The Instigator
W1ll1ph0n3
Pro (for)
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0 Points
The Contender
Oliark
Con (against)
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0 Points

The Negative Income Tax

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Voting Style: Open Point System: 7 Point
Started: 11/16/2014 Category: Economics
Updated: 2 years ago Status: Post Voting Period
Viewed: 868 times Debate No: 65233
Debate Rounds (3)
Comments (3)
Votes (0)

 

W1ll1ph0n3

Pro

I would like to debate the idea of a negative income tax.

The idea is simple: The Gov sets a poverty threshold of X$, anyone earning below X$ would get the difference paid by the Gov.

I recently made a poll about this topic and was surprised by how many people were against it. I also noticed that most people made claims that are simply not true.

Therefore, I'm asking anyone interested, to debate this topic with me. Here are the rules:
-First round is acceptance
-If possible, all claims have to be proven with reliable sources
-Always be polite
-We have 72 hours to argue
-We get 3 rounds to debate (-1 for acceptance, so 2)
Oliark

Con

I accept your challenge over this very interesting subject.

I've been following with interest the Swiss debate over introducing a guaranteed minimum revenue.
To be honest I'm still undecided myself over this issue. However I do have a bunch of rational arguments against it.
Furthermore, as I currently live in a country, Belgium, where there is already a huge welfare coverage (guaranteed income for everyone (about 400 € pm), Generous child benefits or the state topping up revenue as an incentive for employment)
I will not just list arguments why a country should not apply "Negative Income Tax". I will also try to analyze factual negative results of it being enforced (Socially and Economically)

Having said that, good luck and may the best win
Debate Round No. 1
W1ll1ph0n3

Pro

Thank you Olark for accepting, and as you said: may the best win.

One of the main reasons why I support a negative income tax is that it's a very cheap and yet effective way to end poverty.
My alibi is the "Mincome" project that was conducted back in the 70's in the 2 towns in Manitoba, Canada; the town of Dauphin and Winnipeg:

http://america.aljazeera.com...

http://en.wikipedia.org...

http://basicincome.org.uk...

Those below the fixed poverty line received a monthly cheque that allowed them to survive. In the beginning, the researchers predicted that this would encourage people to be lazy and that it would cost a lot of money.
But in the end, none of the above turned out to be true.
From those who benefited from this project, only pregnant mothers and students worked substantially less. This by the way, resulted in a higher number of students graduating. Also hospitalization and domestic abuse went down.
The project started in 1975 but was ended in 1979, when a centre-right government came to power. For many years the results of this project have been forgotten, until a few years ago it caught the attention of Prof. Evelyn Forget of the University of Manitoba.

Now you might say that that these were small towns and that such a project couldn't work on a nation-wide level and that the people of Winnipeg and Dauphin feared that this project would end some day.
Well for the nation-wide thing, I don't know to be honest. It has never been tested on such a large scale.
But "I don"t find the "temporary program" argument very compelling. If people are irresponsible, will they really project four years into the future to decide how to behave?" (quote from Prof. Evelyn Forget)

Contrary to most basic income models, the negative income tax, would only give the amounted of money needed to the people who need it. That's why it would be a cheap way to de facto implement a basic income.

There have also been other basic income (BI) experiments, like in Otjivero, Namibia and in Uganda, India and even In the US:

http://www.spiegel.de...

http://usbig.net...

https://www.opendemocracy.net...

http://en.wikipedia.org...

The Namibian project also caught my attention for the following reasons:

In 2 years,
-the percentage of people living below the poverty line went from 76 to 36%
-the percentage of under-nourished children went from +50% to less than 10%
-the percentage of young adults graduating went from 60 to 90%
-crime went down significantly

Another interesting project is "Bolsa familia" in Brazil. Basically it's a negative income tax for poor families IF they send their kids to School:

http://web.worldbank.org...

As for the BI initiative in Switzerland, I'm crossing my fingers since I live there ;)
It would be really useful for me since in a few years I will be going to University.
Oliark

Con


REBUTTALS


I find this Canadian study very interesting. However while looking at the results of these studies we have to consider some facts :

- People knew the study was temporary, therefore their condition was precarious and left unchanged financial motivation to work harder in the long term. Dr. Evelyn Forget forgot basic economics, if a situation is precarious (4 years in a lifetime) people will not adapt to it.
Milton Friedman permanent income hypothesis tell us that "changes in permanent income, rather than changes in temporary income, are what drive the changes in a consumer's consumption patterns." This model can also be applied to the relation between working hours and free time : People won't work less unless they perceive their income change is permanent (which it definitely wasn't)

http://en.wikipedia.org...

http://www.nber.org...

- It was in people best interest to make the study obtain good results. Behaviour : Workings habits unchanged / Reward : more chances to pass the law and make Mincome permanent.
Psychological term is positive reinforcement.

http://en.wikipedia.org...

http://www.simplypsychology.org...

- Analogy drug testing to minimize psychological effects affecting study's results placebo are given to some of the patient. The aim is si mple : if nobody really knows if they have the drug in their system its effects can be isolated from the rest. In this study there was no placebo, people were aware to be lab rats
- Small villages are in fact not representative of the whole population of a country.

So while this study seems to be very precise (thorough scientific methods) it also appears not very accurate (initial bias was too large). Low accuracy High Precision situation (see image below)




"Contrary to most basic income models, the negative income tax, would only give the amounted of money needed to the people who need it. That's why it would be a cheap way to de facto implement a basic income."

Objection : What does prevent the employers from adjusting wage rates in order to discharge costs on the state.
Ex : Mincome is set at 1000$ per month.
Mr. Mario who works as an apprentice plumber earns 1000$ per month and therefore nothing is added to his income
Mr. Luigi who works as a pizzaiolo earns 700$ per month. Mincome will provide him with the extra 300$

What would happen if Mr. Mario employer decided to cut his salary to 700$ (or hire new personnel at 700$) ?
The state would have to set minimum wages for every single job type to prevent this situation.
This would make mincome pointless ! In addition, Labour market flexibility would substantially drop and we could expect involuntary unemployment to rise (since demand-offer courbe is no longer followed).

http://economics.about.com...

Besides we would have to make sure that this kind of employment subsidizing is not in violation of transnational trade agreements by artificially reducing production costs. Retaliation from others countries have to be expected.
(As Free trade is not the subject of the debate, I will not develop this more).


************************************************

Now let's take you Namibian example. Results are really astonishing indeed ! Let's look at this quote from one of the articles you provided.
http://www.spiegel.de...
"The idea is simple: The payment of a basic monthly income, funded with tax revenues, of 100 Namibia dollars, or about €9 ($13), for each citizen. There are no conditions, and nothing is expected in return. The money comes from various organizations, including AIDS foundations, the Friedrich Ebert Foundation and Protestant churches in Germany's Rhineland and Westphalia regions."

Objection 1 : "if you give a man a fish he is hungry again in an hour. If you teach him to catch a fish you do him a good turn". Ok so this is about giving everyone free fish forever hoping that they will learn fishing.

Objection 2 : If the money comes from outside, it just makes more aid to Africa. The purpose of humanitarian aid is to increase people's quality of life. But it also sustains artificially an unsustainable situation.
However I see that the final idea is to take that money from taxes. Very well ! How can Namibia find this money considering they already have a 5,5% of gdp public deficit ?

- Borrowing from financial markets (Not sure it's a wise choice)
- Creating a special tax aiming richer people in order to redistribute wealth

http://www.africaneconomicoutlook.org...

About Redistribution of wealth. Namibia has a very poor Gini index 0.59 (US is 0.45 and average European country is around 0.3X). Some would just argue about how unfair this is and urge to redistribute income in a more just way.
http://www.worldbank.org...

What's the difference between Namibia and Western countries ? Namibia is still a developing country !
Salary is unequal in Namibia because you have a huge pool of low skilled labour and a lack of medium/high skilled labour (it just widens the gap even more).
Countries like the US already reached a stable equilibrium between low skilled/medium skilled/high skilled labor. Gini coefficient remained quite stable during the past decades.

So yes, many poor Africans need financial help so they can go to school or university in order to create a balanced and sustainable society where in the long term people success is determined by meritocratic standards. But this intervention should be temporary and not permanent !
(By the way, most African governments received international aid for decades and wasted it ! That's a pity... but this is off topic)

Redistributing in Africa is pretty much like rationing in War time Europe. You can't compare true poverty (famine, malnourishment etc.. with our Western "poverty)
http://en.wikipedia.org...


Objection 3 : If we assume that the state intervention is the only possible solution to prevent poverty why should the state just give money to people for nothing ? The state could employ people or orient them towards a sector needing workforce (perhaps by sponsoring studies)

SOME ARGUMENTS

1) If there is a sum of money guaranteed for everyone regardless of what they do, there will always be some people taking advantage of the system.
In Belgium for example the state gives about 700€ per month to every isolated person without any income and 400€ if cohabiting. The state also tops up your income if it is inferior to the amount (this doesn't happen very often because full time minimum wage is above 1000€)

Conditions for obtaining this aid are very general. The state only checks out you have no other income and of course you must be a legal permanent resident and of course earning less than the amount.

There is no time limit to this aid. Therefore there are many cases of chronically assisted people. Some of them even top up working part time under the table. (That is fraud, and punished by jail time).

Source is in French so I also declare on my honour this is true.
http://www.belgium.be...

2) More tax pressure on people not receiving Negative income tax. And this represents the largest part of the population (most of them would probably be unhappy, others do not). Coercion is not the answer.

3) We can expect higher inflation rates on basic commodities. This would mean a substantial drop in purchase power for middle classes not benefiting from the aid. The mechanics are simple : If you induce demand artificially (by permanently giving money to people, in this case poor people) prices of basic commodities will rise.

4) Meritocracy, Meritocracy, Meritocracy ! In order to reduce poverty, the state should focus on making possible for the deserving poor to advance in society. I do agree there are some people forced in to poverty by the force of events even if they are competent and probably deserve better. I mean instead of guaranteeing minimum income for all, why not just increase education funding ?
For undeserving poor the answer is not giving them taxpayer money. We have private charity for that and some other aid initiatives (e.g In EU , agricultural surplus is distributed freely to poor people )


To summarize my conclusion is that the role of the state should not be to provide unconditioned and unlimited in time welfare to everyone. The role of the state should be to provide a safe and just environment in which people can advance according to basic principles of meritocracy.
But If for some reason the state must take urgent action (severe crisis etc...) it should be more about helping people learning to catch fishes than giving free fish.

Debate Round No. 2
W1ll1ph0n3

Pro

Your "low accuracy - high precision" argument is very interesting. I admit that indeed the Mincome study had to take that into account.

************************************************************************************************************

Your quote:

"Objection : What does prevent the employers from adjusting wage rates in order to discharge costs on the state.
Ex : Mincome is set at 1000$ per month.
Mr. Mario who works as an apprentice plumber earns 1000$ per month and therefore nothing is added to his income
Mr. Luigi who works as a pizzaiolo earns 700$ per month. Mincome will provide him with the extra 300$

What would happen if Mr. Mario employer decided to cut his salary to 700$ (or hire new personnel at 700$) ?
The state would have to set minimum wages for every single job type to prevent this situation.
This would make mincome pointless ! In addition, Labour market flexibility would substantially drop and we could expect involuntary unemployment to rise (since demand-offer courbe is no longer followed)."

Objection: If Mr. Mario knows that he could get 1000$/month anyway, he would have the power to negotiate his salary in a fair way with his employer. Mr. Mario would probably say "Listen boss, if you don't pay me more than a 1000$/month, I simply quit, I will get mincome anyway"

So you see, employers will have to offer wages higher than mincome if they want to attract any employees.

Now you might be tempted to object that Mr. Mario would accept low-wage jobs, work less and thus earn less in order to get half of his income covered by mincome.
Since this is plausible the state could indeed set a Minimum wage for all jobs, that would be at least as high as Mincome. To be honest, I see nothing wrong with this.

Mincome and Minimum wage could work hand in hand: If you lost your job, you get mincome and if you work, you'll get at least minimum wage + you have a lot of negotiating power.

***********************************************************************************************************

Your first quote:

"Objection 1 : "if you give a man a fish he is hungry again in an hour. If you teach him to catch a fish you do him a good turn". Ok so this is about giving everyone free fish forever hoping that they will learn fishing."

I have no objection here, I completely agree with your quote. But don't forget, mincome wouldn't "give you free fish", it would just be the "fishing rod" that would help you catch the fish. If you know what I mean.

Consider this: Why do most western countries have Universal Healthcare and free education? Easy! Because most people realize that if you want to work, you must be healthy and educated. So the state ensures that everyone is healthy and educated enough to enter the labour market.

However, being smart and healthy isn't enough if you want to work. You also need food that will give you enough energy to work and you need a decent shelter if you don't want to freeze to death during winter. So Mincome would be set high enough, so that you can access these necessities, But will be low enough to give you an incentive to work and purchase with your own money the luxuries you desire (iphones, a car, a TV and you name it).

Your second quote:

"Objection 2 : If the money comes from outside, it just makes more aid to Africa. The purpose of humanitarian aid is to increase people's quality of life. But it also sustains artificially an unsustainable situation.
However I see that the final idea is to take that money from taxes. Very well ! How can Namibia find this money considering they already have a 5,5% of gdp public deficit ?"

Objection: I totally agree that it would be difficult to implement mincome in poor countries. But we should first ask ourselves why so many African countries are poor.
One argument is that most African leaders make deals with western companies to suck the wealth of their own people.
Another argument is that poor countries (especially in Africa) have to pay back all the money the World Bank or the IMF gave them at very high interest rates.
And add all the wars to it.
Now this is getting a bit off-topic so I'll stop here but you know what I mean.

https://www.youtube.com...

Your third quote:

"Objection 3 : If we assume that the state intervention is the only possible solution to prevent poverty why should the state just give money to people for nothing ? The state could employ people or orient them towards a sector needing workforce (perhaps by sponsoring studies)"

That's true, and it's already done in most countries, especially in Austria, Sweden, Switzerland... but this system is reaching it's limits. In Sweden for example they hired unemployed people as substitute teachers in public schools. And it's a nice concept but many students complained that the substitutes weren't competent enough.

http://en.wikipedia.org...

*****************************************************************************************

Quote:

"If there is a sum of money guaranteed for everyone regardless of what they do, there will always be some people taking advantage of the system."

"There is no time limit to this aid. Therefore there are many cases of chronically assisted people. Some of them even top up working part time under the table. (That is fraud, and punished by jail time)."

True, but that's something you can't avoid in any system. Even when it comes to healthcare some people have "accidents" on purpose so that they can get the insurance money aka. insurance fraud.
But that doesn't prevent us from having Universal Healthcare.
Small quote to better understand what I mean:
"You must not lose faith in humanity. Humanity is like an ocean. If a few drops of the ocean are dirty, the ocean doesn't become dirty" - Mahatma Gandhi

***************************************************************************************

Quote:

"2) More tax pressure on people not receiving Negative income tax. And this represents the largest part of the population (most of them would probably be unhappy, others do not). Coercion is not the answer."

"3) We can expect higher inflation rates on basic commodities. This would mean a substantial drop in purchase power for middle classes not benefiting from the aid. The mechanics are simple : If you induce demand artificially (by permanently giving money to people, in this case poor people) prices of basic commodities will rise."

"4) Meritocracy, Meritocracy, Meritocracy ! In order to reduce poverty, the state should focus on making possible for the deserving poor to advance in society. I do agree there are some people forced in to poverty by the force of events even if they are competent and probably deserve better. I mean instead of guaranteeing minimum income for all, why not just increase education funding ?
For undeserving poor the answer is not giving them taxpayer money. We have private charity for that and some other aid initiatives (e.g In EU , agricultural surplus is distributed freely to poor people )"

Objection 1: There are many models for the negative income tax. But most models share the fact that they would replace several existing forms of social assistance and therefore wouldn't reduce the states annual budget.

In Switzerland for example, we have an annual GDP of approx. 600 billion francs. The Swiss government is already using 180 billion francs (1/3) for existing social services. If the "Basic Income Initiative" succeeds, it is estimated that the government will have to use 20 billion more francs to finance the BI. In total about a 1/3 of our GDP. As you notice there isn't much of a difference, simply because many existing social services would be replaced.

Now imagine a negative income tax initiative in Switzerland. It would cost even less than existing welfare.

http://www.admin.ch...

http://bien.ch...

http://www.businessinsider.com...

http://www.bbc.com...

Objection 2: On the other hand, people need money if they want to consume and keep the economy going.

Objection 3: Meritocracy is fair of course but have you considered technological unemployment which might be a problem in coming years?
Once we arrive at that point we might have to rethink the way we manage our economy. One solution might be a BI or the Negative Income Tax, that way people who lost their job due to automation could study, volunteer and develop interests for arts.
Maybe you think that most people wouldn't volunteer but per year the UN registers 90 billion work hours in Germany and 60 billion of these work hours are done by volunteers.

https://www.youtube.com...

https://www.youtube.com...

http://revenudebase.info...

Or we can go Star Trek style and have replicators and robots that do anything for us for free.
Oliark

Con


" If Mr. Mario knows that he could get 1000$/month anyway, he would have the power to negotiate his salary in a fair way with his employer. Mr. Mario would probably say "Listen boss, if you don't pay me more than a 1000$/month, I simply quit, I will get mincome anyway"
So you see, employers will have to offer wages higher than mincome if they want to attract any employees."


Ok, fair point. And how much will he ask his employers ? Perhaps 300$ more seems fair to you ?
It is not enough !
Who would work over a hundred hours a month to earn extra $300 knowing they have already 1000 in the pocket ?
I wouldn't, most people wouldn't : It would be working for like 2$ dollars a hour (150 hpm, 300$)

So the employer would have to give much more ! It would push salaries to double and the burden would be for the employer only.
That's because the state does not give a dime to people already earning over $1000.
The state would be just left giving $1000 only to every single unemployed person. In Switzerland this represents 3%. Of course it will be cheaper than other initiatives.

http://www.tradingeconomics.com...

So... Employers would take the burden for the remaining people. Employers are not just large multinationals making astronomic profits.
Employers are mainly small businesses and liberal professions. The latter category has everything to loose and this could cause severe damage to our whole economy.

****************************************************************************************

"Consider this: Why do most western countries have Universal Health care and free education? Easy! Because most people realize that if you want to work, you must be healthy and educated. So the state ensures that everyone is healthy and educated enough to enter the labour market."

I see it this more like an opinion (role of the state) than an actual argument. Also I will assume that by free you mean paid by taxes (But let's not play on semantics.).


*****************************************************************************************


Finally let's talk about your "Star Trek style."

"vulgar are the means of livelihood of all hired workmen whom we pay for mere manual labor, not for artistic skill; for in their case the very wage they receive is a pledge of their slavery." Quote from Cicero "De Officiis"

According to this kind of claim, employed labor has no intrinsic value beyond its fruits.
It's quite self-explanatory : people do not work hard because they like it.... but because of the value of the fruit of their labor.
(That leads to Marxist theories that the capitalists are stealing the fruits of the proletarian labor efforts and blablablabla but this is also off topic).

Let's come back to the topic. My point is that even if we had robots doing every thing for us, robots themselves would be the fruit of some people's hard work !
Technological progress is the fruit of a society based on industriousness.
What makes you think that encouraging laziness wouldn't begin its to decline ?

"You can't have your cake and eat it too" if you know what I mean....


****************************************************************************************


My conclusion is that there are enough indicators to show that in the long run, permanently implementing a Negative Income tax would be harmful to our economy.
Of course, some may benefit from it in the short term , but in the long term we would be, on average, worse off.


Debate Round No. 3
3 comments have been posted on this debate. Showing 1 through 3 records.
Posted by W1ll1ph0n3 2 years ago
W1ll1ph0n3
Thank you @Oliark for having had this debate with me. Maybe we'll have another some day
sincerely, William
Posted by cheyennebodie 2 years ago
cheyennebodie
We already have that. It is stealing just as welfare is. Getting something you neither earned nor deserve.We need to repeal the income tax altogether. Of course politicians would never go for that.That would leave most of the power in the hands of the folks, not in their grubby little paws.
Posted by Mike_10-4 2 years ago
Mike_10-4
The Fair Tax is the way to go!
https://www.govtrack.us...
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