The Welfare Trap
The one line that got me was this: "Under our current welfare system, a family that earns around $25,000 is made worse off by earning more money – after accounting for changes in tax and welfare subsidies – unless the family can, in one step, jump from $25,000 to around $45,000."
That is a staggering condemnation of just how corrupt and debilitating our current welfare system is.
That is a staggering condemnation of just how corrupt and debilitating our current welfare system is.
I agree with the tenor of the negative income tax. The author is correct that it doesn't create value, but it does create utility. That utility creates a benefit to society that's difficult to exclude people who don't want to pay from. It's obviously tricky because if the payments are too large or not structured right, you create much worse problems than you're trying to solve.
The reason I even consider something that looks like stealing people's money and handing it to someone else is this: Suppose disparities in wealth are causing social problems that are affecting everyone. We use police, jails, etc to punish the people responsible. But what if in some cases helping people could have the same effect on the problem? There's no reason we should be allowed to tax to pay for punishments but not for helping. So we create agencies to help the needy. Agencies take on a life of their own, and are hard to shut down or change. If you give the money directly to the needy, you cut out the intermediary of gov't agencies. In some cases those agencies help the needy administer the money wisely but in other cases the needy understand their needs better than any gov't agency. In the absolute worst case, politicians expand the agency to serve the middle class, and then we have the horrible effect of people thinking of the gov't as their provider.
With all those perils, it's easier to run to some ideological purity, i.e. gov't should ONLY help or ONLY punish. It's not that simple. I would like to see them scale back agencies designed to help the needy and replace them with these support payments.
If people are responsible for providing for themselves, we will be able to end the social programs which waste hundreds of billions of dollars every year. This should lead to less taxation, which gives people more money in their own pockets to spend - a de facto raise!
We should be seeking to eliminate the welfare trap and encourage people to be productive by allowing them to profit from their increased labor and skills. The current system provides a strong disincentive for improvement, preferring instead stagnation.
This is true when you're taxing people to pay for the poor. I think it's fine to tax people long-term to help the poor, but that debate obscures and even more serious issues: taxing the middle class to help the middle-class. It's incredibly destructive IMHO for the middle-class to feel it needs the gov't to buy its basic needs.