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Comment by Dylan16807 | Hacker News Reader

The exact same way as the new system, except instead of 63% it's a much smaller number.

Edit: Why are people downvoting this?

I don't understand what's so confusing about SilasX's argument.

Removing cliffs and changing it to a smooth dropoff is good.

But that dropoff doesn't have to be £.63 in benefits per £1 earned. That's a pretty big effective marginal tax rate! Why not £.50 or £.30?

It should be extremely easy to understand how this proposal works, right?

It would technically bring more people into the system, but they'd be at the top end, and therefore only be receiving a small fraction of the current levels of benefits. It's totally doable.

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> The exact same way as the new system, except instead of 63% it's a much smaller number.

If it's less than 63%, you "unilaterally extend benefits to a whole bunch of people who don't currently get them".

Let's say benefits for the unemployed are £1,000 a month (chosen to be an easy number to work with). You lose 63p of benefits per extra pound you earn. The government gives you (some) benefits up to the first £1,587 you earn. If you go to 50%, the government gives people earning up to £2,000 a month benefits, and so on, which probably includes a bunch of people who don't currently get any.

You can't change 63% without either paying much more in the way of benefits overall, or without reducing the benefits of those who can't do any work.

> It would technically bring more people into the system, but they'd be at the top end, and therefore only be receiving a small fraction of the current levels of benefits

That's not how the maths works. Assuming an even distribution of people at each wage level, changing this to 30% effectively doubles overall spend.

The people making between £1,587 and £2,000 are getting £206 or less though. That's not an unsolvable expansion, especially because those people probably do in fact need the help.

> That's not an unsolvable expansion

So your solution is "spend a lot of extra money on social security", which is fine, but it doesn't satisfy the constraints.

You said you didn't want to "unilaterally extend benefits to a whole bunch of people", not that the cost couldn't increase even the tiniest amount.

But even so, smoothing out the curve some might be better overall even if the max amount drops.

Also you could extend the curve so that 'benefits' go negative at the high end. Now your budget is fine...

Your plan both massively increases the number of people on benefits and also increases costs by 20% on your 50% proposal, which in the UK means £15b-ish. Reconciling this with "even the tiniest amount" is impossible.

> Also you could extend the curve so that 'benefits' go negative at the high end

You've just invented tax, congratulations.

> massively increases the number of people on benefits

You have a very different definition of 'massively' than I do.

> You've just invented tax, congratulations.

Positive taxes can balance out negative taxes, ~tada~.

Dylan, just note that the problem as originally posed is not solvable. Your „solution“ is one that violates one of the constraints and then says „but it’s minimal“. Sure. But that was exactly the point of the comment above: by the nature of things, any change you make leads to an undesirable consequence. Either people who need the benefits don’t get them, or the „marginal tax rate“ is very high, or you extend the benefits to more people (which is costly). You’re stuck on the horns of a trilemma, and that’s the solution the UK has chosen, and any „improvement“ you suggest will be worse on at least one of the dimensions.

> Dylan, just note that the problem as originally posed is not solvable.

The original constraint was not a $0 increase. I did not violate the original constraint.

And even if you did take it to be $0, it said you can't "just afford to" increase. Proposing a tax to make up the difference meets that critera.

But even inside a hard "no more spending" constraint, it's not nearly as unsolvable as you make it out to be. It's quite possible that giving less money to people mildly below the old cliff edge, while giving more money to people mildly above it, is a net positive. That doesn't screw over people at the bottom, and it doesn't increase total cost.

Going from a hard cliff to a 90% marginal rate was obviously better, right? And going from 90% marginal rate to 85% was obviously better, right? They decided to stop at 63%. It doesn't mean that going further is a priori wrong.

And on top of all of that, smoothing out the curve to 50% very likely motivates more people in the range to work, reducing the amount of benefits they use.

I totally agree, but I just realised -- there’s another cliff edge here!

I surveyed opinions on tax brackets a while back, and it seemed like there was a big psychological barrier at the 50% rate.

Most high earners would be willing to pay a 50% marginal tax rate (albeit some very grudgingly) but almost nobody was willing to go over 50%.

What’s good enough for the rich should do for the poor as well. The benefit drop off rate (effectively a marginal tax rate) should be 50% at the very most.

“For each dollar earned, I get to keep more than I give away in tax/benefits” is a cliff edge, but I think a reasonably justifiable one.

In the UK there's already a higher-than-50% marginal tax rate between £100 and £120k because you lose your personal tax allowance.

It's over 50% at £50k if you have a plan 2 student loan

Yes! That’s silly and should be fixed (although it’s hard to drum up any sympathy for those poor folks earning only 110K or so).

Edit to clarify: if your salary is £100K and you get a £10K raise, you see almost none of it in your payslip. But if you’re on £120K and get the same raise you get to take a good chunk of it home. That’s what seems silly to me.

What does 'willing to pay' mean, exactly? Surely they're not turning down a raise out of stubbornness. And pay of that caliber is not often hourly.

This was in the context of a political discussion about what the tax bands should be, not about paying the current taxes in reality.

Some people want higher taxes and some want lower; what I’m saying is, 50% stood out as an arbitrary threshold that many people seemed possibly willing to agree on.

Some complained that rich people shouldn’t be expected to prop up the rest of society, but conceded that progressive tax bands might be okay as long as the top rate was no more than 50%. Others felt that highly progressive taxes were essential; they wanted at least 50% as the top rate.

Tax rates dont pay for services, they pay for preventing inflation. The government printing money pays for services.

Tax rates dont pay for services

What are you replying to?

You are being needlessly contrarian.

Fiscal policy comprises both borrowing and taxing; the two are fungible as far as spending is concerned.

The government can only effectively print money to the extent that they can convince bond purchasers that taxes will be collected in the future.

They might accept the raise and try to work less hours to keep the total similar. Or it works as an incentive to start finding ways to pay less taxes, out of a notion of fairness.

They're being paid hourly? How many people making six figures are paid hourly, and what kinds of job do they do?

To be clear, I easily understand how a high marginal rate is demoralizing and unfair at the low end. I'm not convinced it's a problem if tax brackets at the high end go to some number above 50%.

Consultants and professionals who serve the public charge hourly.

I loathe Universal Credit.

This 63% thing is the replacement for "working tax credits" -- it's a top-up of wages for people on low paid work. People get their wages, and then on top of that they get extra money.

In the past this would have been working tax credits.

The advantages are that claimants do not need to ask for permission before starting work. They can just do the work and then declare it. The disadvantages are that the system can't cope well with zero-hour contracts or self-employment, and this is leaving people in severe financial hardship.

The drop off corresponds to the benefit. If you reduce the amount less you make from making more money, you are reducing the benefit people are getting.

As an example, you can reword this just as accurately to say that for every dollar less the person makes, they actually only make $0.27 less because benefits kick in for $0.63 of it. You can reduce that 63%, but when phrased that way, do you want to?

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