I found listening to this podcast very frustrating. I just have a very different conception of how a basic income grant works.
You have two parameters to play with. One is the size of the grant, and the other is the income tax rate (let’s go with a flat tax to keep the arithmetic simple). Together, they determine the breakeven income, that is the amount of income someone earns where the tax and the grant cancel out.
For example, suppose that the grant is $20,000 and the tax rate is 20 percent. In that case, if I earn $100,000 then I pay $20,000 in taxes and that just offsets my $20,000 grant. If the BIG is administered by the IRS, at $100,000 a year the IRS and I don’t exchange any money. If I earn $80,000 then the IRS pays me $4000 (20K in BIG minus 16K in taxes), and if I earn $120,000 then I pay the IRS $4000.
Note that this works out exactly the same as a negative income tax with rate of -20% for people earning less than $100,000 a year.* So when Russ says that a negative income tax is better than a BIG, he loses me.
Now, I think that a $100,000 breakeven point is not a good choice. But if you want to get to a lower breakeven point, you need a lower BIG, a higher tax rate, or some combination of the two.
I prefer a lower BIG, say, $10,000 per person, perhaps even less. People who need more and cannot earn it can get help from charity or local governments, which are closer to the family in need and can be more in touch with individual circumstances.
But I also think that a tax rate of 25 percent would not be too high. So with a $10,000 BIG and a 25 percent tax rate, the breakeven point would be $40,000 in income for a single individual.
Incidentally, I also disagree with Russ that our current programs are not problematic in terms of high implicit marginal tax rates. Even if every single program has only a gradual fall-off in eligibility, the combination of programs has fall-offs that for some people make the marginal tax rate on additional income 100 percent or higher.
One issue with a BIG, and with assistance programs of all kinds, is the treatment of households vs. individuals, or adults vs. children. Suppose that the BIG is $10,000 per single adult. Does a household with two adults and two children get $40,000? Or some other number?
Finally, if you only want people to spend assistance on “merit goods,” you can provide the BIG in special savings accounts that can only be used for housing, education, food, and health care. See my early posts in the category of Setting Economic Priorities.
*Mathematically, draw a line with the equation Y = $20,000 – 0.2X [corrected–I had written $40,000], where Y is what the individual nets from the IRS and X is the person’s income. If you think of the line as starting from the coordinate (0; $20,000) and going to the right, then you have a BIG. If you think of the line as starting from the coordinate (100,000; 0) going to the left, you have a negative income tax. But it’s the same line!