Universal Basic Income - pro.s and con.s

[dbergkvist]

13 hours ago, Martell Spy said:

It's probably better if it's federal. States often don't have the budgets. In the U.S. particular state governments are often conservative and regressive. Even in blue areas.

Can you explain how this works for us-non Americans? Because it makes no sense to me. So in state elections, people vote for conservatives, but the same people vote for more left-wing politicians in federal elections? Why?

[maarsen]

4 hours ago, dbergkvist said:

Can you explain how this works for us-non Americans? Because it makes no sense to me. So in state elections, people vote for conservatives, but the same people vote for more left-wing politicians in federal elections? Why?

The federal gov't. collects the money therefore one votes for the party that does it best. The leftish one. 

The state gov't. does out the money to the individuals and to avoid the 'wrong' people getting it one votes for the rightish one. 

[dbergkvist]

2 hours ago, maarsen said:

The federal gov't. collects the money therefore one votes for the party that does it best. The leftish one. 

The state gov't. does out the money to the individuals and to avoid the 'wrong' people getting it one votes for the rightish one. 

So people like high taxes but low government spending? Why then is the US so incredibly in debt? Sounds like people aren't getting their wish.

[Martell Spy]

7 hours ago, dbergkvist said:

Can you explain how this works for us-non Americans? Because it makes no sense to me. So in state elections, people vote for conservatives, but the same people vote for more left-wing politicians in federal elections? Why?

Not really. Many Americans don't pay attention to politics at all. Even more don't pay attention to state politics. This gives a lot of power to special interests. One example is the fight to make state public options I mentioned. Healthcare lobbyists defeated these attempts in various states, Colorado and Vermont were 2 of them. And Vermont is a very left wing state, that's where Bernie Sanders comes from. In Washington it passed, but lobbyists watered it down. A second example would be the west coast housing crisis. A policy that would help the situation a lot would be to give more control to local governments over housing regulations, but the state governments won't allow this. The real estate developers have too much clout in state politics.

 

Sometimes voters in very blue states make conservative voting decisions on initiatives and referendums, too. The vote to make Uber/Lyft drivers employees in California for example just went in favor of Uber and Lyft. California is a very progressive state and Democrats hold a massive lock on power there.

 

 

[OldGimletEye]

On 1/25/2021 at 1:58 PM, Martell Spy said:

I tend to think of UBI as we already have a UBI, but it goes directly to billionaires and CEOs. Saying we can't afford it while Bezos and his ilk head to trillionaire status is pretty laughable. The real question is how much income inequality will we tolerate and so far the answer seems to more and more of it. UBI is just one of the methods of trying to tackle it.

" I think I know what economics is. It's the science of confusing stocks and flows."

-Michal Kalecki

Bezos(or Bozo) is worth about 180 Billion dollars. His worth or wealth is a stock. Most of his wealth is holding Amazon shares and Amazon stock prices are what investors believe is the present value of all of Amazon's future cash flows. The market value of Amazon securities is a stock.

When we are talking about financing UBI per year, we are talking about a flow. For example, if we are talking about a UBI of 500 per month, we are talking about a flow of 1 trillion per year.

If you want to compare Bezo's wealth to financing UBI, its best to take the present values of all future flows to pay UBI. At a 2% interest rate (and assuming a very long horizon), and 1 trillion per year, that comes out to about 50 trillion dollars.

[Iskaral Pust]

As @OldGimletEye has pointed out, I think people are missing the sheer scale of a UBI program.

A livable UBI, similar to the income level provided by Social Security, would be $20k per adult and let’s say $10k per child.  That would cost more than $5trn every year, growing with inflation.  That has a present value of $100trn+.  The entire US federal budget pre-COVID was less than $5 trillion, and the welfare part of that was only half of that amount.  BTW federal tax revenue pre-COVID was $3.5trn with one of the most progressive income tax structures in the world. 

So if we had this level of UBI, and it replaced Social Security and welfare and SNAP and EITC and all the other social safety nets, it would still dwarf the available revenue.  We could end the military in order to afford a UBI — which I’d personally support — but even that doesn’t balance the books.  Also, UBI doesn’t replace health care spending at all, only the various welfare supports.  

I know the constant answer here is to tax the rich, but that just won’t produce enough tax revenue.  Even with higher taxes on Bezos and whoever, there won’t be that much more total federal tax revenue collected.  Even when the marginal tax rate was 90%, the total tax collected as a % of GDP was not all that much higher than today.  And our tax structure is already more progressive than most countries.  It’s the US middle class who pay relatively less tax than their European counterparts, not the wealthy.  There’s lot of things to fix in our tax system, especially estate tax, CGT, carried interest, etc but that’s to make it fairer not because it’ll move the needle on the total federal budget.

So we’ll need a steep clawback tax structure for income above the UBI.  I think others have reached that conclusion too.  Aside from the problem of inflation, will low skill people still have much value in continuing to work, and is there much value in employing them?  I think it could result in a larger % of marginalized people who are left behind in a cycle of poverty and disengagement.  I would much prefer to raise wages and increase the value of civic participation rather than invite a barbell of either/or.

[mcbigski]

On 1/25/2021 at 1:03 AM, Free Northman Reborn said:

One

This weakens the incentive to get off your ass and better yourself. Even if fear of homelessness is what motivates someone to go and become a waiter or construction worker, that is better for society than having millions sitting at home watching TV while earning a government freebie.

Two

It will put upward pressure on the wages for menial jobs, reducing the deserved premium that more highly educated people should earn compared to those who are less educated - and like in Australia will make the cost of a beer or a meal in a restaurant ridiculously expensive for a normal middle class person.

Three

The idea that there are millions of talented authors, artists and musicians that would greatly improve society if only they could be freed from the constraint of earning a living is highly unrealistic. Most would just end up sitting at home, producing nothing of worth.

And idle hands are the devil’s workshop. 
 

EDIT

And four, even if all of the above were untrue, whats the point of paying everyone $2000 a month if the average cost of living then just increases by an average of $2000 due to the inflationary pressure of all this free cash being available?

One and Two really depend on the structure of the thing.  Would have to avoid the Welfare Trap.  Have no place on the benefit curve where marginal value of earned income goes negative.

Three, I agree with, we'd probably just end up with even more insufferable crap for any given case.  Over millions of people you'll get some quality things, but that's a very small second order effect, no where close to covering the financial cost, if one is Philistine enough to put a price on true art.

On 1/25/2021 at 12:01 PM, maarsen said:

In Canada whenever any social benefit is introduced, such as Child benefits, Old Age security benefits, it is always given to all that qualify based on age. Then those whose income is above the level where the benefit stops, have the benefit clawed back through taxes. Then based in the previous year's income, the benefit is recalculated for the next year. The means test and enforcement are done through the existing income tax structure. The theory has been to err on the side of overpaying and then getting it back as opposed to deciding who is needy beforehand and improperly denying a benefit. This system has been in place since the 60s.

That makes sense, depending on the numbers and enforcement, but a whole lot details there.

On 1/25/2021 at 3:43 PM, Chataya de Fleury said:

I am rather fond of the step up in basis on date of death

There isn't a policy reason for it other than the insanity of trying to figure out what grandpa bought IBM for in 1953, right?  That's reason enough, IMO, I consider it essentially a record keeping jubilee, and seems so obvious that's what it is, but I'm cynical enough to wonder if that's just a happy accident.

5 hours ago, Iskaral Pust said:

So we’ll need a steep clawback tax structure for income above the UBI.  I think others have reached that conclusion too.  Aside from the problem of inflation, will low skill people still have much value in continuing to work, and is there much value in employing them?  I think it could result in a larger % of marginalized people who are left behind in a cycle of poverty and disengagement.  I would much prefer to raise wages and increase the value of civic participation rather than invite a barbell of either/or.

You're only approaching this tangentially, I think, but if there were to be a UBI, there should also be a zero minimum wage.  I don't think that's controversial in the slightest, I'm assuming the actuaries and finance folks agree, but maybe I still need to grow in my understanding of modern economics.

[Mr. Chatywin et al.]

I think the better question is do really need to have money at all? That really does bypass all the pitfalls of a UBI while achieving an even better end result.

[Mlle. Zabzie]

1 minute ago, Tywin et al. said:

I think the better question is do really need to have money at all? That really does bypass all the pitfalls of a UBI while achieving an even better end result.

If we didn’t have it we would just invent it 

[OldGimletEye]

2 minutes ago, Tywin et al. said:

I think the better question is do really need to have money at all? 

How are people going trade? Meet in one central location at once?

And without money, how does a nation or state borrow? Does it collect real commodities, with a promise to pay those commodities back in the future?

I'd submit, it would be difficult to create a modern welfare state without money.

[Mlle. Zabzie]

Just now, OldGimletEye said:

How are people going trade? Meet in one central location at once?

And without money, how does a nation or state borrow? Does it collect real commodities, with a promise to pay those commodities back in the future?

I'd submit, it would be difficult to create a modern welfare state without money.

I assumed his comment was tongue in cheek....

[Mr. Chatywin et al.]

1 minute ago, Mlle. Zabzie said:

If we didn’t have it we would just invent it 

As long as the current mentality exists, yes. I personally like to view it through a line (paraphrasing) I heard about Star Trek TNG. 

Q: Why would Captain Picard be bald? Surely by then humans would have cured baldness.

A: No one would care about that in the 24th century.

We still view things through the lens of scarcity when we currently have the means to create a society that functions around abundance. 

[Mr. Chatywin et al.]

5 minutes ago, OldGimletEye said:

How are people going trade? Meet in one central location at once?

And without money, how does a nation or state borrow? Does it collect real commodities, with a promise to pay those commodities back in the future?

I'd submit, it would be difficult to create a modern welfare state without money.

It would require a full rethinking of literally everything we do. It won't happen, but it should. 

4 minutes ago, Mlle. Zabzie said:

I assumed his comment was tongue in cheek....

Yes and no. 

[OldGimletEye]

1 minute ago, Tywin et al. said:

It would require a full rethinking of literally everything we do. It won't happen, but it should. 

I'm not sure why you envision exchanging real commodities for labor&capital services, and for other commodities would solve problems relating to poverty. That state of affairs would make basic economic transactions a pain in the ass.

[mcbigski]

2 minutes ago, Chataya de Fleury said:

@mcbigski - yes, there is the record keeping nightmare, but if/when a taxpayer can’t prove a reasonable basis, the IRS can assume 100% gain.

That said, here’s why the step up in basis is advantageous:

1. Assume estate tax kicks in at $10 million.

2. Assume I get property worth $5 million, so it’s exempt from estate tax, but capital gains tax applies. Property has a basis of $1 million. I’m broke, so I need to sell it right now on the date of death (we are going to assume no probate, here). If there is NO step up, when I sell the property, I have to pay tax on the difference between $2 million and the $5 million it’s worth. If I get the step up, there is no gain, because I inherit at $5 million and it is worth $5 million.

See?

I absolutely get the advantage of the tax savings, thought that part was obvious.  (Esp. in a long term inflationary environment).

Congress doesn't typically go around handing out candy to average Joes though.  Was just wondering if this was an exception where common sense and simplicity overpowered tax collecting greed.  

[Mlle. Zabzie]

6 minutes ago, Chataya de Fleury said:

@mcbigski - yes, there is the record keeping nightmare, but if/when a taxpayer can’t prove a reasonable basis, the IRS can assume 100% gain.

That said, here’s why the step up in basis is advantageous:

1. Assume estate tax kicks in at $10 million.

2. Assume I get property worth $5 million, so it’s exempt from estate tax, but capital gains tax applies. Property has a basis of $1 million. I’m broke, so I need to sell it right now on the date of decedent’s death (we are going to assume no probate, here). If there is NO step up, when I sell the property, I have to pay tax on the difference between $1 million and the $5 million it’s worth. If I get the step up, there is no gain, because I inherit at $5 million and it is worth $5 million.

See?

But, you see, I think you should probably pay tax on the receipt of the $5 million (on the value thereof), and, barring that, when you transact, and sell the property, you should pay gains based on the decedent’s basis.  

Also, if you got property worth $5 million and are broke, why aren’t you borrowing against the property?  That’s way better all around, I would think.....

[DMC]

I've never thought much about UBI and don't really have much of an opinion because it's so unrealistic in the US.  In the spirit of the OP though, based on the (way too little) covid checks here in the states, it already would be means tested - and therefore not UBI, but still.  That would obviously lower the cost and should mitigate some of the tax issues being raised..but the cost would still be prohibitive.  Personally I'd prefer to focus on other means to strengthen the safety net, even if a UBI was a realistic prospect.

While I haven't read all the thread, I will say that the concerns about increased bureaucracy, at least in administering the benefit, are rather unfounded.  The SSA and IRS are already well-equipped to deal with this, as the covid checks demonstrate.  When the first checks went out I told my brother he could get one (and where he could) - he assumed he couldn't since he's never filed taxes.  Took him a matter of minutes once I showed him the site, and when the second checks went out around the new year they already had him on file and sent him another check without him asking. 

I suppose if it was a permanent benefit there should be more guardrails against fraud, but as long as you got a social security number it really wouldn't be too difficult.  The difficulty, as always, would be with the homeless and indigent.

[Mlle. Zabzie]

2 minutes ago, Chataya de Fleury said:

Ssssshhhhh, this was for the sake of an example. 

As they say, bad facts make bad law...

[Mr. Chatywin et al.]

8 minutes ago, OldGimletEye said:

I'm not sure why you envision exchanging real commodities for labor&capital services, and for other commodities would solve problems relating to poverty. That state of affairs would make basic economic transactions a pain in the ass.

Well in that state there wouldn't be any economic transactions, would there? 

[OldGimletEye]

6 minutes ago, DMC said:

  Personally I'd prefer to focus on other means to strengthen the safety net, even if a UBI was a realistic prospect.

This is one of the main reasons, I'm a bit skeptical of UBI. For the amount of money raised, I wonder if it could be better used to help those in need.

I'm not totally against it, but I think we need to understand the opportunity cost.