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My (more conservative-leaning) friend and I were debating a little bit about the 10k student loan forgiveness plan from the Biden admin, with his main problem with it being that it's inherently unfair to people who never had such loans, or who paid them off. So in response to that, I suggested that everyone should just get the 10k, like a large stimulus check. Which, you can then use to pay off any debt, if you have it.
The concept of Universal Basic Income (as promoted by Andrew Yang) is not currently popular with US conservatives. Those of us who think that it's a great idea on many fronts, are, for now, in the minority.
However, discussing it reminded me of the Negative Income Tax proposal, as popularized and promoted by the (very much not left-wing) Milton Friedman, like 60 years ago. And which, at various times in fact had some supporters on both sides. It was touted as elegantly minimalist and simple and low-overhead in comparison to other welfare state initiatives, while also potentially being more helpful to said recipients, who would have cash in hand, with all of its flexibility.
"...a system which reverses the direction in which tax is paid for incomes below a certain level; in other words, earners above that level pay money to the state while earners below it receive money..."
My question is, could potentially a system like that, where those in the bottom let's say, 20% of wealth, get a big check every year from the government, funded by the income tax of the more comfortable 80%- be a social safety net program that could satisfy reformists across the political and ideological spectrum?
Location: East of Seattle since 1992, 615' Elevation, Zone 8b - originally from SF Bay Area
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I don't agree with any plan that gives money to people who have not in some way earned it. Social Security and Medicare are earned by working a lifetime and paying into them, negative income tax is forcing those who are financially successful to pay out some of their wealth to those who are less successful. I'm by no means in that wealthy category, but I don't support that since it's unfair. My only change suggestion is a flat income tax, a small percentage such as 10% on everyone, regardless of their income and where it comes from. There would be no tax deductions, and no credits of any kind. It would be the same for a corporation. Amazon annual net income for 2021 was $33.364B, 10% of that is a lot more than they are paying now at about 6.1% in 2021.
On student loans, $10,000 doesn't go very far anyway, when people owe $80-200,000, the average was $37,000 in 2021. People who took out those loans knew they would have to pay them back, yet they chose expensive schools that they couldn't afford.
Oh, and I'm neither a Democrat or Republican, I vote for the best person, regardless of party, and in 2016 and 2020, in good conscience, I left the president line blank on those ballots.
Last edited by Hemlock140; 08-24-2022 at 10:46 AM..
I don't agree with any plan that gives money to people who have not in some way earned it. .....People who took out those loans knew they would have to pay them back, yet they chose expensive schools that they couldn't afford.
When young adults are looking to educate themselves for a valuable career it makes sense to aim high at that time in their lives, whether to an Ivy League if they are accepted or to a highly paid career like medicine, law, engineering.
That's not what I did but I don't look down on those who have high goals.
I got college loans and paid them back but that was in the thousands not tens of thousands of dollars.
Some parents cannot afford to help pay for their kids college.
I'd like to see free college available, starting at community college level and then moving upward.
This country can afford it, the same way other countries can.
The rich people in US are not paying their fair share.
Are you unfamiliar with the Earned Income Tax Credit? People who earn below a certain amount, not only owe no tax when they file and get a full refund of all withheld income tax, they get a refundable credit (in other words, can get money back beyond what they may have paid in)...and that is in addition to other refundable credits especially if they have children.
Our country uses the tax code to incentivize willingness to be a parent, or to raise a child through adoption, even if one struggles to afford to have and raise a kid. The cost of childcare for instance is brutally expensive, but the entire amount (if it still works the way it used to) as long as your kid goes to a proper childcare provider and you've got the right records, is a fully refundable credit when you file your taxes.
I mean, sure, there are a lot of tax and wealth management planning methods that the rich use to minimize their tax liability, which I suspect that they'd be paying accountants to find and exploit no matter what...but the tax code does make space to help out the poor, especially poor families with kids, to some extent, too.
And the standard deduction goes up every year. The function of that, if you look at that number, every dollar you earn up to that point is not taxed. It is the first bracket, effectively, taxed at 0%. And if you can itemize and get a number higher than that, then you can expand your non-taxable income to that point.
I think what frustrates me about the United States tax code... Like I don't hate the way it is set up or how it actually works that much, it's just it's so dang complicated and most people don't have the patience (I guess) to learn how it works. I find it fascinating, so I love to poke around and learn how all the moving parts of tax code operate and what is promoted or discouraged by tax rules and so on. Maybe it's one of those ADHD hyperfixation things for me, I dunno.
But OP, since you brought up student loan forgiveness here... I have a hypothesis. Mind you, I've got no source or cause to believe this, it's just a guess straight from my gut OK? I suspect that whatever amount of student loan forgiveness is offered will be optional, as in, borrowers can CHOOSE to accept it or possibly to defer it, or to not use it at all. Which means that if you don't have student loans today, they may make space for people to have a "credit" from the government to pay for future tuition (and it would be cool if it were like the GI bill where soldiers were able to shift it over to their kids to use, instead)...BUT.... Even if they don't do that but instead just offer some amount of debt relief to those currently holding balances... My main guess here is that it will be taxable as income. There are some forms of debt relief that are already considered taxable income, and I am willing to bet that this is gonna be like that.
And it will be VERY important for borrowers to understand how this will impact their taxes. Because a sudden bump in one's income in a year, of even $10k let alone more, could cause a person to owe taxes that they don't expect.
My only change suggestion is a flat income tax, a small percentage such as 10% on everyone, regardless of their income and where it comes from. There would be no tax deductions, and no credits of any kind. It would be the same for a corporation. Amazon annual net income for 2021 was $33.364B, 10% of that is a lot more than they are paying now at about 6.1% in 2021.
Yeah, I'm all for those kind of proposals of income tax reform, because the current process is so ridiculous in so many ways.
And I'm all for something that would increase the taxes of the leverage-dominating mega-corporations with their mega-billionaire oligarchs, especially if that raises net revenue in a way that could balance the federal budget and pay down the national debt, in a way that doesn't gut social welfare.
I disagree though that the government in such a wealthy and prosperous land as ours, has no place in a general attempting to counter the effects of those with financial hardship and poverty, regardless of who "earned" what. I consider all that part of "promote the general welfare", right there in the preamble.
Capitalism makes our society productive and lets people get rich, and is a general good thing. But that doesn't mean that we should accept the negative consequences of it as a deserved fault of people who just didn't work hard enough.
I support basic supplemental-type welfare, emphasis on the word basic. And, to me, what could be more basic than receiving a few thousand per year to make sure our citizens are alive and fed and mostly not living off the streets. It certainly wouldn't do a lot more than that. I'm not talking about economy-crippling amounts of money or taxes. Just some form of either a negative income tax structure that would pay out to those who were below a certain % threshold. Or, as Yang proposes, just a universal basic income check, where every citizen (even the wealthy) would get a credit for the same amount of money, that would obviously help the poorest people the most.
Redistribution is not the inherent evil it's made out to be, if done tastefully and in appropriate moderation. Obviously, we already have plenty of it in place already. And if you really think about it, almost anything the government does, amounts to some form of effective redistribution.
Are you unfamiliar with the Earned Income Tax Credit? People who earn below a certain amount, not only owe no tax when they file and get a full refund of all withheld income tax, they get a refundable credit (in other words, can get money back beyond what they may have paid in)...and that is in addition to other refundable credits especially if they have children.
EITC is more like a limited, targeted, non-universal form of NIT, which gives certain amounts to certain groups or categories for certain things the government favors, or whatever. This article talks about some of the differences:
I don't agree with any plan that gives money to people who have not in some way earned it. Social Security and Medicare are earned by working a lifetime and paying into them, negative income tax is forcing those who are financially successful to pay out some of their wealth to those who are less successful. I'm by no means in that wealthy category, but I don't support that since it's unfair. My only change suggestion is a flat income tax, a small percentage such as 10% on everyone, regardless of their income and where it comes from. There would be no tax deductions, and no credits of any kind. It would be the same for a corporation. Amazon annual net income for 2021 was $33.364B, 10% of that is a lot more than they are paying now at about 6.1% in 2021.
On student loans, $10,000 doesn't go very far anyway, when people owe $80-200,000, the average was $37,000 in 2021. People who took out those loans knew they would have to pay them back, yet they chose expensive schools that they couldn't afford.
Oh, and I'm neither a Democrat or Republican, I vote for the best person, regardless of party, and in 2016 and 2020, in good conscience, I left the president line blank on those ballots.
What you are proposing is a gross receipts tax. Amazon's effective rate looks low because they have invested huge amounts of money in their business, and the depreciation and loss carry forwards offset current year profits. Imposing a tax on businesses that have loss carry forwards is ill advised. Keep in mind that net income is defined differently for accounting books and for US tax. Under international accounting rules, there are even more definitional differences.
Negative Income Tax: something both sides could support?
It's just another name/method for a redistribution scheme ... solely to prop up the surplus population.
Yes, we need to take responsibility there, no less that 70M today maybe 130M counted some ways,
but the FIRST point in any scheme needs to be about not digging that surplus hole deeper.
I think there's worse ways to distribute payments than a negative tax rate. It doesn't create as many distortions as other methods.
I think it does provide incentive for employers to keep lower salaries on board at the expense of higher salaries, but there's already a deficit lower salary roles due to the fixed cost of each additional employee's benefits. Essentially a decent chunk of these high paying individual contributor roles could be more effectively done if you took that wage and sliced it between 2 half paid employees, but the cost of benefits make that impractical.
The method I'd prefer though is subsidized saving. Say a 15% govt subsidized interest rate on personal savings up to $3000 or something of that nature. It's more digestable to the general public - less tax the rich to feed the poor, though in effect would be that. It would increase economic stability at the expense of consumption - which is a worthwhile trade off.
Fundamentally the problem lower income households in the US have is not necessarily that they don't have enough income, it's that they have outsized risk when the rug is pulled out and don't have a safety net to cover. This means lower income households would have the funds to support real needs when things go south and less propensity to blow income on wants when things are good.
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