The Negative Income / Perfectly Progressive Flat Tax

[cpwill]

So, I was trying to decide how to effectively integrate work requirements in order to arrive at the endpoint of A: not punishing the actual single mother due to events outside her control (no policy that does this will pass - or should) while still B) incentivizing marriage and self-improvement.

I decided to use minimum hourly work-requirements.

So, basically: Each Adult (single) is expected to produce 20 hours of work-activity during the average week (the program is run on monthly installments, so this works out to a generalized 80 hours of work a month). A married household, however, is only expected to produce a minimum of 30 per week. This incentivizes marriage with a reduction in work requirements (momma can stay home with the kids while dad picks up another 10 hours somewhere, or any combination therein). Being a Student counts as 10 hours of work every week that you are a student (so, if you take summer months, your work requirements go back to 20), using a reduction in work requirements to incentivize education / self-improvement, the same as we did with marriage (yes, this includes trade school, apprenticeships, and the like). This gets interesting when you see how you change the incentives for education by reducing its costs in terms of lost income, and offers our low-income working classes an easier ramp up.

The reduction in work-measures, however, is more likely to benefit women than men, as women are more likely to prioritize staying home with children, especially when they are young. To incentivize men (and ensure that the plan remained good for single mothers through no honest fault of their own), I added in a child-support component. Because I sat the poverty line at $2500 per kid per year in our initial math, a parent who is not the caregiver loses 50% of the FPL per child from their NIT check/deposit to the caregiver. So (using generalized gender roles, which yes, will be reversed in some situations) just as women can benefit from an increased ability to stay home with their children via marriage, men will be able to enjoy their full benefits, instead of signing them over.

So, a quick example of how these changes would follow a low-income couple with two children who are previously unmarried, and deciding on whether or not to tie the knot would look like:


View attachment 67206533


For each instance, I made the assumption that the individuals involved would only be doing the bare minimum necessary to get government assistance.

Fusing this with my http://www.debatepolitics.com/polls/85770-social-security-fix.html]Social Security Proposal[/url] for a man who

Begins working at age 18 making the minimum wage.

Has a child out of wedlock at age 20

Gets married at age 24

Has two children within the marriage

See's a Rate of Return of 6%

total over the lifetime looks like:

 

[Brewdog]

Has two children within the marriage

There are 7 billion people. And climbing.

Perhaps a little birth control would help the wallet and the world at the same time.

 

[cpwill]

There are 7 billion people. And climbing.

Perhaps a little birth control would help the wallet and the world at the same time.

On the contrary - global population is currently set to peak in about 2055, and then begin declining. Our problems (especially when it comes to our public support networks) stem not from too many children (especially in the West), but too few.

 

[Brewdog]

On the contrary - global population is currently set to peak in about 2055, and then begin declining. Our problems (especially when it comes to our public support networks) stem not from too many children (especially in the West), but too few.

I'll very likely be dead by then. And the world can go to hell after that. I don't care.

 

[cpwill]

I'll very likely be dead by then. And the world can go to hell after that. I don't care.

:shrug: well then you needn't worry one way or the other, nor should you be part of making major policy changes.

 

[cpwill]

61% Support Wage Subsidy for Low-Income Workers

Sixty-one percent (61%) of voters support a proposal to provide low-income workers with a wage subsidy. The government would provide a modest amount of extra income for every hour someone worked. The amount of extra income would gradually decrease as the worker’s income increased. A ScottRasmussen.com survey found that another 14% of voters would support the proposal if it would be paid for by reducing the cost of other government assistance programs....

 

[phattonez]

61% Support Wage Subsidy for Low-Income Workers

A negative income tax does seem vastly superior to a welfare system that requires many social workers, its own logistics system (EBT cards), frequent meetings, buildings, etc.

 

[jmotivator]

Alright, I gave up on trying to recreate family structure inside of the income statistics, and finally just went ahead and assigned the standard sized family equally to all income strata. That's the biggest methodology criticism I have off the top of my own head for this work. but here it is.



Currently, the tax and welfare structure of this nation are costly and self-destructive. They represent needless harm that we as a people inflict upon ourselves, and worst, they disproportionately harm those in our society who are most vulnerable. In order to achieve the goal of a tax/welfare reform effort that accomplishes the three goals laid out:

1. It should not place undue burden on the poor or provide them with incentives to engage in self-destructive behavior.
2. It should retain a progressive approach while eliminating the ability of politicians to take advantage of it to set bloc against bloc in a cynical search for power, and
3. It should encourage growth that raises all boats and provides opportunities especially to the poor to escape their station.)​

I propose the following: TANF, SNAP, and the EITC will be replaced with a negative income tax of 50% on all income not earned below 200% of the poverty line, with a simple poverty line of $5K per adult and $2500 per child being assigned. If you earn precisely zero dollars, then you are raised precisely to the poverty line - in this manner we can ensure that not a single man, woman, or child in the United States lives in poverty. In addition, a 25% flat tax should be applied to all income earned over 200% of the poverty line. This will make the actual effective tax rate perfectly progressive. Instead of our current system, in which the marginal tax rate on each dollar earned between $218,000 and $388,000 is flat, with the perfectly progressive flat tax, the effective rate increases for each dollar earned, as that is a dollar further away from the 200% of the poverty line. I have run the figures and created the presentation below on the effects, comparing a perfectly progressive flat tax of 20% to a perfectly progressive flat tax of 25%, to the current system.





SOURCES:
TANF Calculator: TANF Calculator
EITC Calculator: Earned Income Tax Credit Calculator
SNAP Calculator: Page Not Found - South Carolina Department of Social Services
Effective Tax Rates: Warren Buffett’s Tax Story Is Bogus | Cato @ Liberty
Negative Effective Tax Rates: Free 2011 Tax Estimator & Tax Return Calculator - H&R Block®
Current Poverty Line: http://coverageforall.org/pdf/FHCE_FedPovertyLevel.pdf
Population and Income Data derived from the US Census
Program Cost derived from 2012 Budget Proposal

The fundamental flaw in your plan is that Poverty is being continually redefined. granted everyone enough money to exceed the poverty line then all that happens if the poverty line is moved.

As Thomas Sowell once pointed out, there is no program that is capable of eliminating the bottom 20% of wage earners, any more than there is a program that would eliminate the top 1%.

 

[cpwill]

The fundamental flaw in your plan is that Poverty is being continually redefined. granted everyone enough money to exceed the poverty line then all that happens if the poverty line is moved.

As Thomas Sowell once pointed out, there is no program that is capable of eliminating the bottom 20% of wage earners, any more than there is a program that would eliminate the top 1%.

Sure. But a defined basket of goods is a defined basket of goods. You aren't complaining about the particular benchmark, but rather their existence, here.

 

[joko104]

The OP proposal is a drug addict's and alcoholic's dream come true plus only only a fool would work a blue collar job when they can make as much doing nothing - or better yet working off the clock for cash like so many on disability and welfare already do.

Only a fool would work 40 hours a week for a year for an extra $5,000 - or $2.40 an hour - to make $30,000, when they can get $25,000 doing absolutely nothing.

How is this extra welfare program for over 50,000,000 people going to be paid for - assuming tens of millions don't quite to get the $25,000 per year free money? Higher payroll taxes on those who foolishly continue to go to a job creating more reason to quit and just live on welfare?

I'm guessing free medical care and free college also is part of the plan too.

So when a kid graduates from high school or turns 18, the government is sending him or her a check for over $2,000 per month - for which s/he could have a career as a bum.

 

[SMTA]

The OP proposal is a drug addict's and alcoholic's dream come true plus only only a fool would work a blue collar job when they can make as much doing nothing - or better yet working off the clock for cash like so many on disability and welfare already do.

Only a fool would work 40 hours a week for a year for an extra $5,000 - or $2.40 an hour - to make $30,000, when they can get $25,000 doing absolutely nothing.

How is this extra welfare program for over 50,000,000 people going to be paid for - assuming tens of millions don't quite to get the $25,000 per year free money? Higher payroll taxes on those who foolishly continue to go to a job creating more reason to quit and just live on welfare?

I'm guessing free medical care and free college also is part of the plan too.

So when a kid graduates from high school or turns 18, the government is sending him or her a check for over $2,000 per month - for which s/he could have a career as a bum.

So you have now obtained expert status in sociology, public policy, and economics?
Feel free to justify these observations with actual facts.
We will wait faithfully.

 

[NWRatCon]

Alright, looking at the budget numbers this doesn't work out as well as I'd hoped, so I'm going to have to alter these #'s to a 75% NIT on all income under 150% of the Poverty line, and a flat tax on the above 150% of the poverty line.

I, for one, certainly appreciate the effort.

 

[cpwill]

So you have now obtained expert status in sociology, public policy, and economics?
Feel free to justify these observations with actual facts.
We will wait faithfully.

He fairly clearly didn't read what he was responding to.

Sent from my Moto G (5S) Plus using Tapatalk

 

[SMTA]

He fairly clearly didn't read what he was responding to.

Sent from my Moto G (5S) Plus using Tapatalk

His silence shows that you are correct.

 

[NWRatCon]

I think the NIT (negative income tax), like a UBI (universal basic income), is a sound economic idea for any advanced economy. Those who respond negatively do so based upon pure supposition and prejudice, without due consideration. I really, really appreciate the effort to grapple with the economic subtleties, and the willingness to adjust the proposed program based upon new information. That shows serious thought about the subject. I applaud that. Finding a rational solution to our convoluted tax system is a Herculean task. Too few people even attempt it.

I have made my own proposals, and have had to endure similar unreasoned partisan reactions. I am very sympathetic.

 

[joko104]

The Democratic Party's new slogan: "We will steal other people's money and property to give it to you and if you don't vote Democratic everyone dies within 12 years."

 

[cpwill]

I think the NIT (negative income tax), like a UBI (universal basic income), is a sound economic idea for any advanced economy. Those who respond negatively do so based upon pure supposition and prejudice, without due consideration. I really, really appreciate the effort to grapple with the economic subtleties, and the willingness to adjust the proposed program based upon new information. That shows serious thought about the subject. I applaud that. Finding a rational solution to our convoluted tax system is a Herculean task. Too few people even attempt it.

I have made my own proposals, and have had to endure similar unreasoned partisan reactions. I am very sympathetic.

I think one thing the NIT gets right that UBI doesn't is that it accounts for human nature - if offered the ability to laze around and leisure at a given level, plenty of people will do so, and the number willing to do so will likely grow over time.

Thank you for your kind words - that is much appreciated.

 

[cpwill]

Bumping because it's worth noting - as I hawk, hawk, and continue to hawk - that, in a time such as this, with sudden skyrocketing unemployment, a system like the one in this thread would already provide for the millions and millions of suddenly-unemployed, without requiring any additional legislation.

 

[Individual]

The Federal government should tax each State relative to their portion of the total population to provide the revenue needed to fund the functions ONLY the Federal government can do most efficiently. State governments should be the extent of which citizens of each State should be dependent in any way for personal assistance. Much less money would then flow to the Federal government from the States, and each State would tax their citizens as needed to acquire the revenue necessary to pay their Federal tax bill AND to provide the functions necessary for the welfare of their citizenry.
If a State lacks the resources to employ and/or provide the needs of their population, people would be free to move to where the resources existed to provide their needs.
Federal laws would be created allowing the States latitude in their implementation. For example the Federal government minimum wage law would simple require each State to create a minimum wage law to be applied within their State, the dollar figures to be determined by the State government. People would have greater access to make changes they want made when they are made at the State/local levels of government.

 

[d0gbreath]

Bumping because it's worth noting - as I hawk, hawk, and continue to hawk - that, in a time such as this, with sudden skyrocketing unemployment, a system like the one in this thread would already provide for the millions and millions of suddenly-unemployed, without requiring any additional legislation.

Thou hast hawked the flat tax for as long as I can remember. Weren't you the lone team member in a WhistleStopper judged debate against two of us and j-mac? You won. Why, I'll never know because the flat tax is one of the worst economic ideas that has ever come around. Now or then.

 

[cpwill]

Thou hast hawked the flat tax for as long as I can remember. Weren't you the lone team member in a WhistleStopper judged debate against two of us and j-mac? You won. Why, I'll never know because the flat tax is one of the worst economic ideas that has ever come around. Now or then.

1. This isn't a flat tax - it's a perfectly progressive tax because every additional dollar someone makes above 200% of the Federal Poverty line slightly increases their real tax rate. It benefits from the simplicity, predictability, and growth potential associated with the structures of flat taxes, without being flat itself.

2. I think that was the FairTax debate Wow, blast from the past

 

[Trypt]

Thou hast hawked the flat tax for as long as I can remember. Weren't you the lone team member in a WhistleStopper judged debate against two of us and j-mac? You won. Why, I'll never know because the flat tax is one of the worst economic ideas that has ever come around. Now or then.

Whether it's good or bad economically is debatable, depending on your knowledge of economics and also how you view individuals' economic freedom. But I would think a flat tax is the only fair tax, as far as any tax can be "fair". A flat tax is also progressive, as the more you make the more you pay, without moral shortcomings of the so called "progressive" tax of taking a bigger piece of the pie the bigger the pie is.

The way you can easily tell is how people change their minds. Many a peoples change their mind from believing in a progressive tax as youngens to absolutely wanting a flat tax once they enter the workforce. The other way around is non-existent.

 

[Individual]

There's no denying it to be a progressive tax rate beginning at 0% and progressively approaching 25%.

One question quickly arose, would the negative tax rate result in an annual lump sum payment or a monthly payment, and would that payment be excluded from the following years taxable income? After all, the payment occurs in the present while the needs/wants are in the past.

 

[avatar]

Are you dealing with "income" as stated on a line in the tax forms after deductions that are simply not available to all are applied or have you got a method of calculating all income?

 

[Individual]

1. This isn't a flat tax - it's a perfectly progressive tax because every additional dollar someone makes above 200% of the Federal Poverty line slightly increases their real tax rate. It benefits from the simplicity, predictability, and growth potential associated with the structures of flat taxes, without being flat itself.

2. I think that was the FairTax debate Wow, blast from the past

A link to a spreadsheet showing how this would work would really be helpful IMO.

Personally, I would prefer repealing both the 16th and 17th amendments, allowing only State and local governments the ability to tax individuals directly, and the Federal government only the ability to tax States in proportion to the Census. But unless/until that happens, I'm open to changing the current method of taxation applied by the Federal government.
I'm not a proponent of top down government, which greatly reduces the voice of the people over the great many issues of government today.