Evening Star

Ha, well, if we're bringing in various need-based adjustments, you're already moving away from a universal demogrant + flat tax principle, and getting a little closer to a system of taxes + social programmes and/or credits. Before I'd discuss the idea further, I think I'd need to know what these sorts of adjustments might be, as well as what sorts of numbers you'd be talking about after you work it out with various theories and principles. So far, it seems a bit eccentric and unworkable, to be honest.

Which "you people" is that directed to?

-1=e^ipi, I tried to run some numbers under your proposed tax regime. Let's say the minimum income is $20K. That would really not be enough for someone with a child in even a medium-sized city but we'll go with that as an absolute minimum. Even if the flat tax rate is as high as 50% for all income aside from that basic $20K grant, anyone who makes less than $40K would still be seeing their income topped up by the government. I made $36K last year and don't have children or significant debts, and, frankly, I do not need to have my income supplemented. On the other hand, someone who made the same amount and does have children or significant debts might well need some assistance idk. So one problem I see here is that it is a one-size-fits-all solution for something that really does not fit all with one size. This particular regime would at least be quite progressive, though, with even the richest person still keeping over 50% of their income. In order to make the GAI more liveable, though, we might need something closer to a $25K GAI and 65% flat tax rate. However, my feeling is that you would not be satisfied with such a high flat rate, given your concerns with the 'incentive to work' and your desire to encourage saving instead of consumption. If the flat rate were 20% and the GAI were 20k, anyone who makes less than $100K would be receiving a supplement from the government, which just does not seem sensible to me (although it might be necessary if we are also paying 25% sales tax on everything?). Edit: At this rate, the tax would probably not generate enough revenue to even come close to covering the GAI. In order to support our current level of services, the rate would probably have to be quite steep. The sort of society we would live in would be radically different depending on where this rate was pegged, so the discussion seems a bit empty unless you actually state some numerical ranges as to what GAI and flat tax rate you would be in favour of.

Ah, I see that now.

Yeah, Progressive Fair Tax is better, although it reminds me of this: https://en.wikipedia.org/wiki/FairTax

KIS, I think "flat tax" would be a disastrous marketing term, especially for something that isn't a flat tax. The term triggers HUGE red flags for anyone who is a centrist, let alone left of centre, on economic policy. -1 has really worked to persuade me to consider his or her version of a flat tax. (And I am at least seriously thinking about it. I'm intrigued by his or her rigour and principle on this!) (Edited for grammar and gendered language.)

-1=e^ipi, which of these would describe your system? (Or is it something entirely different?): Assuming that the GAI is $25K and the flat tax rate is 25%, i) Both fishermen receive $25K for free from the government each year. Fisherman 2 pays 25% tax on the $50K he made in Year 1 and 25% tax on the $150K he earned in Year 2 but the $25K grant was tax-free each year. ii) Both fishermen receive $25K for free from the government each year. Fisherman 2 pays 25% tax on his $75K total income from Year 1 (grant + earned income) and 25% tax on the $175K income from Year 2.

Yes, I made the same criticism. Edit: but Euler did clarify that he was in favour of a somewhat different system.

OK, I tried running the numbers at a $25000 GAI and a 22% flat rate on income above $25K and I'm starting to see your point: both fishermen end up paying the same amount but Fisher 2 pays less in his rough year than he would under the current system. I'll think about this idea some more.

KIS, a flat tax is not tiered by definition: "flat tax" means that everyone pays the same tax rate regardless of their income level, as is the case in AB at the provincial level. You are describing progressive marginal rates, which are what we have now. The difference is that you want to also tax capital gains, savings accounts, interest, inheritance, etc at the same level as earned income, which puts you to the left of the NDP. I lean towards agreeing with you on this, though.

I'm not clear on what your argument is here. Do you think it is always a good thing if people put in more hours and take on more stressful jobs and that we need to develop a tax system to promote this? Below, when you were responding to cyber, you seemed to think that is just important that people have *some* incentive to work, which is more where I was coming from. I tried running the numbers wrt your example of the two fishermen. I know it's slightly more complicated but I just assumed that neither would pay any tax on the first $11 138 that they make (http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/ddctns/lns300-350/300-eng.html). Then using these marginal rates, I concluded that Fisherman 1, who makes $100K each year, would pay a total of $35 248.38 in two years, and Fisherman 2, who made $50K in Year 1 and $150K in Year 2, would pay a total of $33 936.82. I'm OK with this slight difference, honestly, given that Fisherman 2's situation seems more volatile and he had a pretty rough Year 1, where it seems like he could have used more of a break. If he continued to make $150K for the next few years, his total tax bill would quickly overtake Fisherman 1's, as it should.

Ah, I thought you were advocating for Friedman's negative income tax. My arguments about the disincentive to work (and my suspicion on the long-term motive) were based on this assumption. My apologies. You are then advocating for the universal demogrant sort of GAI described here?: http://www.canadiansocialresearch.net/ssrgai.htm#Whatis I haven't come across this idea much before. I'll think about it.

I'm kind of curious, though, if proponents of this idea can give some hypothetical numbers: what would be a liveable GAI in your opinion and what flat tax rate would be needed to support the social services that we have today in this country? My suspicion is that this would be quite unworkable if we saw the numbers and that this is actually going to lead to a second argument that we need to start cutting these services in order to reduce the tax burden. xp to PrimeNumber

I think the idea is that everyone is guaranteed $25K (or whatever the GAI is). So if you only earned $15K, the government hands you $10K for free to bring you up to $25K. Whatever the difference between your income and the GAI, the government makes it up. If you make over $25K, the portion of your income above the GAI starts getting taxed at a flat rate. (I don't agree with the idea, if it wasn't clear. I'm trying to explain it as I understand it.)

dp

This Friedmanite idea of eliminating the minimum wage and moving to a flat tax + GAI just seems to me like it would relieve employers of any expectation of having to pay a living wage. That burden would be shifted to the government that would now be responsible for providing a GAI to everyone who falls below the line. Assuming that the GAI was set at a liveable level, I also don't see how this would promote the incentive to work. It seems like it could have the opposite effect, since you would be guaranteed a decent liveable income by the government and low-end wages for working could be quite low. (I suppose one could argue that this would encourage employers to raise wages?)

See, I'm with you on the mathematical definition of "progressive tax". However, I'm having trouble with this last statistic, although I'll admit that I'm not well-versed in the field. The "incentive to work" is a psychological phenomenon, right? A feeling, more or less? (I felt a strong incentive to work on preparing next semester's classes last evening when I saw how much fun some of the assignments could be.) I don't see how it could be quantified to one decimal place. What would an 8.5% higher incentive to work look like as opposed to an 8.7% higher incentive? I have to think that at most this is a model or estimate? Moreover, I don't see why people would stop working or work less if they slip into a higher tax bracket, as long as they are still earning more money for their work. Do you think that teachers will put extra time into prep and marking if we switch to a flat tax? The links I gave argue that there is little evidence of decreased labour force participation in Nordic countries with highly progressive tax structure; quite the opposite. Well, in the year that Fisherman 2 made $50K, it would have been a greater burden on him to pay 25% of his income in tax than it would be for Fisherman 1, given his expenses during that year. In the year that he made $150K, it would have been much easier for him to do so. He may have incurred debts during the first year, which he might be able to claim against his taxes in the second year to some extent. You could extend this to a 10-year period and say that over 10 years, both fishermen made the same total number of dollars but Fisherman 2's income fluctuated more widely, and thus a social injustice has been perpetrated against the fisherman who had to pay more. However, that seems a little silly to me, since it is easier for people to budget for a year at a time than for 10 years (unless their income is rather stable, in which case the point is moot). TimG's point about government benefits does seem fair to me, though. I'll consider that.

I find this useful for clear, simple definitions of the terms "progressive tax", "regressive tax", and "flat/proportional tax": http://apps.irs.gov/app/understandingTaxes/student/glossary.jsp [Edited: explanation added]

This isn't a flat tax at all. It is basically a textbook example of progressive income tax, and is more or less what I was advocating. It's closer to the status quo than it is to a flat tax, honestly.

I agree that the system is more complicated than it needs to be. (I wasn't necessarily arguing for the status quo, although I prefer it to some of the alternatives that people are suggesting here.) The first thing I would do would be to scrap all the goofy tax credits that have been introduced over the last decade or so. I have no real problem with a system based on marginal rates but the idea of basing the tax code on a c-infinity function warms my nerdy heart. I find it hard to believe that this effect is significant (unless marginal rates become much higher than they are now), mainly for the reasons given in these: http://modeledbehavior.com/2011/05/18/do-taxes-decrease-the-incentive-to-work/ http://www.bloombergview.com/articles/2014-12-24/do-higher-taxes-make-us-work-less I'm not sure that this is unfair, given that people work, earn money, vote, etc as individuals. I don't see why they shouldn't be taxed as individuals rather than as families or couples. (A tax deduction for dependents does make sense to me.)

But if CO2-producing energy sources are still a thing that everyone needs to use, then this is basically a regressive tax on a necessity. I'm not against modest CO2 taxes. I would not be opposed to bringing the GST back up to at least 7%. (I actually agree that the NDP will probably need to charge more taxes than they say they will in order to fund their proposals.) I just don't agree that these should replace income taxes as a primary revenue stream.

Again, I'm being told that there is consensus among economists. Yet, when I gave an example above of a famous economist who advocates for both consumption taxes as well as higher income taxes, there was an admission that there is in fact a very wide range of opinion among economists. I don't deny this but I don't see how we could be close to this point at our current tax rates. From what I've read, many economists peg the Laffer Curve around the 65-70% mark. (Some peg it much lower, yes.) Every economist surveyed here disagreed that a cut in the US's income tax rates would result in an increase in revenue. I'm not against consumption taxes per se but if we had something like a 25-30% GST (which doesn't seem unrealistic if it has to replace income taxes), I think a lot of people would just shop across the border or online. In fact, this seems more believable to me than the idea that people would just stop working or investing if a higher income tax bracket were introduced.

My concern with using carbon taxes as a principal revenue source is that if the tax actually works like it 'should' and discourages people from using CO2-emitting fuels, government revenues will suffer. If this does not happen, we are basically admitting that the tax's environmental benefit is marginal. We can't have it both ways. This basically applies to all sin taxes: revenue depends on how much people sin. This is not to say that sin taxes are a bad idea per se but it does seem like a bad idea for them to become a principal revenue stream. What is wrong with progressive income tax? It is clear and simple and relatively stable, takes money from people who can afford it, and is not nearly as dependent on consumption trends.

I have no idea what you're trying to say here. Is it that the Opposition is to blame for asking questions during Question Period?

Assuming you're right, this is a clever strategy but also blatantly contemptuous of Parliament and democracy.