Why Not a Negative Income Tax?

March 14, 2011 10:20 PM

Why Not a Negative Income Tax? "What kind of program could help protect every citizen from destitution without granting excessive power to bureaucrats, creating disincentives to work, and clogging up the free-market economy, as the modern welfare state has done? [Nobel-prize winning economist Milton] Friedman’s answer was the negative income tax, or NIT."
posted by shivohum (106 comments total)

blah blah blah removing the minimum wage blah blah blah

Zero chance of becoming law. I like most of what this proposal tries to do, and much of the math works out. But removing the minimum wage? Not in my lifetime. (Even if I thought it was a good idea.)
posted by andreaazure at 10:26 PM on March 14, 2011 [2 favorites]

City Journal, unded by the Koch Brothers. Humph.
posted by Brocktoon at 10:39 PM on March 14, 2011 [4 favorites]

funded.
posted by Brocktoon at 10:39 PM on March 14, 2011 [1 favorite]

very interesting.

However, where does the money come from? After all, regular income tax is a very important source of government revenue.
posted by jb at 10:42 PM on March 14, 2011 [3 favorites]

My father was a civil servant in the government of Saskatchewan, one of Canada's most reliably left-wing provinces (except when it flips right periodically), distributing welfare. By the time he'd retired, they'd implemented a similar program to address the same issue of the disincentive to work created by welfare. Previously, if you got a job that paid $100/month, they simply deducted that amount from your benefits. They replaced this with a sliding scale of benefit reduction, so that they only deducted part of the earned amount from your benefits, which left in place a reason to increase your earnings however you could. In the short term, it was considered reasonably successful and politically quite palatable.
posted by fatbird at 10:53 PM on March 14, 2011 [10 favorites]

The U.S. has the Earned Income Credit which is quite useful for some people. Does that count?
posted by mrhappy at 10:54 PM on March 14, 2011 [3 favorites]

It's a pretty interesting idea that goes back a ways. However, it seems pretty obvious why a pure version of the reform would face a huge uphill battle, at least here in the US. Especially in today's climate. The current Earned Income Tax Credit is sort of the politically feasible version of the NIT.
posted by 2N2222 at 10:54 PM on March 14, 2011

It's cheaper to give some people a pittance, than it is to keep it from them. A guaranteed "bottom" reduces the costs of crime, poor health, child/spousal/self-abuse, etc.

The Vancouver BC safe injection site is another example of how spending smart saves money and improves outcomes, even though it's effectively spending money on supporting heroin addiction.

Doesn't matter what our personal moral feelings are: the fact is that spending money on our needy is much better than attempting to ignore them.
posted by five fresh fish at 10:56 PM on March 14, 2011 [36 favorites]

So how does this work? If you file it anually like income tax and the get a payment, how does that help the 11 other months of the year? Presumably you'd want to meter someone's income by month and then help them out with 1/12 their expected NIT refund.

I don't even know if this system would work in the 21st century considering that we now have an abundant pool of labor (here and abroad) and jobs are harder to come by. Providing incentive to work doesn't do a damn thing if unemployment is 10% and underemployment is 20%, all you're doing is taking benefits away from people with NIT.

I like the idea of a graduated welfare system - where you get to keep a little extra if you work and still earn below the poverty line. But the libertarians attach all sorts of nonsensical ideas to it like removing the minimum wage to advance their personal interests.
posted by SirOmega at 10:56 PM on March 14, 2011 [2 favorites]

I stopped reading

[Nobel-prize winning economist Milton] Friedman

right there.

The only difference between him and a snake-oil salesman is the snake-oil salesman probably didn't train advisors to Pinochet.
posted by regicide is good for you at 10:57 PM on March 14, 2011 [30 favorites]

I stopped reading at clogging up the free-market economy, as the modern welfare state has done because I was laughing too hard.
posted by cmonkey at 10:59 PM on March 14, 2011 [25 favorites]

oh - I think I realised - the idea is that regular income tax would still be collected, but then the IRS would handle a minimum income guarentee, while still allowing people to increase their income with work.

Actually, as someone who has both been on social assistance and studied the history of social assistance, this sounds like a good idea. It couldn't replace all social assistance - housing assistance would still be required in some areas, extra support for disabled people in others. And, of course, it doesn't do anything for health, since very poor people aren't the ones in the US who are lacking health care, but rather the working classes. But simplifying and guarenteeing support from the poor law? Good idea.

That said, I would set it up so that people could keep more of their earned income - if you really want to incentivise people to work, you don't want them to just get up a little, you want them to move up a lot. I would guarentee everyone something like 10,000 - and then let them keep every dollar they earned additional to 20,000 or 30,000. You'd still be only giving them 10,000, but they would be living so much better than if they could make 11,000k and you refused to help them at all - at that point, they might figure they could live better on 10k and have the extra time to put down food, etc. And you have to remember the cost of childcare - it can be 10,000 a year these days, and that's at a cheap rate. Whatever someone can earn working has to be 10,000 above what they get on any social assistance, or no single parent can afford to work.
posted by jb at 11:01 PM on March 14, 2011 [2 favorites]

Just give cash to poor people? My good man, the poor need a hand-up, not a hand-out. But they'll get neither from me. Smithers release the hounds.

/C. Montgomery Burns
posted by 2bucksplus at 11:02 PM on March 14, 2011 [14 favorites]

By itself, a NIT isn't a bad idea, but it also sounds like a great way to justify cutting the feet out from under poor people. I can just imagine the conservative drool at the idea of getting rid of food stamps, medicare, etc in favor of just giving poor people a wad of cash and forgetting about them.
posted by Salvor Hardin at 11:03 PM on March 14, 2011 [2 favorites]

I don't know if I agree with it or not, but I once read an article arguing that the precursor of the modern welfare state - the English Poor Law - didn't clog up the free-market economy, but actually helped it to develop by giving a social safety net to wage-dependent labour, one which could (sometimes) follow them to new places (by a system of payments from home parishes).

Don't remember that I was so convinced by the argument, and there were some good critiques - but certainly social assistance spread and became more important with the spread and growth of capitalism and wage-dependency.
posted by jb at 11:05 PM on March 14, 2011 [1 favorite]

I remember the experiment in Washington State because at the timevI was affected in a good way by it. You could not refuse a job if you physically could performanse the work and could getvyourself to and from. No children care subsidy. Thosevwere the downsides. The upside was you could keep your Medicaid in full, you kept most of your food stamps and 2/3 of your cash benefit. I used ot to get into a nicer apartment. The job only ladted a couple months. It was as a care-giver during the day for an older lady. The sad part is the supposedly better qualified person who replaced me was not at all as good.
Still that little bit of time improved things, I got an apartment withva fireplace and a tiny back yard for my kids to play in. Much nicer!
posted by Katjusa Roquette at 11:08 PM on March 14, 2011

Am I wrong in assuming this system would literally allow people to starve on the presumption they might be lazy or gaming the system? Very few people live on welfare because it's easy and they just can't be bothered. I don't understand why right wingers see welfare as such a threat.
posted by Hoopo at 11:09 PM on March 14, 2011 [6 favorites]

Brocktoon: “City Journal, unded by the Koch Brothers. Humph.”

I don't mean to be picky, but you've misspelled a word there. It's actually spelled "undead."
posted by koeselitz at 11:12 PM on March 14, 2011 [3 favorites]

The U.S. does seem to have a problem with bureaucratic solutions becoming unkillable monsters, but the great irony of the article is that their main sticking point to an NIT, Medicare, would go away if the U.S. introduced true universal health care.
posted by fatbird at 11:14 PM on March 14, 2011 [5 favorites]

Right Wingers see welfare as a threat because they have this insane notion that people hate to work. They think all people on welfare are screwing around popping out more babies for more money.
They go in the welfare office and they see non-Whites. They freak out when some ugly set of circumstances places them on welfare. 'Oh my God! I'm a leech!' they feel like a failure if that happens. Well all of us on Maggie's Farm can get hurt. Bit Right Wingers don't understand that anyone can get hurt, lose their job, get sick, etc. There but for the Grace of God.
Better to have social supports than to reduce people to begging.
posted by Katjusa Roquette at 11:19 PM on March 14, 2011 [7 favorites]

Just to reemphasize what mrhappy and others have said upthread: the US has this, it's called the Earned Income Tax Credit:

For tax year 2010, the maximum EIC for a person or couple without qualifying children is $457, with one qualifying child is $3,050, with two qualifying children is $5,036, and with three or more qualifying children is $5,666.

Notice that it is a "refundable" credit which means you actually get the cash even if you have not paid any income tax in the current year. Granted it's in addition to all the other benefits like TANF, Section 8, Medicaid, etc., and not instead of them.
posted by rkent at 11:19 PM on March 14, 2011

This is just a variation on Basic Income from the right instead of the left.
posted by Pseudoephedrine at 11:20 PM on March 14, 2011

(Comparisons with the EITC are made in the article, as is how it would be funded.)

They did actually implement some pilot schemes with poor results:

The results of all these tests were fuzzy, probably because so many other factors were in play, from the subjects’ family structure to their personal values to the fact that they were aware of the experiments.

I can see a number of problems. First, we know from the EITC and equivalents that getting the Income Tax office to do benefits is actually very difficult and costly and doesn't handle things like intermittent employment at all well. Second, it gives you a marginal tax rate of 50%, assuming we increase the threshold at which you start paying income tax is changed so that doesn't kick in until after the NIT threshold is reached. (My completely-made-up rule of thumb is that a tax rate of 50% is high enough to start being a disincentive to work - both for rich and poor alike). Mind you, that's better than the current effective rate. Third, they're assuming that the people on zero earned income could simply start working and get a reasonable salary, where I suspect many of them could command only very low rates of pay, so staying on 100% non-working time is probably a better bet for them. Finally, I'd be concerned with the interaction with wages: why wouldn't rates of pay simply fall to match the supply of labor, meaning you're subsidising to low pay? (The article suggests this isn't a concern, but I can't see my way to understanding that.)
posted by alasdair at 11:42 PM on March 14, 2011 [2 favorites]

Didn't marginal tax rates in England reach 94% after the war for the wealthiest? Did they stop working?

The idea that if I'm making $1,000,000 and get taxed at 60%, bringing home $400,000, that I'd rather quit altogether and make $10,000 is pretty absurd.
posted by maxwelton at 12:00 AM on March 15, 2011 [2 favorites]

I stopped reading ["][Nobel-prize winning economist Milton] Friedman["] right there.

I stopped reading at ["]clogging up the free-market economy,["]

Well, I stopped reading at "Republicans have been winning races again, but with a few important exceptions—Wisconsin congressman Paul Ryan comes to mind—they have done so mostly by running against proposals by liberals in power, rather than by suggesting a coherent alternative agenda."

SUCK IT!!1!! I STOPPED AFTER ONE SENTENCE!

Paul Ryan's "plan" was never evaluated for what would happen with his changes to tax policies-- he simply fed economists groundless assumptions about how much would come in, and they pretended to believe they were plausible. And even with those BS assumptions, his silly little "Roadmap" wouldn't stop adding to the debt until... 2063. (That's from his own appendix at his own site for his own bullshit not-quite-really-a plan.)
posted by ibmcginty at 12:07 AM on March 15, 2011 [3 favorites]

Didn't marginal tax rates in England reach 94% after the war for the wealthiest? Did they stop working?

No, but that did result in the term tax exile entering the lexicon. Call me sentimental but I think the marginal tax rate should go up like a log graph until it hits 50%, for all forms of income (not just salary, but capital gains and inheritance). The way I see it is, at the very least, a person becomes rich because they're working in an economy and under a rule of law that permits acquisition of wealth, and society deserves to be an equal partner in extreme wealth.

But by the same token, I philosophically have an issue with the government taking MORE than half. After all, is it not the person earning it who has created that value (in someone's opinion either by salary or by salesj or by investment) in the first place?
posted by chimaera at 12:10 AM on March 15, 2011 [10 favorites]

Ok, I admit it, I ignored the better angels of my nature & kept reading. Suckage insistence revoked.

Has anyone noticed that Hayek was wrong about everything? In 1984, the UK's PM was Margaret Thatcher, not INGSOC.

As to the merits of the NIT, they're obviously irrelevant-- the Republican Party, as we all know, believes in nothing but resentment for a series of out groups. What Friedman said holds zero sway against a bunch of anti-government slogans GOP marketers cooked up to face the challenges of 1980 & 1972.

"[W]hen Richard Nixon proposed an NIT in 1972, Republican legislators flatly rejected it, seeing it solely as an encouragement for people to stay on the dole. Prejudice and emotion had trumped knowledge."

Nixon is easily imaginable as a premodern Judd Gregg, thinking, "I only said all those things about groups you're supposed to hate, you right-wing nutcases! How could you take it so literally and spoil my respectability!"

A few years ago, the social theorist Charles Murray

Oh, FFS. That's where I stopped reading. These fuckers just don't care about fact. Makes it hard to care about what they think.
posted by ibmcginty at 12:11 AM on March 15, 2011 [3 favorites]

Didn't marginal tax rates in England reach 94% after the war for the wealthiest? Did they stop working?

No. Some said "fuck you" and left.
posted by 2N2222 at 12:13 AM on March 15, 2011

But by the same token, I philosophically have an issue with the government taking MORE than half. After all, is it not the person earning it who has created that value (in someone's opinion either by salary or by salesj or by investment) in the first place?

I don't know how I feel about that.

The government creates the conditions that allow for the individual to reap that money.

As Warren Buffett put it, "The world is unfair, and I have been very lucky. I was born white - and male - in the world's richest country, to parents that took care of me, and inspired me. I could, for example, have been born a woman - in Bangladesh - with few possibilities of development. It's a big lottery."

Pretty clearly Rawls-influenced.

I don't want to ride that view to the mat, as it proves too much-- could everyone's tax rate be set at 97% by that rationale? But it's absolutely a view worth considering.
posted by ibmcginty at 12:15 AM on March 15, 2011

Didn't marginal tax rates in England reach 94% after the war for the wealthiest? Did they stop working?

Also, we're talking *marginal* tax rates. I know that if after a certain point the government would take 94% of my income, I'd probably stop working for the year. But the vast majority of people who were in that position couldn't really choose to "just stop working" because they were passively earning (i.e. big money investors and rock stars). So THOSE people often really did up and leave the country.
posted by chimaera at 12:16 AM on March 15, 2011 [1 favorite]

All this posturing about when you stopped reading is pretty grotesque and unworthy of this site.
posted by nasreddin at 12:21 AM on March 15, 2011 [22 favorites]

The government creates the conditions that allow for the individual to reap that money.

That was my first point. The government creates conditions that allow wealth to accrue -- I think it's valid to say that in that case the government is entitled to a 50% share in that wealth. None of this 15% capital-gain crap, or inheritance exemptions. 50% marginal top tax rate for all forms of income.
posted by chimaera at 12:23 AM on March 15, 2011 [1 favorite]

All this posturing about when you stopped reading is pretty grotesque and unworthy of this site.

Oh, fuck, amen! It would be nice to evaluate ideas on their merit rather than pull a page from the teabagger handbook, and instantly write off ideas based on their endorsement from persons on one's enemies list.

Ironically enough, the NIT is very much a large wealth transfer from high income earners to low income earners. Which conservatives like Friedman and the Koch brothers all hate, right? Or maybe not.
posted by 2N2222 at 12:29 AM on March 15, 2011 [6 favorites]

SUCK IT!!1!! I STOPPED AFTER ONE SENTENCE!

f***ing amateurs. I didn't even start reading. eat the rich.
posted by philip-random at 12:34 AM on March 15, 2011 [6 favorites]

It always seemed like fraud would derail the NIT (a nice-sounding idea even to this liberal, as it's hard to argue that the existing welfare system is the best way to get resources to the poor). If the government pays you $5,000 to make nothing, I'm pretty sure the price of a stolen SSN would start fluctuating rapidly.
posted by zvs at 1:12 AM on March 15, 2011

The major problem here is that the programs this would be replacing are not meant to help non-disabled adults. They're meant, primarily, to help kids. If you're a non-disabled adult without children, the number of programs you qualify for is tiny, and the amount of benefits you get compared to a family is also tiny. So, these programs are not there to make sure that adults have anything. They're there for kids. You know, because the five-year-old who lives with her grandma and two cousins in a housing project in Cleveland cannot go out and get a job if she wants to.

Once you're talking about kids and the interests of the kids, this starts sounding like a really stupid idea. I don't think that the poor on the whole are dumber than anybody else. I've been poor most of my life. I still think that food stamps needs to be limited to buying food, because otherwise *some people*--not all, but too many to ignore--will spend that cash on things that are not food for their kids. And the kids will go hungry. Some people will spend the cash that used to be Medicaid on things that are not their kid's medical care. As long as we're talking about adults, I don't care if you buy a new TV but you don't go to the doctor. Whatever, that's you.

But as a taxpayer, I'm not okay with *paying* for that decision. I'm okay with putting money into the system to cover the basic *needs* for the whole population, to make sure that we all have access to the necessities of life. I'm not okay with buying your TV while your kid hasn't been to the dentist. I think plenty of people would be responsible with a cash payment, but that doesn't change that not all would. The point of food stamps is that when a family gets food stamps, society has a reasonable assurance that this family is being fed. And if these benefits are scaled somehow to incentivize work, then either you have to come up with *more* money than we currently spend... or you have to give less to those who don't work. Except then you're punishing, again, the five-year-old who lives with her grandma who has no control over any of this.

So, it doesn't work. I mean, the part where you want to maximize wealth in the economy might go better, but under that plan, more kids *will* go hungry. This is not a trade-off that I believe anybody in a civilized nation should be willing to make. There's an unacceptable level of shame involved with the current system, but that doesn't mean that the solution is to institute a system that has less protection for the most vulnerable members of society.
posted by gracedissolved at 1:23 AM on March 15, 2011 [10 favorites]

giving poor people a wad of cash and forgetting about them

I'd rather have a wad of cash and be forgotten by the fumbling clusterfuck of tentacled retarded blind elephants that is the government than have food stamps and somebody with a desk job for life telling me I'm a bad person.

I say that as somebody with a desk job for life. You really, really don't want me deciding what's good for you, because my professional incentives are nothing like your private incentives. I get rewarded for making your life a living hell. The more I make the world like Brazil, the more money tumbles into my pockets. If I can make your life hell while creating a new army of bureaucrats who don't actually do anything, why, I'm Senior Executive Service Material, Son (tm).

If you're holding the money, on the other hand - enough money that you suddenly drop of my list of people who are poor, and thus obviously stupid and probably a child molester and everybody needs to be protected from you, including you - your incentives are your own.
posted by obiwanwasabi at 1:28 AM on March 15, 2011 [5 favorites]

I'm not okay with buying your TV while your kid hasn't been to the dentist.

Why not? If you are down with giving people cash, then don't be so arrogant that you should think you have the right to tell them what to do with it.
posted by three blind mice at 1:34 AM on March 15, 2011 [7 favorites]

Australians get benefits for all sorts of random reasons. Not working, working part time, living alone, living at home... Whatever. Oddly enough, we survived the GFC.
posted by Lovecraft In Brooklyn at 1:58 AM on March 15, 2011 [3 favorites]

To me, all this basic income and NIT business sounds like a trick for turning people welfare into indirect corporate welfare, i.e. poor people spend their money on luxuries instead of necessities.

There should be a basic income for people engaged in economically useful but homebound activity, especially raising children, kids writing open source software, maybe people caring for grandparents, etc. And there should be microfinance opportunities.

After this, any government funds directed towards the needs of poor should probably focus more directly on meeting basic needs, i.e. health care, housing, and food. Yes, there might be economic advantages in making these people participate more directly in the economy, i.e. give them money, but we're likely talking about people who aren't participating very effectively in the first place. Food stamps should work pretty well, no?
posted by jeffburdges at 2:27 AM on March 15, 2011

A lot of knees jerking here.

This idea is sometimes called a Citizens Basic Income and it's not unique to the political right, many on the left are strongly in favour too. See Chris Dillow or these PDFs from the Citizen's Income Trust for a UK perspective.
posted by TheophileEscargot at 2:41 AM on March 15, 2011

I disagree with this idea, but I'm not going to tell you why because you've already stopped reading.
posted by Eideteker at 2:57 AM on March 15, 2011 [3 favorites]

Some of Milton Friedman's ideas make for a great litmus test.

Let's say that you have an acquaintance who calls themselves a classical liberal, you can use the following script to determine if they really are, or just use that to cloak a "fuck-you got mine" selfishness.

You: Do you agree with me that taxation distorts the economy?
Soi disant classical liberal: Yes.
Y:...and that we should maximise those taxes that cause the least distortion so that we can reduce those that cause more (such as income tax)?
Sdcl: Of course
Y: Then you agree with me and Milton Friedman that inheritance taxes should be very high?

At this point there is a magical bifurcation, real classical liberals will agree with you, the fakers will start shrieking about a death tax and venting steam from their heads like some kind of Glen Beckian tea kettle left on a stove too long.

I do think that the City Journal is an unfortunately goofy place to read about these ideas, but that's life.
posted by atrazine at 3:07 AM on March 15, 2011 [12 favorites]

Heartily endorse negative taxes instead of benefits. I've also eliminated my need for fresh water by using a negative sewage system, a much purer concept. In fact I've given up on buying food too, as I now use an approach based on collection of negative shit (something Milton Friedman knows well, I believe).
posted by Segundus at 3:44 AM on March 15, 2011 [3 favorites]

There should be a basic income for people engaged in economically useful but homebound activity, especially raising children, kids writing open source software, maybe people caring for grandparents, etc.

Kids writing open source software?
posted by Lovecraft In Brooklyn at 4:25 AM on March 15, 2011 [1 favorite]

Right Wingers see welfare as a threat because they have this insane notion that people hate to work. They think all people on welfare are screwing around popping out more babies for more money.
They go in the welfare office and they see non-Whites. They freak out when some ugly set of circumstances places them on welfare. 'Oh my God! I'm a leech!' they feel like a failure if that happens. Well all of us on Maggie's Farm can get hurt. Bit Right Wingers don't understand that anyone can get hurt, lose their job, get sick, etc.

Any other sweeping generalizations you'd care to enlighten us with?

As someone who has worked on both sides of the spectrum I can tell you that this couldn't be further from the truth except for in the fantasy world of Metafilter where right=bad and left=good.
posted by tgrundke at 4:53 AM on March 15, 2011 [7 favorites]

One should note that one of Clinton's big "accomplishments" was welfare "reform" which exchanged direct aid to women with children for higher EITC payments (roughly speaking).

Democrats implementing proposals from the radical right i.e. Friedman.
posted by ennui.bz at 5:02 AM on March 15, 2011

The only problem with a negative income tax is that it discourages work by creating a massive marginal tax rate for those moving out of poverty. Better to give everyone a basic guaranteed income, regardless of their already existing means of support. That way, they can work or not as need and desire allow, and when they work, they build up from a sustainable income that already supplies the means of subsistence and dignity. Self links: Basic Income for the win!
posted by anotherpanacea at 6:40 AM on March 15, 2011

I'm a big proponent of food stamps for everyone. In my admittedly-unrealistic fantasy land, they could substitute for conventional absurd agricultural subsidies, because really food stamps are an agricultural subsidy with the big difference that they allow some consumer choice about what producers to support and they have the potential to allow people to eat better. Poor people would use them to survive (and oftentimes it's waaay too hard for them to get regular food stamps) and middle class people could use them to improve the quality of their diets.
posted by melissam at 6:43 AM on March 15, 2011 [2 favorites]

> As someone who has worked on both sides of the spectrum I can tell you that this couldn't be further from the truth except for in the fantasy world of Metafilter where right=bad and left=good.

Well, up here in Ontario we once elected a premier (Mike Harris) who eliminated a $37-a-month benefit for pregnant welfare recipients because, as Harris himself put it, he wanted to make sure 'those dollars don't go to beer.'
posted by The Card Cheat at 6:53 AM on March 15, 2011

anotherpanacea: "That way, they can work or not as need and desire allow..."

eponysterical?
posted by Perplexity at 6:59 AM on March 15, 2011

Anotherpanacea, I think you're missing something in the way the NIT works. The benefit declines marginally so to create an incentive to work. The example in the article goes something like this: If you don't work, you get $5,000 annually (in 1968 dollars). If you then get a job the next year and make $2,000, your benefit drops to $4,000 and you have earned a total of $6,000.

The basic idea isn't all that different from your basic guaranteed income and if you adjust for inflation, the numbers you use are even pretty close.
posted by VTX at 6:59 AM on March 15, 2011

I really don't see how this is groundbreaking. It follows thoughts that have passed through my head, and I have just about zero formal education in economics.

I would personally say we shouldn't tax income up to $30,000 and then create a flat tax over that with no deductions except for those you put into a business. **Obviously I'm oversimplifying that process for the sake of argument here
posted by zombieApoc at 7:05 AM on March 15, 2011

Y: Then you agree with me and Milton Friedman that inheritance taxes should be very high

Nope.

On the other hand, he did support property and gasoline taxes.
posted by topynate at 7:06 AM on March 15, 2011

insane notion that people hate to work

Actually, this has been pretty much my experience with approx 30% of the people I've encountered throughout my 30-years of life.
posted by gagglezoomer at 7:09 AM on March 15, 2011

Oh, the City Journal. I just discovered this publication in my field placement. I found issues ranging from 1999-2005. Lots of assertions in the rag, but not a single citation, therefor, I assume that anything published in the City Journal is bull shit. It is a joke publication, and after reading a number of back issues I can say that their perspectives and opinions don't age very well, and they make a lot of presumptions and predicts that have turned out to be completely untrue. It has the clothings of a respectable academic publication but it is without nuance or scholarship.
posted by fuq at 7:10 AM on March 15, 2011 [2 favorites]

The problem is always going to be that of dividing the sad few who truly cannot function in society and the Sturdy beggars and the bone idle. How to balance the personal and social good of capable workers working vs societal obligations for the genuinely needy.

The negative income tax would seem to be a cost effective way of passing off the problem, but would encourage the bone idle and do nothing to reach out to the socially helpless. On the other hand, the heavily bureaucratic hands-on methods are more than a little paternalistic and humiliating. On the other hand, the humiliation should be incentive for the layabout to get out of the system. On the other hand, the cost of government is set to bankrupt us all. On the other hand, economies grow best when the goal of creating and keeping wealth is guaranteed. On the other hand, many of the best paid currently (you know who I mean) are getting rewards way disproportionate to their economic value.

Too confusing and heart breaking. I've no answer.
posted by IndigoJones at 7:12 AM on March 15, 2011 [3 favorites]

> insane notion that people hate to work

Working is like getting old; it sucks, but it's better than the alternative.
posted by The Card Cheat at 7:13 AM on March 15, 2011 [3 favorites]

VTX- That's a marginal tax rate of 50%!! I'm fine with high taxes on the rich, but it's a hell of a disincentive on the poor!
posted by anotherpanacea at 7:14 AM on March 15, 2011

You can always change the rates. It sounds like you're getting hung up on the details.

What if the base benefit was $5,000 and if you got a job paying $2,000 annually, your benefit dropped to $4,500, or $4,750? Would that be okay?
posted by VTX at 7:46 AM on March 15, 2011

anotherpanacea: "That's a marginal tax rate of 50%!! I'm fine with high taxes on the rich, but it's a hell of a disincentive on the poor!"

I've seen statements similar to this a few times and for the life of me I can't wrap my brain around them. What is the disincentive? I'm seriously not following.

Is the logic that "money for nothing" from the government should be calculated as if it's an income?

I understand that if the NIT threshold was $60,000 then a person without any income for that year would receive $30,000 (in a 50% NIT). A person who made $10,000 for that year would receive $25,000. So yes, the person working would receive less NIT than the person not working. But to extend that to say it's a disincentive? Since the person working had $5,000 more disposable income than the person not working, I don't follow the disincentive angle.
posted by forforf at 7:49 AM on March 15, 2011

I don't follow the disincentive angle either, but if you tried to implement a 50% marginal tax rate on the rich the Republican Party would scream bloody murder about it being a disincentive to "create jobs." If it's a disincentive on one end, surely it is on the other.
posted by stevis23 at 8:17 AM on March 15, 2011 [1 favorite]

forforf - it would depend on the costs of working. If childcare costs $10k / year (which it often does), then the family would end up with less money to live on.

My mother actually opted to stay on welfare and not to take the only jobs she was qualified for - low paid factory or cleaning work - because she had two children and she was worried about both the costs and quality of childcare. She did end up doing in-home childcare, which allowed her to work and be home with us, but it paid less than welfare (and so she was still partly on welfare and a cost to the system).

Transportation is another cost - in my city, it's abt $1200/year minimum to commute 5 days (10 trips) a week - not including any other travel.

Also, you lose a huge amount of time if you are working - esp if you are poor and have a long public-transit commute. Time really does equal money -- that's less time that could be spent buying very cheap raw ingredients and making your own food, leading to more reliance on more expensive prepared foods. When on welfare and home all day, my mother made her own pickles, as well as preserving fruits and vegetables -- suffice to say that now, since her work and her commute take 11 hours each day, she doesn't do anything like that.

So there are all these costs to working outside the house (people on welfare are still engaged in reproductive work) that have to be thought about when thinking about how much to scale back the benefit when someone starts earning outside the house. I would certainly (in today's money) let them keep the first $10-15k before reducing the benefit.
posted by jb at 8:26 AM on March 15, 2011

What if the base benefit was $5,000 and if you got a job paying $2,000 annually, your benefit dropped to $4,500, or $4,750? Would that be okay?

Sure: that's a 25% or a 12.4% marginal rate. But when does the rest of it phase out? If you set the rates to phase out well above the middle-class income level, I've no trouble at all with a negative income tax. But then you're going to run into other issues, like having a substantial enough tax base.

The key here is that people respond to incentives, especially when they're poor, and right now there's a hell of a disincentive for the poor to work. When you account for things like child care, many folks have to pay more money than they receive in income to work. Then, if they make over a set amount, any number of their benefits phase out or are eliminated. And so, you find a large number of people who are stuck: they can't afford to make any more money, unless they can make a lot more money. These people end up relegated to unregulated grey and black markets, where they lose all the labor protections we've carefully crafted to benefit the least advantaged.

On preview: what jb said.
posted by anotherpanacea at 8:36 AM on March 15, 2011 [1 favorite]

eponysterical?

A bit more on my username:

“Hey guys! Look at this great solution-to-the-world’s-ills I’ve discovered!”

“Another panacea? Great, I bet you worked out all the kinks in the human condition this time….”
posted by anotherpanacea at 8:39 AM on March 15, 2011

You end up having income tax deductions for things like childcare and commuting expenses that lower your adjusted gross income.

That way, a person might actually make $40,000/year but get their NIT benefit as if they made $30,000/year (or $20k/yr, whatever makes sense).
posted by VTX at 8:46 AM on March 15, 2011

I did not realized that I was able to deduct my commuting expenses. Please tell me how to do this!
posted by anotherpanacea at 8:50 AM on March 15, 2011

I stopped reading ["][Nobel-prize winning economist Milton] Friedman["] right there.

I stopped reading at ["]clogging up the free-market economy,["]


Yes, because reading is not a good thing.
posted by storybored at 8:52 AM on March 15, 2011

You could add them to the tax code for low income families.
posted by VTX at 8:53 AM on March 15, 2011

Kids writing open source software?

I'd be fine with that actually. Apache didn't write itself.
posted by thsmchnekllsfascists at 9:07 AM on March 15, 2011

You could add them to the tax code for low income families.

Sure, but then you've got to figure out when those deductions phase out as well, which increases the marginal tax rates that hit people as they work their way out of poverty. Still, if you do enough of this, it's probably possible to make a negative income tax and basic income look fairly similar. Here's one account of the ways that different proposals can be distinguished, and why those distinctions might matter.
posted by anotherpanacea at 9:10 AM on March 15, 2011

Ack! Forgot to put a pdf warning on that link.
posted by anotherpanacea at 9:11 AM on March 15, 2011

It sounds nice and clean (which always makes me suspicious). One question is where the level would be set. If we want to guarantee people a minimum income of $20,000 a year and the government makes up 50% of the shortfall, then the mark should be $40,000. That's probably a higher number than most people were thinking and I'll bet it wouldn't fly.

Another question - are there different marks for people with and without kids?
posted by It's Never Lurgi at 9:13 AM on March 15, 2011

Anecdata: I am living on a $9000/yr disability benefit, and am allowed to make about $1000/mo before they start knocking away bits of benefit. Of course, this would require being able to find paying work, ha ha ha.
and if anyone would like to help me "live the dream" of an income in the five figures, please check my page in Jobs
posted by jtron at 9:26 AM on March 15, 2011 [1 favorite]

I stopped reading [Nobel-prize winning economist Milton] Friedman right there.

There is no Nobel prize for Economics.

There is however "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel". Banks trying to make economics respectable.
posted by rough ashlar at 9:41 AM on March 15, 2011

Working is like getting old; it sucks, but it's better than the alternative.

Not working? By the laws of High School Science! I do not work each day.

I get up in the morning from one spot and I come back to that same spot and with work being a product of distance and time, I do no work every day.
posted by rough ashlar at 9:45 AM on March 15, 2011

Thanks to those that responded, I understand some of the issues better now. Namely that there are expenses incurred just in getting employed (transportation, maybe child-care, etc) that should be considered (which a basic Negative Income Tax scheme does not).
posted by forforf at 9:48 AM on March 15, 2011

What kind of program could help protect every citizen from destitution without granting excessive power to bureaucrats, creating disincentives to work, and clogging up the free-market economy

Based on this discussion it certainly sounds like implementing something like this would require a fairly massive bureaucracy. Also, my understanding is somewhere around 5% of the country receives actual welfare at any one time (not food stamps or unemployment insurance etc). I'm not sure if that counts as "clogging up the free-market economy." I think the article is based on some flawed assumptions.
posted by Hoopo at 9:48 AM on March 15, 2011

(work done = force * distance when distance == 0, no work. No idea how time got there unless it was just gonna be unfunny anyway. )
posted by rough ashlar at 9:48 AM on March 15, 2011

The first thought I have whenever I read anything about any kind of "everybody gets x amount of money" scheme is of Robert A. Heinlein's first book, For Us The Living. In it, he describes a society based around everyone having a base income that the government gives out to everyone so people can decide to work or not and never have to worry about meeting their basic needs. When I first read this, I naively thought it was a workable system of economics, compatible with capitolism. However, upon further learning and study, I realized that it is actually a whole unworkable system, worse than anything we currently have. The first thing that will happen is that housing costs will rise to eat up as much of that free money from tenants as possible. You would either have to create massive government housing projects to provide basic shelter for everyone, otherwise the private individuals/corporations that own any residential rentals properties are going to hike the costs up so that even with your free money from the government, you can't afford to live anywhere on your own without having a job to supplement your income so you can eat too. Oh, and food prices. Yeah, forget about low cost food. Everything will rise to make as much of a profit from the free money out there as possible. This isn't a system that will create harmony and help the poor or disenfranchised. This is a system that pretty much lets the wolves into the sheep pen, while the shepherd goes and jumps off a cliff.

Never, ever, ever think that you can have a system where there is a baseline above zero. Artificially creating one will skew the entire system towards barbary and rampant corruption. Unless your goal is to enslave the population and capture as much "money" from others as possible, any system with this kind of manipulation from the governing entity will automatically create a huge gulf between the rich and the poor. There will be no way to change your class and an automatic aristocracy will be created, based upon who controls the means of production. This will always be the dividing line between the rich and the poor, and creating an artificial floor above zero simply cements into place the ownership and control.

The object should be to reduce the need for monetary wealth for basic needs, not to simply throw more money into the system. The reason those in power don't want universal health care? because they're making money from it. It's that simple. So instead of having something that has a fixed rate of pay and a fixed rate of use, you end up with something that has continuing rising costs and profits and forces everyone to buy insurance, whether they can afford it or not. This would be the same thing. Once you institute that everyone will have a minimum amount of money, there will be a zillion things that the law will now require you to have, just to exist in society. You'll have to have health insurance, sidewalk insurance, housing insurance, food insurance, and job you have will have it's own insurance you have to have in order to work, etc, etc, etc. Want to live in a multi-unit building? Neighbor insurance. Every activity you can think of will require permits and forms and fees to make sure that every last penny that has been "given" to you is extracted with interest. Any system that gives you 1 thing will take away 2.

Sorry, for the rant. I've had this argument a thousand times (yes, hyperbole is fun) with people who really are that lazy and would be more than happy to eat cheetos and drink mountain dew all the time and play Xbox all day instead of working. $5000 (1968 money) a year would be more than enough to keep them fed, in a studio apartment, with an internet connection and a Gamefly account, and they'd still be able to order pizza once a week. This is not the society I want to live in. This is basically a way to create ghettos of people who have been allowed to succumb to the sweet opiate of a slow, isolated death by sloth. It's a way to weed out people who haven't had a chance to learn that they can be more than just a bundle of dopamine receptors.
posted by daq at 9:50 AM on March 15, 2011 [4 favorites]

There is however "The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel". Banks trying to make economics respectable.

A.K.A The Nobel Memorial Prize in Economic Sciences commonly referred to as the Nobel Prize in Economics.
posted by VTX at 9:52 AM on March 15, 2011

That's exactly what's happened in Alaska, daq!
posted by anotherpanacea at 9:56 AM on March 15, 2011

It isn't really throwing more money into the system, it is throwing money into the system differently. The goal is to spend less on welfare overall by replacing some (some, not all) assistance programs with NIT.

We already have section 8 housing here (I think it is a state program in MN) where low income families pay 30% of their income in rent and the state makes up the difference to the lessor. I haven't really noticed much upward pressure on rental prices. In the last six years, my rent has only gone up by $60.

As they say, the devil is in the details, I think the concept is sound but the income levels and deductible expenses would have to be carefully researched, chosen, and monitored to make sure that the program has the desired affect. $5,000 in 1968 dollars translates to about $31,500/yr today. A person would have to make somewhere close to $40,000/yr to bring that much home after tax. Obviously, that kind of NIT is way to high. For the NIT to work, the base level would have to be kept low enough that a person could live on it but no one would want to live that way for long.

If we're assuming that we had the kind of competence in our government to pass this kind of radical re-engineering of the system to begin with, we may as well assume that they are competent enough to figure out the details well enough.
posted by VTX at 10:12 AM on March 15, 2011

So, what, exactly does "incentive to work" mean, precisely?

If you give welfare to people to buy shit with, including paying rent, housing, food and clothes, does this not really mean "wage slavery" then? Because the implication is: if these things are provided you won't actually work. And thus you must work in order to survive, and ultimately at the lowest possible wages the market will allow.

And the biggest flaw I find with all these systems is that they still underserve the poor. When I heard about Moynihan's/Nixons GAI proposal I thought it was an interesting idea. Until I found out how much that "guaranteed income" was. Or rather how little it was.
posted by symbioid at 10:40 AM on March 15, 2011

"[W]hen Richard Nixon proposed an NIT in 1972..

I really need to revisit my notion that Nixon was the worst president ever. From wiki:

Under Nixon, direct payments from the federal government to individual American citizens in government benefits (including Social Security and Medicare) rose from 6.3% of the Gross National Product (GNP) to 8.9%. Food aid and public assistance also rose, beginning at $6.6 billion and escalating to $9.1 billion. Defense spending decreased from 9.1% to 5.8% of the GNP

Another large part of Nixon's plan was the detachment of the dollar from the gold standard.

Nixon initiated the Environmental Decade by signing the National Environmental Policy Act, the Clean Air Act of 1970 and the Federal Water Pollution Control Act amendments of 1972, as well as establishing many government agencies. These included the Environmental Protection Agency (EPA), the Occupational Safety and Health Administration ...

By the fall of 1970, two million southern black children had enrolled in newly created unitary fully integrated school districts; only 18% of Southern black children were still attending all-black schools, a decrease from 70% when Nixon came to office.[112] Nixon's Cabinet Committee on Education, under the leadership of Labor Secretary George P. Shultz, quietly set up local biracial committees to assure smooth compliance without violence or political grandstanding

I mean, dude seemed like a mess personally, but he did some really great stuff while he was in office.
posted by electroboy at 12:00 PM on March 15, 2011 [1 favorite]

When I say "incentive to work" I just mean that working will make you more money than not working. For some people welfare gives them an excuse not to work. These people are rare but they're out there. For others, they fall on hard times and need get on some kind of welfare program but the currents systems are often set up so that they will make less money if they start working or their benefits are reduced by their earnings.

For the majority of those on welfare who are honest, hard working Americans, this system says, "Look, things have gone wrong for you, we're going to make sure that you can survive but we're not going to punish you for trying to dig your way out of poverty. In fact, you'll be rewarded."

The trick is make the maximum benefit (for those with no income) high enough that people are able to survive yet low enough that no one wants to live at that income level.

If I don't work and the government will pay me $12,000/year and I work make $5,000/year the government will still give me $10,000/year, I'm now making $15,000/yr. I'm still making more money than I was if I didn't work so but that $3,000 will make a big difference in my lifestyle so I will always want to make more money. There will never be a situation where getting a raise or otherwise increasing my income will mean I bring home less money. There is always an incentive for me to do better for myself, a reward for getting a better job or getting a raise. In some cases now, I might get $12,000 worth of benefits for not working but if I got that same job at $5,000/year my benefits might drop to $3,000. Now my total take-home is only $8,000. At that point, it makes more sense for me not to work. Even if they just deduct my earnings from my benefits I'm now working and still only getting $12,000/year and it still makes more sense for me to stay unemployed.
posted by VTX at 12:37 PM on March 15, 2011 [1 favorite]

When I first read this, I naively thought it was a workable system of economics, compatible with capitolism. However, upon further learning and study, I realized that it is actually a whole unworkable system, worse than anything we currently have. The first thing that will happen is that housing costs will rise to eat up as much of that free money from tenants as possible. You would either have to create massive government housing projects to provide basic shelter for everyone, otherwise the private individuals/corporations that own any residential rentals properties are going to hike the costs up so that even with your free money from the government, you can't afford to live anywhere on your own without having a job to supplement your income so you can eat too.

That doesn't make sense.

There's no new money being printed: it just redistributes existing spending. So there's no reason to think it will be inflationary.

The whole point of the scheme is to get away from things like "massive government housing projects". If the government pays for people's housing, that can create an upward pressure on housing prices, because of principal-agent problems: you have no incentive to haggle down or search for cheaper housing if the government's picking up the tab. But that's the opposite of what this scheme is about. With this kind of system you're the one getting a fixed sum of money, so you have a strong incentive to look for the cheapest rent: that way you've got more left to spend. So, the pressure on housing prices is downward. A major point of the scheme is to move away from the kind of problems you're describing.
posted by TheophileEscargot at 12:44 PM on March 15, 2011 [3 favorites]

Americans are revolted by the idea that anyone anywhere may somehow get something that he or she does not deserve. We would err toward denying an entitlement to a deserving individual rather than allow an undeserving individual receive anything, the same way we would rather punish an innocent person than allow a guilty person go unpunished. Hence: the benefits I and my family and friends receive are justified, whereas the benefits you and your family and friends receive constitute an egregious theft.
posted by squalor at 2:02 PM on March 15, 2011 [5 favorites]

I don't know enough about economics to know if what daq writes makes sense, but it rings true. The best real-world analogy I can think of is Williamsburg, where the majority of people seem to survive due to starting out with a hand-out (from their parents instead of the government). The effect on rent prices is startling. On the other hand, there is some built-in scarcity there which justifies the high prices... but there will also be more desirable places to live, and if people have that available cash that they start with, some will be willing to spend it and take the job.

Another relevant analogy might be higher education, in which government assistance has been partially responsible for allowing ridiculous levels of inflation -- if people had to pay out of pocket, one presumes they would have more strongly resisted the rise in costs.

Does that make sense?
posted by crackingdes at 2:12 PM on March 15, 2011

I think one of the best points the article makes (possibly I'm reading too much into it) is that designing a distribution system so that people must use their welfare benefits for exactly their intended purpose is both expensive and futile. People figure out pretty quickly how to convert whatever you're giving them into cash, so it's probably a lot easier and more efficient if you just do that in the first place.

I also agree that it'll probably never happen, since most everyone seems to be concerned that someone, somewhere is getting something for nothing.
posted by electroboy at 2:33 PM on March 15, 2011 [1 favorite]

Another relevant analogy might be higher education, in which government assistance has been partially responsible for allowing ridiculous levels of inflation -- if people had to pay out of pocket, one presumes they would have more strongly resisted the rise in costs.

I think this is a great example of why a basic income is preferable to targeted government support. If I can only get money from the government if I go to school, then I'll go to school even if I don't particularly want to. (The same thing goes for rich kids who do things to receive their inheritance.) If I can get the money regardless, then I'll spend the money and my time on what I actually value, and try to maximize the amount of what I want that I can get.

If the government will give me grants based on the amount that the school costs, I'm incentivized to go to the most expensive school, hoping that it will be the best. But if I want to go to school on a basic income, I'll seek out the best educational "deal," knowing that I can spend the leftover money on other things that I want.
posted by anotherpanacea at 2:35 PM on March 15, 2011 [1 favorite]

We would err toward denying an entitlement to a deserving individual rather than allow an undeserving individual receive anything, the same way we would rather punish an innocent person than allow a guilty person go unpunished

Of course! If we allowed people to live on a barely livable wage without working for it, no one would ever work and the economy would grind to a halt. Just like if the justice system didn't use overly severe punishments on people to make an example of them, everyone would kill everyone else over just about anything and society would completely break down. Incentives and disincentives, that's all that matters to people. It's simple economics, man.
posted by Hoopo at 2:38 PM on March 15, 2011 [1 favorite]

Williamsburg, where the majority of people seem to survive due to starting out with a hand-out (from their parents instead of the government)

DUMB HIPSTER STEREOTYPE ALARM

Also, the source of someone's income does not determine how much they'll pay for rent. Someone getting $5000 a month from their parents has to save the money just like anybody else. What we're talking about is a dedicated payment from the government that can ONLY be used for housing, in this case.

Not that I've ever met anyone in Williamsburg who fits this annoying trope, grumble grumble
posted by zvs at 2:48 PM on March 15, 2011

Sorry, "has the incentive to save"
posted by zvs at 2:49 PM on March 15, 2011

TheophileEscargot, housing prices will rise because they are still owned by those seeking to profit from owning a rental property. I never said new money was being printed. I said that the market for housing would raise prices to garner as much of that "free money" that everyone has. Unless the government put strict price controls on housing costs, the market will respond to the availability of the entire population to pay, regardless of supply or demand, because it will rent seek to profit from the available consumer base. This would not be limited to housing, either. Any market actor could seek benefit from a guaranteed income source, since the population at large would always have funds, provided by the government.

This is not a solution to poverty or lack of employment. This is a bad idea that has so many holes in it that it wouldn't float in a bathtub, let alone sustain a growing economy. The other thing this relies upon is total economic isolation (or a one world economy, take your pick). It's just a bad idea, because the majority of the population will not utilize this as the economist theorize. This becomes a buyoff instead of a means to sustain a livable existence in a 1st world nation.
posted by daq at 3:33 PM on March 15, 2011 [2 favorites]

Just like if the justice system didn't use overly severe punishments on people to make an example of them, everyone would kill everyone else over just about anything and society would completely break down.

I think there's more accuracy to this statement than you might have intended.
posted by gagglezoomer at 4:41 PM on March 15, 2011

Providing a base income would not be automatically wiped out by an increase in prices. The income wouldn't come from the government magically saying everyone had 10k (or whatever the base income was), it would come from redistribution of wealth (or loans). If what Daq were saying was true, prices should've already raised to wipe out the welfare recipients out there whatever. People with zero income aren't participating in the housing market anyway, so how would they affect pricing?
posted by switchsonic at 5:58 PM on March 15, 2011

I was going to come in to say that I don't see the difference between the NIT and a simple lump sum paired with an income tax bracket that starts at $0. But then I realized that there can be a big one, depending on where the income tax brackets start.

Suppose under Plan A you have a NIT that starts at $10K and phases out evenly up to $20K of income. A simple table would be:

$0 : $10K
$10K : $15K
$20K : $20K

You'd get exactly the same effect if you had a $10K lump sum but a 50% marginal tax rate starting at $0.

But what about at $30K? The NIT gives you $30K, but the lump sum + taxed income gives you only $25K.

I'm not sure what to take from this, but I think that recasting this as an income tax helps bring into relief the main issue, which is how it would incentivize work.

I think the GOP talking point about high marginal tax rates discouraging work are largely bogus, mostly because the people it affects aren't hourly workers, so the monetary effect of them working that extra hour is very tenuous. They can't just quit, or they'd lose all that other money that wasn't taxed at punitive rates. And often the hours are part of the job description, so they can't really reduce them. Take lawyers, whose performance is in large part measured by billable hours -- they aren't actually paid by billable hours, and have so many other incentives (try making partner with subpar billable hours) that it's hard to envision a reduction in work based on changes in the marginal tax rate.

But for the poor, this would be huge. First, they are pretty much guaranteed to be hourly employees, and are likely to work in jobs where part-time work is a realistic option. Mainly, though, the choice between work and not-work is a lot more even. As pointed out above, having a job entails various fixed costs, which are substantial at the lower end of the scale. And that high marginal rate is on all the income -- if you aren't going to work that last hour because you only take home 50% of the pay, then you could say the same thing about the first hour, and the logical solution is to not work at all.

Moreover, I find this practical marginal tax rate really distasteful. Basically, if you have a job that doesn't pay much, it's going to make that job even more worthless.

I'd much prefer a straight grant with no clawback provisions. Lower the bottom income tax bracket to compensate, and you don't wind up with too much perverse incentives.
posted by bjrubble at 6:41 PM on March 15, 2011

Right Wingers see welfare as a threat because they have this insane notion that people hate to work.

There's plenty of work that I did for money alone. Economic incentive has definitely played a role in my professional decisions.

The reason that the economic incentive is critical is because the desperation to work drives down the cost of labour, which reduces inflation. The problem with welfare is not the direct payments, but the dampening effect on this desperation to work.
posted by esprit de l'escalier at 9:33 PM on March 15, 2011

The problem with a lot of these types of ideas is they break down when dealing with circumstances like recession. These days I see people advocating variations of the idea that the recession would end if we just kicked everyone off welfare so they'd get back to work, as if the jobs were already there and it's just laziness that's the issue. Pushing people off welfare doesn't have much of a benefit when people cannot find work. Similarly, this type of incentive doesn't work when the jobs simply don't exist and when the government is needed to minimize the human damage instead of giving workers incentives. If incentives are necessary it's in providing business the means to hire, because that has to happen first.
posted by krinklyfig at 11:55 PM on March 15, 2011

TheophileEscargot, housing prices will rise because they are still owned by those seeking to profit from owning a rental property. I never said new money was being printed. I said that the market for housing would raise prices to garner as much of that "free money" that everyone has. Unless the government put strict price controls on housing costs, the market will respond to the availability of the entire population to pay, regardless of supply or demand, because it will rent seek to profit from the available consumer base. This would not be limited to housing, either. Any market actor could seek benefit from a guaranteed income source, since the population at large would always have funds, provided by the government.

Seriously, this just doesn't make any sense. You're making an assertion that prices will rise, but you're not giving any mechanism by which this happens.

There is no new money entering the system. The existing money in the system from a variety of benefits like unemployment benefit for example, is being redirected to a different benefit.

Your argument is a non-sequitur. You've not given any reason why the same amount of money suddenly becomes inflationary just because it's being distributed in a different way.
posted by TheophileEscargot at 3:00 AM on March 16, 2011 [1 favorite]

> Seriously, this just doesn't make any sense. You're making an assertion that prices will rise, but you're not giving any mechanism by which this happens.

There is no new money entering the system. The existing money in the system from a variety of benefits like unemployment benefit for example, is being redirected to a different benefit.

I don't understand your definition of what daq says as inflation, which implies we are talking about inflation in an isolated market segment, while pairing it with a requirement that more money enter "the system," which you seem to be defining as the economic system as a whole. The premise of a guaranteed baseline income is that it will predominately be used for housing, food, and other necessities, with housing being the major one. If every citizen has a guaranteed minimum amount available for housing, but we are presuming that otherwise no restrictions are being placed on the marketplace, it seems to me quite likely that the result will not be landlords keeping prices the same and allowing their tenants to quit their jobs if they are satisfied with the minimum standards this system provides, but rather landlords, who have no incentive to guarantee the right of tenants to subsist without work, would raise their rents to take as much of this 'free money' as they can, thereby essentially making work mandatory again. That's my understanding of daq's argument.

Sorry for posting in this slightly-stale thread, I've just been thinking about this idea for the last few days and was disappointed to see it ending on this unchallenged point.
posted by brightghost at 11:16 PM on March 18, 2011

Thanks for this response, I will try to address it. There are a number of issues here

1. The premise of a guaranteed baseline income is that it will predominately be used for housing, food, and other necessities, with housing being the major one.

I don't think this premise is true.

Suppose someone changes from an existing benefit to a Citizens Basic Income. They might choose to spend the money on a bigger, better dwelling. But they might spend it completely differently. They might choose to spend less on housing and more on something else. They might want to spend more on bus fares to help their job hunt, or they might spend it on evening classes, or they might just spend it on booze.

The point is: they have a choice, because they get the money directly.

However, if under the old system they lived in a government housing project, or if the government was assisting or paying their rent: they had no choice: the money was going on housing.

So, the money isn't likely to go to housing in particular.


2. You need to consider the incentives. The incentive of a landlord is always to raise prices as much as he can, but he's prevented from raising them too much or tenants will decide to live somewhere else instead. The incentive of the tenant is to haggle the price down as much as he can, or move somewhere better value.

However, under the old system if the benefit is paying the tenants rent, or putting him in a housing project, the tenant has no incentive to look for a cheaper property elsewhere, or to haggle the rent down. So the change to a basic income makes the tenant more likely to do these things, since he now gets to keep the money he saves. Also, he's no longer tied to a particular dwelling, but can move wherever he chooses. So, you would expect this to exert a downward pressure on housing prices.

The negative income tax or citizens basic income distorts the market far less than direct benefits, which is why some right-wing economists like Milton Friedman were in favour of it, despite not being generally keen on helping the poor. Their logic is basically "ideally the poor should starve or freeze to death, but since those damned bleeding heart liberals won't let that happen, let's help the poor as efficiently as possible".


3. It's important to remember that this system involves only reallocating existing money: it doesn't involve any additional spending, or redistribution from rich to poor. But even if that did happen, it wouldn't necessarily have the effect of inflating house prices. High-income and moderate-income households both spend about 31% of their income on housing. High earners tend to live in bigger, more expensive houses rather than save the money. So if there was any redistribution (which is not part of the plan), the long term effects would be for the rich to have smaller homes, which leaves more room for the poor in terms of land and subdivided dwellings.


4. If someone is one of the unsheltered homeless, living under a bridge say, it's true that getting a basic income might lead to him getting a place to live, which would exert an upward pressure on house prices in the short term. But there aren't that many people that are literally homeless in that way, so even the short-term effect is likely to be small. Moreover in the longer term, the supply of housing will increase as landlords build new housing or subdivide existing properties into high-density housing to take advantage of the new ex-homeless market.

It's hard to know how many unsheltered homeless there really are. The estimate of chronic homeless in the US, defined as "those with repeated episodes or who have been homeless for long periods" is 123,833 out of 307,000,000 or 0.04% of the total population. Even if every single one of them gets a home, it shouldn't have a big effect on overall housing prices.

To put it in context, during the boom, 1.5 million homes were being built per year in the US, which has dropped to a mere 479,000 now. The US has plenty of capacity to build homes for all the homeless without straining. The land's there, the materials are there, the workers are there: the problem is the system that allocates them.

But even more importantly: if prices did rise temporarily, the new system is providing roofs over the heads of people who didn't previously have them. This is a good thing.


Overall, one big mistake people often make with economics is assuming that variable quantities are fixed: assuming that there's a fixed number of jobs or homes to be allocated. It's important to remember that if demand rises in a free market, supply usually rises to balance it.
posted by TheophileEscargot at 3:35 AM on March 19, 2011 [2 favorites]

While I agree with everything you've said and am glad there are otter supporters, I do suspect that there would be less work under a basic income than there currently is, which we is lost productivity the market would need to deal with somehow: just as aggregate demand increased, aggregate supply would diminish. Of course, I tend to think this effect will be small, but it does suggest some price increases. Perhaps not on housing (which is already heavily subsidized for all classes) but somewhere.
posted by anotherpanacea at 4:59 AM on March 19, 2011

Well, firstly you have to remember that a major advantage of a Basic Income, especially a non-progressive one, is that it eliminates "benefit traps". There are people today who are on an income of X by living on benefits, but won't get a job earning Y because Y is less than X, or not much greater than it.

Secondly, it makes part-time or intermittent work more practical, because you still have the basic income in bad times.

Thirdly, it means that people with a habit of not working over a period can gradually get introduced into the workplace, starting with part-time occasional labour, and moving on to full time work.

Fourthly, insofar as minimum wages discourage jobs (not very far according to empirical evidence), the abolition of minimum wages would mean more jobs are practical.

So, there are significant effects at play that could mean that more work is done under a Basic Income.

That's my personal view. Now you might think as daq does that some people who work under the current system would choose to "play X-box all day" if they could get a basic income, and that enough of them would do that to counterbalance these effects. But from what I've seen of the benefits system in the UK, complexity is the scrounger's friend. Someone who is determined not to work can always manipulate a benefits system: making false claims, making multiple claims, exploiting different benefits, faking mental or physical illness. The more complex it is, the easier it is to exploit. Moreover, the more "moralistic" it is, designed to give the "deserving" a better deal than the "undeserving", the easier it is to get a generous deal out of it. So I think the people who really want to play X-box all day are probably already doing it, and likely exploiting diverse multiple benefits to get a better deal than they would under a simple Basic Income.
posted by TheophileEscargot at 8:39 AM on March 19, 2011 [2 favorites]

Sorry for the delay in responding, but I just wanted to say that I'm pro-basic income, so I'd love it if what you've written is true. Certainly some of it is true, but there are competing effects here and it's not clear until we implement the program which effect will be larger.

Moreover, I don't think this is ultimately just an empirical question to be worked out, such that if basic income is more economically efficient, we ought to do it. I think we ought to be willing to stomach lower productivity if it relieves the pressure on the least-advantaged to work-or-starve. If it turns out that more stuff gets produced in that world, that's just gravy.

The efficiency argument you're making becomes more important when we reflect on the internal and external productivity issues related to the international distribution of resources, however. That's a trade-off I've tried to address before.
posted by anotherpanacea at 7:45 AM on March 22, 2011