• Maggoty@lemmy.world
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    2 months ago

    How is it a negative income tax if they are taking money from the lowest bracket? That’s the bracket where an NIT gives money instead of taking it.

    • humanspiral@lemmy.ca
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      2 months ago

      A NIT of 50% up to $20k income is equivalent to UBI of $10k with 50% as the lowest tax bracket. Under both, you pay 0 net tax at exactly $20k income, and you get a $10k refund at 0 other income.

      Either one is still a 50% marginal tax rate no matter the name. On every $ you earn you only keep 50cents.

      • Maggoty@lemmy.world
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        2 months ago

        This still doesn’t make sense to me. The UBI clawback that starts small and grows with each bracket makes sense. At 0 earned you get 20,000. And it’s not until you hit the poverty line that it starts gradually being taxed back. So a family of four would pay 5 or 10 percent back if they were in the 40k-50k bucket.

        It seems to me you’re not discussing a NIT which pays money to workers, but rather a national minimum wage through the tax system. In this case 10,000 dollars. An NIT doesn’t need a clawback because it diminishes as you go up in tax brackets. A UBI uses it to remove administrative overhead from issuing it and to make it clear that every adult, employed or not, is eligible.

        • humanspiral@lemmy.ca
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          2 months ago

          NIT is paid to workers and non workers alike. As is UBI. The maximum NIT refund you get is at 0 earned income. When you earn income, your refund is lowered. That starts at $1 of income. Even if it is called a negative tax, it is still a positive marginal tax rate that reduces your net income for every $ earned.

          An NIT refund comes from the IRS, while UBI can come from IRS or another department. They are still highly related concepts. Other than the most famous NIT proposal has a 50% tax rate on the lower incomes, and frequenly left leaning politicians, instead of UBI propose Guaranteed Minimum Income, with tax rates of 50% to 100% on the lowest incomes.

          Sensible UBI plans use normal tax rates with higher rates on upper incomes if needed.

            • humanspiral@lemmy.ca
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              2 months ago

              Guaranteed minimum income plans are either a 100% tax, when literally, all get a minimum income of say $20k, if you earned less than $20k, you don’t keep any of those earnings. Practical, still left of center plans do change this to a more modest 50% clawback rate similar to welfare/EI. The most famous NIT proposal had a 50% tax rate on the lowest income. That is the exact same as the flawed GMI plans.

              • Maggoty@lemmy.world
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                2 months ago

                That sounds like a great way to do a poverty trap when you could simply add 20k-reported income to their account. It’s entirely unnecessary to the concept of an NIT.