So what would an NDP government do?

cybercoma · June 25, 2015

If we restrict ourselves to developed western countries then the 3 closest to the optimal are Norway, Sweden and Denmark, all of which have sales tax rates of 25%. This suggests that Canada should try to go for a ~25% sales tax (also 25% is nice because it is easily invertible).

If Canada cranked the sales tax to 25% without establishing the same kind of social services that those other countries have first, it would be an utter disaster.

Evening Star · June 25, 2015

-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.

Edited June 25, 2015 by Evening Star

Canada_First · June 25, 2015

I don't understand why you people seem to be so against people keep more if their own money and deciding themselves how to best spend it. We are adults we don't governments treating us like children. We can manage our own finances, thank you very much.

Edited June 25, 2015 by Canada_First

Evening Star · June 25, 2015

Which "you people" is that directed to?

Canada_First · June 25, 2015

Which "you people" is that directed to?

Anyone who wants to raise our taxes.

cybercoma · June 25, 2015

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.

And bear in mind that 50% of Canadians have a personal income of $32,000 or less. So he's suggesting we top up over half the population.

-1=e^ipi · June 25, 2015

If Canada cranked the sales tax to 25% without establishing the same kind of social services that those other countries have first, it would be an utter disaster.

Proof?

Why would tax shifting from income to consumption necessarily be a 'disaster'?

How are you even measuring if something is a 'disaster'?

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.

You could also give lump sum transfers to children as well. They are people after all. Of course it would make sense for the parents/guardians to control that money. I would also suggest that disabled people have a larger lump-sum transfer. Maybe people in remote or Northern Areas should receive more as well.

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.

Maybe. But at the same time the more complicated you make things, the harder it is to implement (you will need a larger bureaucracy).

-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.

A priori I don't exclude a high rate and I don't exclude a low rate. The rate would be chosen to optimize a social welfare function that I would justify on the basis of the Pareto Principle, the Pigou-Dalton Principle, the Anonymity Principle, Occam's Razor and empirical evidence. Right now I'm leaning towards the social welfare function being the sum of everyone's utility, where the utility function depends on consumption and leisure and the utility function has constant relative risk-aversion (and this constant would be determined empirically).

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.

I need to determine the social welfare function first though before I can quantify that.

-1=e^ipi · June 25, 2015

We are adults we don't governments treating us like children. We can manage our own finances, thank you very much.

Lot's of adults act like children and can't manage their finances. This may not be the majority, but there are people like this who exist.

And bear in mind that 50% of Canadians have a personal income of $32,000 or less. So he's suggesting we top up over half the population.

No, not 50%. 100%.

-1=e^ipi · June 25, 2015

A logarithmic utility function is used to maximize growth of stock portfoilios.

http://www.museful.net/2011/quantitative-finance/logarithmic-wealth-utility

I wonder if that adds more support to the idea that a logarithmic utility function would arise due to evolution.

A log utility function also makes calculations much easier compared to other constant relative risk aversion utility functions. It would definitely make it much easier to determine optimal mitigation response with respect to climate change.

Canada_First · June 25, 2015

Do you honestly think any of this socialist type stuff is actually going to happen? It's a piped dream.

Evening Star · June 25, 2015

You could also give lump sum transfers to children as well. They are people after all. Of course it would make sense for the parents/guardians to control that money. I would also suggest that disabled people have a larger lump-sum transfer. Maybe people in remote or Northern Areas should receive more as well.

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.

-1=e^ipi · June 25, 2015

Do you honestly think any of this socialist type stuff is actually going to happen? It's a piped dream.

Not sure if you are responding to me. But if you are, is a flat tax socialist?

Canada_First · June 25, 2015

Not sure if you are responding to me. But if you are, is a flat tax socialist?

Anything that gives the government more control over my money is a socialist plot. Why are you so afraid of letting everyone keep more of their money? Letting each individual decide how to best invest and spend it.

cybercoma · June 25, 2015

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.

It's not a flat tax anyway, since he's advocating for a minimum living allowance to be paid out to everyone in the first place, regardless of what they make. It's essentially reversing the exact same system we have now. Except, instead of the personal exemption being about $10-12k, it's bumped up to $25k.

-1=e^ipi · June 25, 2015

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.

Well it still would probably be the same for most adults. Though with respect to children or disabled people, I'm a bit stuck on how to determine the value. I guess for disabled people, you could assume that they have a similar utility function but don't have the option to work (so a social welfare maximizing government would give disabled people more money). For children, maybe you look at the relationship between monetary support for children & their long run outcome and pick a value that optimizes steady-state social welfare.

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.

I'll get their slowly. I think it is far better that the tax structure has a proper justification and the best possible tax structure is chosen, rather than what our political parties do (just choose completely arbitrary numbers with no basis and hope to get elected).

-1=e^ipi · June 25, 2015

Anything that gives the government more control over my money is a socialist plot.

So according to some in this thread I am an extremist libertarian for supporting a flat tax and to others in this thread I am a socialist for supporting a guaranteed income. All without specifying how much flat tax and how much guaranteed income.

As I said earlier, you could have a 0% flat tax and a $0 guaranteed income and you have extreme libertarianism, or you could have a 100% flat tax and redistribute all that money equally and you effectively have communism. Or you can have anything in between.

Why are you so afraid of letting everyone keep more of their money?

I'm not sure if I accept the premise of your question.

-1=e^ipi · June 25, 2015

It's not a flat tax anyway

Yes it is.

It's essentially reversing the exact same system we have now.

Nope.

Except, instead of the personal exemption being about $10-12k, it's bumped up to $25k.

It's not an exemption system for first $x of income to be tax free. All income is taxed at the same rate. And I never said that the guaranteed income should be $25000.

Canada_First · June 25, 2015

It's fine how it is now. People need to keep more of their money not less. The government needs to butt out of our lives. We don't need more government intrusion but less.

cybercoma · June 25, 2015

It's fine how it is now. People need to keep more of their money not less. The government needs to butt out of our lives. We don't need more government intrusion but less.

Move to a country that has no government. Somalia is pretty close. Have fun!

Evening Star · June 25, 2015

It's essentially reversing the exact same system we have now. Except, instead of the personal exemption being about $10-12k, it's bumped up to $25k.

The main difference is that he's getting rid of marginal rates and tax brackets. People's effective tax rates are basically points on a curve with an asymptote at x where x is his 'flat tax rate'. The effective tax rate reaches 0 at y = c + y(1-x) where c is the GAI and y is one's total income prior to receiving the demogrant, I think.

[Edited for variable names]

Edited June 25, 2015 by Evening Star

Evening Star · June 25, 2015

So far, it feels more like a math assignment than a tax policy, though, but I'm having some fun with it. I miss algebra.

Evening Star · June 25, 2015

dp

Edited June 25, 2015 by Evening Star

Evening Star · June 25, 2015

I guess you could simplify that equation to x[1] = 0 when c = xy where x[1] is the effective tax rate, I think.

I think the formula for x[1] is x[1] = x - c/y

(Edited because I figured out the formula for x[1] in the shower just now.)

Edited June 25, 2015 by Evening Star

PrimeNumber · June 26, 2015

It's fine how it is now. People need to keep more of their money not less. The government needs to butt out of our lives. We don't need more government intrusion but less.

What he is implying would give a majority of the people more money, more than they currently have.

-1=e^ipi · June 26, 2015

The effective tax rate reaches 0 at y = c + y(1-x) where c is the GAI and y is one's total income prior to receiving the demogrant, I think.

Yes.

What he is implying would give a majority of the people more money, more than they currently have.

Not necessarily. Probably, but I don't think it's necessarily true a priori.

Edit: take for example 2 tax systems A and B that are all but identical except tax system B makes 49% of the poorest people $2 richer and 51% of the richest people $1 poorer. Even though tax system B makes the majority of people poorer relative to tax system A, tax system B has an on average richer society and has less income inequality, so should be preferred to tax system A.

Edited June 26, 2015 by -1=e^ipi