The Instigator
AncientWisdom
Pro (for)
Winning
20 Points
The Contender
brian_eggleston
Con (against)
Losing
2 Points

The Negative Income Tax

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Post Voting Period
The voting period for this debate has ended.
after 4 votes the winner is...
AncientWisdom
Voting Style: Open Point System: 7 Point
Started: 7/21/2009 Category: Politics
Updated: 7 years ago Status: Post Voting Period
Viewed: 5,737 times Debate No: 9007
Debate Rounds (3)
Comments (25)
Votes (4)

 

AncientWisdom

Pro

The Negative Income Tax is a little known system of taxation that can be used as an alternative to minimum wage laws, and would eliminate the need for welfare, food stamps, and potentially social security as well. In addition, outsourcing would virtually be eliminated as a problem.

Here's how it works: the Negative Income Tax involves a yearly, fixed government payment to all working and disabled individuals, and is used in conjunction with a flat tax rate. For example, suppose there's a flat income tax rate of 25%, and the fixed government payment involved equals $10,000 a year. A person who earns $4,000 a year would pay $1,000 in taxes, which would reduce their earnings to $3,000 a year. However, after they're granted their fixed government payment of $10,000, their total earnings would add up to $13,000 a year. A person earning $40,000 a year would break even, because their $10,000 fixed government payment equals the 25% they pay in taxes ($10,000). In other words, they pay no taxes, yet they don't earn any extra money. And finally, a person earning next to nothing (e.g. a disabled person) would earn the full $10,000.
brian_eggleston

Con

I extend my thanks to AncientWisdom for posting this interesting debate. As it happens, I've long been intrigued by the concept of flat taxes – I mean, on the face of it, what's not to like about them?

As my opponent explained, the theory is that middle income earners are no worse off and low earners get a substantial annual lump sum. Meanwhile, the rich pay less tax than they had done previously so everyone's a winner, right?

Well, unfortunately, things that seem too good to be true usually are, and that is the case with flat tax schemes, which is why they haven't been more widely introduced worldwide.

Say you are installed as the leader of nation with 150,000 inhabitants.

It's boring, I know, but let's do the maths {please refer to the ‘comments' section for details due to character limits}.

So, the net deficit under this flat tax system would be $375 million.

That means the government will have to cut expenditure by $375 million order to balance the books, but where will these cuts be made?

The vast bulk of government expenditure in most Western countries goes on public services such as social security payments, pensions, health and education, even in the United States, where defence accounts for a much higher proportion of government spending than in other developed nations.

http://www.usgovernmentspending.com...

So, unless you decide to leave your country utterly defenceless and abolish the army, navy and air force and also get rid of the police and do away with public infrastructure such as roads, trash collection and street lighting, the cuts are going to have to be made in public services that disproportionately affect the poor, since higher earners usually procure healthcare, pensions and education privately.

Therefore, the low earners will have to pay for the education of their kids, all their medical bills and the pension provisions in addition to all their normal living expenses out of as little as $10,000 per annum. Meanwhile the high earners are coining it in. If they were paying 40% tax on $60,000 p.a. leaving them a net income of $36,000 p.a., under a 25% flat tax system they will have a new net income of $45,000 – an increase of $9,000 per annum.

In conclusion, since middle income earners are no better or worse off under a flat tax, what this model demonstrates is tha the government would take $9,000 from each low earner and hands it over to a high earner.

It's like Robin Hood robbing from the poor and giving their money to the Sheriff of Nottingham - it's morally wrong and it shouldn't be implemented - vote Con!

Thank you.
Debate Round No. 1
AncientWisdom

Pro

First and foremost: you've obviously missed the point in my second paragraph. Those numbers were merely examples. Aside from the fact that the government CAN, in fact, get rid of some of the things you've mentioned, and that not all of those things would need to be dropped in order to sustain a budget, the fixed government payment and flat tax rate could be adjusted accordingly to help.

The other thing you need to consider is the massive bureaucratic costs that would be eliminated by implementing such a system, namely the IRS (it might actually still exist, but would only be a mere shadow of what it once was).

You also seemed to have overlooked something: I don't know how it is out there in the UK, but at least in the United States, budgets for schools, police, fire stations, hospitals, garbage disposal, sewers, roads and sidewalks, etc., are usually funded by property taxes (i.e. property tax pays for pretty much anything at a local level). By saying that these things must be dropped from the budget for the system to work out, you're assuming that they're funded by the income tax; they're not.

Finally, I've realized that I forgot to mention something in Round 1: the Negative Income Tax would provide a guaranteed income, just like minimum, but would have virtually none of the negative side affects of minimum wage. Minimum wage laws decrease job availability, cause outsourcing, and impose their own sort of inflation on currency, in the sense that employers have to raise the price of goods to compensate for the lost profit.

http://www.heritage.org... (this covers the effects of minimum wage laws)
http://www.econlib.org... (this provides further clarification on the Negative Income Tax)
brian_eggleston

Con

With thanks to AncientWisdom for his reply, I did, of course, realise that the numbers my opponent gave in his opening argument were merely arbitrary but, nevertheless, the formula remains the same whatever figures are used. The net result of a flat tax is that middle income earners remain largely unaffected while the rich get richer and the poor get poorer.

Let's say my opponent suggested that if a pack of braying toffs (a group of exuberant aristocrats) were to walk into a three Michelin star restaurant and order plateaux de fruits de mer, Chateau Briand steaks, fois gras salads, white truffle risottos and a jeroboam of vintage Champagne, and that the restaurant owner should give them their meals for free and take the cost of them out of the waitress' wages because it is only right and proper that the rich should be subsidised by the poor, I think (and sincerely hope) that you'd say that was immoral. However, my opponent didn't suggest that, but he did argue in favour of flat taxes, which amounts to the very same thing.

You see, the reality on the ground with flat taxes is that the wealthy pay less tax while the poor have the essential public services that they rely upon withdrawn - so the rich are better off and the underprivileged are the ones that suffer as a result.

Now, to say that money could be saved by axing the IRS doesn't begin to address the resulting shortfall in tax receipts that would result from the introduction of a flat tax. Indeed, since rich people really, really hate paying taxes and can afford to hire expert accountants to help them avoid paying them, the IRS is the one department that needs to be expanded not downsized: after all, it is the only major department that fills the government's coffers rather than depletes them.

To address the distinction between income and property taxes, they exist in Europe as well as America and are often much hated by posh people because they argue that one person living in a large house has to pay the same tax as a whole family living in the same sized house next door. In my opinion, if the posh don't like it, they can always move to a smaller property, but of course they don't see it that way.

Finally, the minimum wage was introduced to defend vulnerable workers from greedy, exploitative employers and should be kept. At the end of the day, the US or the UK could abolish the minimum wage but, in the global economy in which we all now operate, American or British factory workers couldn't possibly compete with workers doing the same jobs in China or India. I mean, could you bring up a family on a dollar a day if you live in Europe or America? I don't think so.

For these reasons, the flat tax system should remain the ideal preserve of the privileged few and should not be implemented in democratic capitalist countries.

Thank you.
Debate Round No. 2
AncientWisdom

Pro

In your last argument, you're only really acknowledging the fact that the Negative Income Tax is a flat tax rate; you're failing to address the fact that the fixed government payment component covers the poor; anyone earning under a certain amount essentially pays no taxes. Ultimately, the effects of the Negative Income Tax are equivalent to the desired effects of a progressive tax system, except more effective.

The example of the exuberant aristocrats you give is sort of an incoherent argument, even as an analogy. The Negative Income Tax does not subsidize the rich at the hands of the poor. Remember, the poor under such a system essentially pay no taxes.

You say "since rich people really, really hate paying taxes and can afford to hire expert accountants to help them avoid paying them, the IRS is the one department that needs to be expanded not downsized." First of all, I hope that by saying that the rich "avoid" paying taxes, you're attempting to say that they do everything they can to get massive deductions. A can't imagine really anyone managing to avoid paying ALL their taxes. But the point is this: the IRS is the very thing that allows the rich (or anyone, for that matter), to reduce the taxes they pay. The reason there are so many opportunities to receive deductions is because the system is so complicated that it allows for loopholes. A flat tax rate would ensure that there's no way to get around paying full taxation.

The paragraph in which you distinguish between income and property taxes doesn't really help or hurt either of us. The debate is about income taxes. Nowhere did I state anything about how property taxes should be distributed, and I most certainly didn't suggest that the rich deserve lower property taxes.

You then proceed to say the following:

"Finally, the minimum wage was introduced to defend vulnerable workers from greedy, exploitative employers and should be kept. At the end of the day, the US or the UK could abolish the minimum wage but, in the global economy in which we all now operate, American or British factory workers couldn't possibly compete with workers doing the same jobs in China or India. I mean, could you bring up a family on a dollar a day if you live in Europe or America? I don't think so."

The Negative Income Tax would ensure that workers aren't exploited, as I've already explained. As far as China and India, you do realize that the reason they're doing so well is almost entirely BECAUSE of US minimum wage laws, don't you? Minimum wage has caused the outsourcing of most industrial jobs. The Negative Income Tax would do away with this, and all that would have to be done to prevent insourcing of jobs would be to tighten border security. The rest would work itself out, since illegal immigrants would not be eligible for government grants.
brian_eggleston

Con

With many thanks to my opponent for his considered reply, I should like to point out that I did, in fact, acknowledge that a fixed income would be paid to the poor. I also pointed out that there would be no advantage in this if they then had to pay for their own public services such as healthcare and education.

Consider the situation of a mother of a child whose father left them when the baby was born with severe physical and mental disabilities. She cannot work because she has to look after her child and so she is, therefore, totally dependent on the state for their housing and living expenses plus her child's special (and expensive) medical and educational needs. Now if the lump sum paid to all the poor was substantial enough to cover these types of costs, that would be fine. But then, wouldn't middle-income earners then complain that they would be better off financially if they gave up their jobs and sat at home doing nothing all day instead? And where would all the money to pay for these generous state handouts come from? Not the rich, that's for sure, they will be paying less, not more tax.

My opponent then argued that IRS should go because it was full of loopholes. So close the loopholes. Just because a system is flawed doesn't mean it should be abolished. There are a lot of corrupt police officers who take bribes to overlook criminal activity, which is very corrosive to society as a whole. So what to do? Make more of an effort to investigate and prosecute bent cops or abolish the police force altogether? In other words, don't throw the baby out with the bathwater.

He then wrote: "Nowhere did I state anything about how property taxes should be distributed..." So do the poor still have to pay property taxes? If so, their cash allowances are going to have to be huge.

Finally, he wrote: "Minimum wage has caused the outsourcing of most industrial jobs. The Negative Income Tax would do away with this, and all that would have to be done to prevent insourcing of jobs would be to tighten border security."

The outsourcing of industrial jobs always happens as nations become wealthier and there are cheaper workforces abroad. Thirty years ago we used to buy goods that were "Made in Japan" because they were cheaper but then Japanese wages soared and we were buying products that were "Made in Korea" instead. Now it's "Made in China". The only measure than can inhibit this process is higher import duties and state subsidies to industry. Certainly a reform of the tax system will not prevent jobs from going where the labour is cheapest.

In conclusion, by all means crackdown on people who take advantage of the social security system but let's not introduce a negative tax system that withraws the safety net that essential public services provide to the most disadvantaged in society, just so that the richest among us can get even richer than they already are.

Thank you.
Debate Round No. 3
25 comments have been posted on this debate. Showing 1 through 10 records.
Posted by frankpicklefish 3 years ago
frankpicklefish
In response to Princess's Three year old comment "
- The unemployed will receive free money for doing absolutely nothing.
What incentive is there to work if you can subsist without a job? None.
This will turn the country into a welfare state where nobody will want to work.
The government can use the same money to employ them."

the reason why this isn't true is because there is always incentive to work harder. under the current system, if u receive government assistance, then its better for you not to work. if you start working gradually, you'll become ineligible for government assistance anymore, so its better to stay in the system and receive entitlements. on the other hand under the negative income tax, if you only make 1,000 your grand total will be 13,000. whereas if you don't work, your grand total will be only 10,000. Therefore under this system, it pays to get a job even if it is a low skill job. because the government isn't "making up the difference for all your needs" its an incentive program to get a job. you can sit on your butt and receive money, but if you get a small job you'll receive even more money. in today's system its better for you to not work, then to try and work. its more important to give people the opportunity to move up in wealth.
Posted by regebro 7 years ago
regebro
aunche: "People are often inefficient will their money and can easily waste the negative income tax money on something other than basic necessities so we need social services."

What you are saying here is that some are unable to take care of themselves. This is of course completely true. You also say that therefore the state should take care of them. That's an opinion I agree with. But what I don't see is why this means that the state must take care of everyone. Why must the state decide how I use their money, should I lose my income? I AM capable of spending that money better than the state does. I see that many would squander them on drugs for example, but let then the state take care and decide over those people, and not me.
Posted by regebro 7 years ago
regebro
(Uh, scratch that, I failed in searching. The Pro side did point that out, I see now. OK.)
Posted by regebro 7 years ago
regebro
Both sides in this debate has completely missed the fact that negative income tax in fact is flat tax + a basic income, and that this in fact gives a practical *progressive* tax scale. Thus, the arguments against that are based on argument against flat tax completely fall flat.

I vote that you both fail. :) But I can't vote, since this site requires that silly mobile-phone thingy.
Posted by aunche 7 years ago
aunche
There is a reason why other countries do not impose a flat tax rate. The rich can still easily avoid taxes by disguising their income. To make up for the deficit, one could raise the income tax for the rich. Furthermore, inflation and the inefficiency of developed countries' economy creates the outsourcing of jobs. I do not really see now the negative income tax will help eliminate social services. People are often inefficient will their money and can easily waste the negative income tax money on something other than basic necessities so we need social services.
Posted by Princess 7 years ago
Princess
I was incorrect about the unemployed, but the rest of my argument is still intact. Local programs are funded by the property tax, not federal programs. The lower class still loses many of the federal programs they need, the middle class may even be at a slight loss in this new tax as they benefit from a few government programs as well, and the wealthy get a free handout that they do not even need. If anything direct the handouts to paying the national debt instead of giving it to people who do not need it.
Posted by AncientWisdom 7 years ago
AncientWisdom
In response to Princess's last comment:

I only said the employed and the disabled receive the fixed government payment. Never did I say anyone sitting around on their asses would receive any money. So your assertion that it would turn the country into a welfare state doesn't really hold true, considering the fact that it would eliminate the need for the welfare system altogether.

The reason "most impoverished workers will lose all these programs" is because they won't need them anymore. Also, you really need to read things more thoroughly, namely the part about how such programs are funded almost entirely by property tax, NOT income tax.

The middle class would remain unaffected, as you state. And...your point?

"The upper class does not need programs, so they unaffected by spending cuts." Again, such programs are funded almost entirely by property tax. They WOULD end up paying more for these programs.

Next time, please do a better job reading the debate more thoroughly before you post a comment or vote. Providing your own, substandard and inaccurate summary of the debate is going to lead future voters astray.
Posted by TCFreedom76 7 years ago
TCFreedom76
Lower tax rates encourage growth and an increase in productivity will partially offset the decline in revenues due to a lower tax rate. A flat rate as pro mentioned is much harder to avoid than a system fraught with exemptions, resulting in more taxes paid by the rich and lower overhead costs to also offset the drop in revenues. Cuts in the military, law enforcement, and other public programs are not the only cuts that can be made; the U.S. government wastes all kinds of money on pork projects and could do much better job of defense contracting. This is a classic argument against any kind of limited government minded reform, rather than talk about cutting out the waste the discussion goes right to laying off teachers, firefighters, and police officers. Don't forget the enormous costs of the war on drugs, all the money to pay for prisons and law enforcement and all the lives wasted in prison for engaging in activities that only harm oneself. Taxing drugs is a much cheaper way to reduce drug use than prohibiting them, and it turns far fewer users into career criminals. The negative income tax would likely only cover the most basic needs, and most people want more than that and will work accordingly; and with debit card technology we could easily divert part of the transfer payments into cards that could only pay for healthcare or education, making that "free money" less attractive to the deadbeats.
Posted by Princess 7 years ago
Princess
Here is how the negative income tax proposed in the above debate will affect each class:

- The unemployed will receive free money for doing absolutely nothing.
What incentive is there to work if you can subsist without a job? None.
This will turn the country into a welfare state where nobody will want to work.
The government can use the same money to employ them.

- The lower-class workers will receive free money in addition to their small income
Most impoverished workers lose their programs which they need. And it makes almost no difference whether you work hard to become poor or be poor because you don't work at all.

- The middle class may be unaffected or slightly hurt
They receive no benefits from this plan whatsoever and they may even be hurt by the fact that programs are cut.

- The upper class will benefit slightly
The upper class does not need programs, so they unaffected by spending cuts. They get a tax refund which almost means nothing to them. And it doesn't matter where the upper class pays their income tax. It's all about where they own their business, which is why income taxes which favor them won't be overly effective.

And essentially, you get a big mess.
Posted by KRFournier 7 years ago
KRFournier
Instead of voting per category, I dispersed the points based on total performance. It was a very close debate, but I gave Pro 1 more point than Con. His math didn't work for me. In "The Maths part 2," after calculating a government expenditure of $1 billion, he says:

"But, from that, we have to deduct the tax paid by the middle income earners – also $1 billion ($40,000 / 4 x 25,000). That's leaves the total government expenditure of $750 million for the high earners to pay."

Why does he deduct the tax paid by the middle income earners? Why deduct the tax for anyone? It's a flat tax. He seems to indicate that the middle pay no taxes. The do pay taxes, but the get it back. However, he already accounted for this in his previous calculations. So it seems, he sneaks in a reverse tax in which the middle income pay nothing and get another 25% back to boot.

Additionally, he assumes all rich people make 60K, which drastically reduces the incoming cash flow. Why not use the average and assume a few millionaires in there? There are just too many assumptions in his math to make a solid case.

That being said, Pro didn't bother to critique the math, so I can't give full credit there either. He did argue pretty well on the other points, though.

Like I said, both sides did well, but I thought Pro did just slightly better, thus the 1 point difference.
4 votes have been placed for this debate. Showing 1 through 4 records.
Vote Placed by tBoonePickens 7 years ago
tBoonePickens
AncientWisdombrian_egglestonTied
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Vote Placed by TCFreedom76 7 years ago
TCFreedom76
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Vote Placed by AncientWisdom 7 years ago
AncientWisdom
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Vote Placed by KRFournier 7 years ago
KRFournier
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