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Discussion: Introduce a Negative Income Tax
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Posted Anonymously |
Introduce a Negative Income Tax
Feb 27 2008, 4:50 PM EST
It's ridiculous that people in as low as $6k start paying tax... and then receive it back in welfare. I propose we replace welfare with a negative income tax. You have 30% tax above $40K - and a 30% "negative tax" for amount below 40K. This works out similar to the basic wage idea someone else mentioned, but combines it with a tax system and a flat tax.So... someone earning $0, would receive a negative income tax (NIT) of (30% x $40,000) = $12,000. Other earnings would be: Earn $10,000. Receive (30% x ($40K - $10K)) = $,9000 welfare Earn $25,000. Receive (30% x ($40K - $25K)) = $4,500 welfare Earn $40,000. Pay no tax, Receive no welfare. Earn $50,000. Pay (30% x ($50K - $40K)) = $3,000 tax Earn $100,000. Pay (30% x ($100K - $40L)) = $18,000 tax. You might want to play with the figures a bit - but even with a "flat rate" above 40K, you can see it's still a progressive tax, since someone on $50K pays 6% of their total income, whilst someone on $100K pays 18%. Yet the effective marginal rate of tax is the same for every dollar earned (ie, you either pay 30cents in tax, or lose 30 cents in welfare), so the incentive is the same for every dollar earned. 79 out of 87 found this valuable. Do you? |
trgh |
1. RE: Introduce a Negative Income Tax
Feb 27 2008, 5:49 PM EST
Yep, I think this is a good idea.Although if all the tax revenue still comes ONLY and ALWAYS from the pockets of the working, then this is just a modification of the "rules of distribution" - the over-all purchasing power of the nation will still be the same, which is insufficient to buy all its own production. Good thinking Anonymous - it's another edge in the right direction! 5 out of 7 found this valuable. Do you? |
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Posted Anonymously |
2. RE: Introduce a Negative Income Tax
Feb 28 2008, 1:05 AM EST
Here's my idea - very similar:http://one-salient-oversight.blogspot.com/2005/07/zero-unemployment-economic-system.html 2 out of 6 found this valuable. Do you? |
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Posted Anonymously |
3. RE: Introduce a Negative Income Tax
Mar 2 2008, 7:06 PM EST
There's a more detailed example of how NIT would work here:http://www.cis.org.au/policy_monographs/pm70.pdf (PDF file) This is where I borrowed the idea from... but they use a 30K as base - I think it should be 40K. 5 out of 6 found this valuable. Do you? |
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Posted Anonymously |
4. RE: Introduce a Negative Income Tax
Mar 4 2008, 9:57 AM EST
This is a good idea. I liked how you gave examples of what people pay or receive based on their income. Perhaps you should calculate their current tax bill / welfare payment in rough terms so we have an idea of the welfare effects.
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Posted Anonymously |
5. RE: Introduce a Negative Income Tax
Mar 5 2008, 6:49 PM EST
"Perhaps you should calculate their current tax bill / welfare payment in rough terms so we have an idea of the welfare effects."That's a bit hard to calculate - and certainly isn't based on income. At the moment, we have welfare/rebates going to middle class and rich people, whilst some poorer and lower income people don't qualify (eg, childcare rebates, baby bonuses, homebuyer grants, etc). Income doesn't come into it. The above system replaces all welfare with a purely means tested outcome - and so is a lot fairer. A single with no kids and no job is presently eligible for just short of $12,000. So for these people it actually represents a slight increase. Childcare rebates woild be largely unnecessary with NIT, since you won't pay tax on first $40K anyway (so rather than taxing mothers, and then giving them a rebate, we simply don't tax the lower level of income in the first place). 5 out of 6 found this valuable. Do you? |
dra_red |
6. RE: Introduce a Negative Income Tax
Mar 8 2008, 9:51 PM EST
Without giving it a lot of thought, I think this is not a good idea. When people in Australia get welfare, it comes with strings attached. Recipients of welfare need to show they are making efforts to improve their situation before they can recieve their welfare. This has been shown to be a very important requirement for welfare because without it, a lot of people tend to move towards long term unemployment. Also, if your on a low income, who wants to wait for your tax return to get some money. If it was distributed fortnightly, it would be very complex. There are other issues that would need to be considered but I think just these two make the idea dead in the water. Cheers, Dale 3 out of 5 found this valuable. Do you? |
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Posted Anonymously |
7. RE: Introduce a Negative Income Tax
Mar 11 2008, 5:41 PM EDT
"When people in Australia get welfare, it comes with strings attached."I don't think there should be strings attached to welfare aside from how much money you earn... the advantage of the NIT is that each dollar earned has the same incentive. "Also, if your on a low income, who wants to wait for your tax return to get some money." It would be weekly/fortnightly... and it isn't complicated at all - it goes straight into the nominated bank account. 2 out of 3 found this valuable. Do you? |
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trgh |
8. RE: Introduce a Negative Income Tax
Mar 11 2008, 6:56 PM EDT
Dale,I agree with you - about not giving it alot of thought ;-) I agree with the Anon. who last responded to your concerns: I think there are less "STRINGS" here, and the frequency of distribution is arbitrary. When both parents are FORCED to work in order to make ends meet, then perhaps a level of supported "unemployment" would be welcome (no room to embelish this statement here) What could be more complex than the tax system we already have? There are nearly as many Australians in the ATO as there are in the entire military! Concepts like NIT and a National Transaction Tax are very simple, manageable and traceable with only a small fraction of the administration effort. 0 out of 2 found this valuable. Do you? |
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dra_red |
9. RE: Introduce a Negative Income Tax
Mar 11 2008, 7:44 PM EDT
Hi Guys, I am not convinced at all. Howard's government introduced most of the strings that come with welfare and it was good move. History has shown that there is a sub-population of people that will begin to rely on welfare for their living if there are no strings attached. Currently there are schemes to help motivate people to return to work. An idealist might say that people shouldn't require motivating but reality has shown that a lot of people do. If people's 'welfare' gets distributed fortnightly, they will need to inform the tax department fortnightly what they are earning. The mess of doing ongoing tax seems overly complex to me. It might be able to simplified but really, it is my first point that I think would make the system unworkable. Giving people money for nothing is just wrong. It encourages the wrong mind set. I can't see the actual benefit of doing it like this? Cheers, Dale 2 out of 3 found this valuable. Do you? |
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trgh |
10. RE: Introduce a Negative Income Tax
Mar 11 2008, 11:00 PM EDT
So Dale,Are you denying my right to life because I don't work in conventional industry? Perhaps we should kill all the lazy people. In the words of Tolkien, "Who has the right to decide who should live and who should die? Do you?" Money for nothing means giving someone the unconditional right to life. Surely this is good. Perhaps if we were released from the current mindset, we would learn to develop a better one. 0 out of 3 found this valuable. Do you? |
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dra_red |
11. RE: Introduce a Negative Income Tax
Mar 12 2008, 12:41 AM EDT
trgh, you have a right to life but you don't have a right to my money. We don't need to kill the lazy people. We just don't want to make them lazy. The principles are simple, if someone wants the benefits provided by society, they need to contribute to society. I think it is fair to say that the majority of Australian would not like the idea of working hard and paying higher taxes so someone can take some time off. If someone wants time off, they should save up and take a holiday. Also, a lot more people would rely on welfare if there were no strings attached. The number of unemployed would skyrocket and the economy would suffer for it. trgh. I don't accept your assumption that not giving someone money is depriving them of life. Cheers, Dale 4 out of 6 found this valuable. Do you? |
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trgh |
12. RE: Introduce a Negative Income Tax
Mar 12 2008, 2:16 AM EDT
I would agree with you entirely IF I made the same assumption which I think you persist in:Namely, that the only possible source of money is through the labour and dividends of production. This is the basis (if I'm not mistaken) for your belief that if I do not work, then it is YOUR contribution via taxes, that sustains ME. This is so, so far from my proposition. Perhaps I have not been clear (forgive me) For further explanation of my view on things, read my other contributions on this site - especially my thread "The Issue & Regulation of Money". 0 out of 3 found this valuable. Do you? |
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Posted Anonymously |
13. RE: Introduce a Negative Income Tax
Mar 19 2008, 11:05 PM EDT
As far as I can tell, this scheme would pay for people who want to surf their lives away. I have no doubt that there would be many who would want to do exactly that. Come to think of it, I would want to do exactly that. I remember someone putting this argument across on 60 minutes years ago and they made exactly that point. A big problem I have with this is that I don't see what problem it is aimed at solving? What exactly is being addressed with this scheme? It does not seem to be more efficient. Can anyone fill me in more on this issue? Cheers, Dale 1 out of 2 found this valuable. Do you? |
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trgh |
14. RE: Introduce a Negative Income Tax
Mar 26 2008, 12:58 AM EDT
"As far as I can tell, this scheme would pay for people who want to surf their lives away. A big problem I have with this is that I don't see what problem it is aimed at solving? What exactly is being addressed with this scheme? It does not seem to be more efficient. Can anyone fill me in more on this issue?Mr Anon. This scheme simplifies the tax system by reducing the cost of its administration. Currently each citizen pays tax, and then is given all sorts of rebates & returns for all sorts of things which need to be applied for and means tested - lots and lots of work every year. Under the current system, calculating your tax may come to $0 for the year, but the cost of working it out is huge ! The current tax system is a horrendous waste of money. I heard that the ATO employs nearly as many people as our entire defense departments ! This system is far simpler - increasing the threshold to about the "minimum wage level" means one adjustment per year for a fraction of the administration cost. I'm not questioning the charging of tax - or even the rate here (since I object to both), but this system is much better than the current one. 1 out of 1 found this valuable. Do you? |
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trgh |
15. RE: Introduce a Negative Income Tax
Mar 26 2008, 1:04 AM EDT
Dale,The only reason why the economy is suffereing at all is because the money barons have engineered it that way. Should we introduce euthenasia because the old can no longer contribute to society in financial terms? Or should we perhaps charge primary school children with HECS debts? Or force all surfers to clean public toilets if the swell is less than one metre? 1 out of 1 found this valuable. Do you? |
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dra_red |
16. RE: Introduce a Negative Income Tax
Mar 26 2008, 9:58 PM EDT
trgh, I think there are things you have not given serious thought to. In this system people still need to submit some form of proof of their income to calculate their tax or their return. If they want their payments fortnightly then they will need to declare their income fortnigtly. Rebates and returns are the methods used by the government to influence individual spending. We don't want to remove that influence (look at the recent example of rebates for solar power...). I am not sure if your advocating the removal of many of the different taxes and levies that exit but if so, this is different to what the original idea suggests. It would be possible to remove such taxes and rely on personal income tax if this was the main point. trgh, I am going to eject myself from this discussion. I see from the vote that this is a popular idea while in my mind it is complete nonsense for a number of reasons. I don't see any merit in this one but good luck with this idea. Cheers, Dale 1 out of 1 found this valuable. Do you? |
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Posted Anonymously |
17. RE: Introduce a Negative Income Tax
Apr 15 2008, 5:32 AM EDT
Family Tax Benefit Part A is somewhat akin to a negative income tax. If a family spent a year living off cash in the bank earning no interest and they did not get other benefits they would get FTB Part A. If they earn enough income, the combination of FTB Part A and income tax ges through zero and becomes positive, ie more tax than benefit.THE DECEPTIVE 30% MARGINAL TAX RATE In 2008/09, the Low Income Tax Offset will be $1200 and will reduce at 4 cents in the dollar as income increases from $30,000 to $60,000. For most of this range, the marginal tax rate for most single adults under age pension age will be 35.5% made up of the 30% rate, the 4% taper, and the Medicare Levy. Families with a taper from FTB have much higher marginal rates. Most adults either pay no tax or have a marginal rate in excess of 35%. This is quite separate from the welfare to work poverty traps. A NIT or similar with a falt rate of 35-40% would be a closer approximattion to current settings and could be implemented as an incremental shift in policy moves towards more transparency and simplification. UNIT of TAXATION The $6000 tax free threshold and the interaction with the $2100 Dependent Spouse Tax Offset or the FTB Part B raise issues that would need to be addressed for couples. 1 out of 1 found this valuable. Do you? |
