the profit-maximizing price is not necessarily or even usually one in which the consumer bears the full amount of the tax.
As you raise more corporate tax in US, doing business in US becomes less and less attractive. As business move away from US, there will be less and less jobs in US. This already and undeniably happened with manufacturing sector. Unfortunately, people are now again arguing for increasing more taxes in US which will further lead to more business moving their business to other countries.
While high corporate taxation environment is great for boom years (unless your corporate constituents relocate), it necessitates bailouts during the bad years. Good example would be some European socialist economies overly reliant on state enterprises.
Better would be trying to tax the beneficiaries of the corporation. The best measure of profitability is some benefit to the owner. Usually capital appreciation or dividends, but sometimes outsize cash or non-cash compensation in an employee context, or as a non-arms length counterparty.
Increase the dividend and capital gains* rates substantially, start taxing fringe benefits, transform the corporate income tax into a very small tax on revenue to prevent the multiplication of corporate entities, crack down on people who renounce US citizenship (by for example making them inadmissible) and call it a day.
*Also eliminate the capital gains basis reset when assets are transferred at death. That makes no sense at all.
This is not to say that printing any money ever is a disaster, but simply that there are absolutely constraints imposed by economic realities.
If it is added where it will directly translate to demand (e.g. eliminating payroll tax) then you will get more spending, which will cause businesses to hire, take on loans to meet the new demand. At some point if you keep adding, you will surpass the ability of the market to absorb the demand and you will get inflation.
If it is added on top of already flush corporate balance sheets (e.g. eliminating corporate taxes), then you most likely won't see much difference in the current environment. They won't use it to hire more people because the demand isn't there.
Loans in and of themselves don't add net dollars to the private sector, as they create a liability for the exact amount of the loan (plus interest). For the domestic private sector to experience a net increase in financial assets, either the sovereign government (whoever's name is on the money) or the foreign sector must increase its deficit.
This has never seemed like a strong argument or an accurate description of what actually happens to me.
If it's true that businesses just pass along taxes, then:
1) I'd think businesses wouldn't be so concerned with minimizing/fighting taxes. What we seem to see instead is that businesses seem to be concerned they will be carrying the cost and investors seem to be worried it will cut into profits.
2) I assume that's true for me, too, of course -- presumably, I don't pay income/payroll taxes either, I just pass along the cost of those taxes to my employer. My employer, as given, just passes those costs along to consumers. Consumer just figures in the costs of goods/services and calculates their asking price for their market offerings accordingly...
So nobody pays taxes?
It seems more likely to me that rather than people "just" passing costs along whole is that everybody pays the tax by finding some economic balance between what they can/must pass on and what they can/must absorb. How much is passed along probably depends on how competitive the market for each exchange is along every cascade and how price sensitive buyers are.
> Taxing corporations doesn't produce magic money
I don't think anybody really thinks it does. The idea is to distribute the load, which taxes (passed along or not) do.
More importantly, this is partly incorrect as it applies to employees. Employee wages are an expense deducted before corporate profits are taxed; I believe (though I'm less confident) that in the case of profit sharing money going to employees could face double taxation.
Most importantly, though, "double or triple taxation" is misleading. Every time the money is taxed needs to be taken into consideration, to be sure, but the ultimate question is the overall rate, not the number of passes. (Please, please, please QUINTUPLE TAX me at 0.01% per pass...)
With loopholes and exemptions and deductions and sliding scales and different rates in different jurisdictions and everything, that's not a simple question, unfortunately.
Oversimplifying, though, for a single example...
Consider the following individuals in a State (fictional, if necessary) with no corporate or individual income tax and no tax on dividends, interacting with a corporation in the same State. The corporation turns a profit (income minus expenses) of $2 million/year, some of which it saves year-to-year and the rest of which it pays out in dividends.
1) Makes 75000, takes standard deduction of $6100. Pays $14492 in income taxes, plus $9300 FICA (half of which comes from employer, but it's still a tax on the employee's income) for a total of $23792, or an overall tax rate of about 31.7%2) Assuming their income is such that they can be reasonably assumed to be paying the top bracket on their average dollar (this person is really making a ton of money, and it's not all coming from this company): A dollar of corporate income that will wind up in this person's hands is taxed at approximately 34%. The $0.66 cents per dollar that he's receiving is then taxed at 20%, meaning a total of 47.2%.
3) $7.25 * 40 * 52 = $15,080 / year. They pay only $901 in income tax, but the $1870 they pay in FICA brings it up to $2771, which is about 18.4%. They may or may not qualify for assistance under one or more of our various current means-tested systems.
4) Profit within the corporation is taxed the same as for the wealthy investor, but now the $0.66 cents per dollar income is taxed at only 15%, for a total of 44% instead. This assumes they are making more than $36,250, which seems fair - but if they are not, the tax rate on the dividend income is 0%, so they are paying in total only the 34%.
I'm not making any particular point regarding what tax policy ought to be, just trying to shift the focus to numbers that are more meaningful.
From my point of view, it is easier to decide how much to tax a particular good or service e.g. a luxury car vs. a basic car vs. public transport. Another example would be a salon visit vs. a doctor visit. In addition, sales taxes are less personal (maybe even less controversial). As opposed to taxing "me" or "you", tax that "thing". Finally, sales tax seems easier to enforce since it is applied at the point of sale. However, I will admit that it's easy to avoid paying sales tax if transactions are paid for by cash.
Taxing corporations may not produce magic money, but it is certainly more efficient than taxing individuals. Look, for example, at the Canadian tax system which offers near full integration for corporate taxes. Corporate taxes be a way of capturing money up front and limiting tax avoidance.
If we had a flat tax with basic income, one could scrap taxes on employment and just tax corporations by denying salary as a deduction. This would be equivalent to the standard approach of writing-off salary expenses and taxing individuals.
The author is so far removed from reality that it's almost humorous. He cites an example where Instagram has apparently replaced Kodak, an example as ignorant as it is misguided. Having known one of Kodak's chief inventors from before the company began its steep decline, it is evident that Kodak collapsed from a series of bad decisions and a failure to secure its territory in IP space. Comparing that to Instagram isn't a comparison of apples to oranges, it's a comparison of oranges to a desk lamp.
I could go on, but there's no need. This article is crap factually, logically, and intellectually. I understand that the title panders to the closely held ideologies of many on these boards, but if you have to look this hard to find arguments for why we're moving toward a UBI, then we're probably not moving toward it at all.
Most people also don't understand technology and what it means that, to quote a Portal poster, "Robots are SMARTER than you, Robots work HARDER than you" [0]. Those people who have never heard of UBI will also, in 30 years, never hear of their jobs again.
[0] - http://half-life.wikia.com/wiki/Karla_the_Complainer?file=Bu...
However, Bitcoin is a radical economic ideology, and UBI is certainly not limited to HN -- it's been discussed all over the world for decades. Most people might not have heard of it, but they have not heard of most political ideas in general.