Negative income tax

Rusakov · 2012-12-25 12:55:14

I found out about something called the negative income tax.

https://en.wikipedia.org/wiki/Negative_income_tax

In economics, a negative income tax (abbreviated NIT) is a progressive income tax system where people earning below a certain amount receive supplemental pay from the government instead of paying taxes to the government.

Maybe a Martian government could be the first to implement it...

Last edited by Rusakov (2012-12-25 12:55:53)

JoshNH4H · 2012-12-25 13:15:05

In my opinion, a negative income tax is good social policy and an expensive fiscal policy. In general, rather than giving money out to everyone I think it should be targeted to where it will do the most good for the least cost. But in general very progressive taxation will probably be the norm on Mars given the fact that life on Mars is inherently based more on communal participation than life on Earth.

Rusakov · 2012-12-25 14:39:31

It's not being given out to everybody, just the people who make less than a certain amount of money.

Terraformer · 2012-12-25 15:12:17

And if you earn no money?

louis · 2012-12-25 19:57:21

Giving money out to EVERYONE is actually cheaper than targetting. That's why negative income tax is a good policy, because you know that you are targetting (more or less) the right people since low income tends to be associated with poverty but you aren't having to do expensive means tests.

If you combine that policy with property and wealth taxes you can get a good fit with minimal bureaucracy.

Mars's early economy will I think rely more on sales taxes and licence fees to raise revenue.

JoshNH4H · 2012-12-26 23:45:58

Firstly, Terraformer: For a negative income tax with a marginal tax rate of 25% above say $10,000/person*year, the formula to calculate tax levy would be as follows:

Let I=Income, dollars per person per year. Assume that I>
Let L=Tax Levy, where negative values indicate that money is being given to the person

L=.25*(I-$10,000)

A tax bracket system, with different rates for different income levels is also possible; In effect, the equation described above is a tax rate of -25% on the first $10,000 of income followed by 25% on all income above $10,000.

Plugging in zero, someone with no income would pay -$2,500 in taxes, in other words they would rec- though the precise value would be different for different tax rates and "cut points" so to speak.

Mars is probably going to be a command economy for a while so fees and sales taxes won't really be relevant. For a while after, rather than taxing people for things necessary services will just be provided by the municipality. Basically, instead of taxation, some portion of the economy will be owned by the government and used as a revenue source. Farming and food production, for example, seems to be something that is relatively amenable to government takeover; seeing as everyone needs food and air (which is an inevitable product of farming, always in quantities that are more or less equivalent to the amount needed to breathe).

Later on, it's a tossup. I'd like to see a more communal life, where democracy (not a republic like Liberal "Democracies" on Earth) is the norm. That means that each person can sign onto an explicit social contract or reject it, as they will. This would also mean that people are expected to do communal work more or less voluntarily. The need for taxes would be much lower because much of the functions currently done by governments would be handled as ~community service (or a tax paid in man-hours). Income inequality would be much lower in an economy in that kind of state of flux, especially in a democracy where people are really equal and opportunity is available for everyone.

By the way, a simple stipend paid to all low-income peoples isn't the answer to society's problems; That is a "give a man a fish" solution, so to speak; For governmental intervention in society to do more than create dependents, the thrust of the effort should go into community development. This means investments in infrastructure, property, institutions, and people that would be hard to suck a profit from by private enterprise. So while basic housing needs, food, and air are going to be provided to everyone beyond that government resources will have to be targeted towards investments that benefit society.

bobunf · 2012-12-27 13:08:02

What happens to people who reject the social contract? What about people who are not competent to make such a decision? And who decides?

Tom Kalbfus · 2013-11-01 21:11:26

For a small community, I'd say the trip back to Earth should be already paid for by each member of the colony including those born on Mars. Since the population of an early colony would be small the burden of nations accepting refugees and deportees from Mars would be virtually non-existent, an agreement by all nations participating in the colony would be to accept all refugees, deportees, and criminals from the colonies they are helping to finance, and the colony would have few resources to devote to holding areas or prisons for members of their society they refuse to contribute. Children would be educated on Mars in their K through 12 grades, college courses may be taken over the internet as is the case for many online courses today. Some form of e-mail, voice or video mail would probably be the most popular form of communication between Mars and Earth. Probably a good portion of the work would involve controlling various drones on the surface of Mars. The drones could be piloted more efficiently from Mars than from Earth, and objectives can be accomplished faster through real time control from Mars than delayed control from Earth.

Later on as technology advances, people will have to learn to live with self-willed intelligent machines, and in this case the negative income tax will come in handy indeed. Capital will become labor and the owners of that capital will earn the majority of that money, they will be taxed on their income and that income will be redistributed to those flesh and blood humans that can't earn an income through a job, this is known as the Technological Singularity, it will occur system wide, this singularity is what will allow us to terraform the planets, as the labor supply will not then be limited only to the population of flesh and blood humans, but will also consist of self-willed intelligent machines and the software that runs them. The machines can build and work in factories that build more of these self-willed machines. I take back my previous statement, I don't think Mars will end up as a city planet, the labor force that terraforms it will consist of software and robots that will fly through space and crawl on the surface of Mars and other planets, when their work is done Mars will have a breathable atmosphere and an ocean in the northern hemisphere plus a lot of lakes and rivers, the AIs that did this work will then retire their robot bodies which will be recycled and live in their virtual worlds that they will also build and maintain. The flesh and blood humans will need some work to keep them healthy and busy, but they won't depend on that work to earn an income, income will come from the negative income tax plus the profits from the capital they own.

Last edited by Tom Kalbfus (2013-11-01 21:13:16)

JoshNH4H · 2013-11-07 10:33:11

bobunf wrote:

What happens to people who reject the social contract? What about people who are not competen to make such a decision? And who decides?

Well, as a logistical matter I would day that if the portion of people who reject the social contact is above 5%, we can consider ourselves to have failed.

Should they choose to reject the social contract they would be free to find a group of people and set out on their own. I'd suggest that mining outposts would be a good place to do so. As human beings they would still be held to minimal standards of conduct, even after they repaid whatever seed money the colony lent them to make their outpost. Things like "Don't sabotage other colonies", "Don't kill people" etc.

If someone is not competent to make that decision then they will remain within the colony. However, I would claim that if someone is capable enough to join or start a separatist group by themself they are competent to reject the social contact for themself.

Terraformer · 2013-11-07 14:08:29

You mean, hold them to a basic, minimalist law? Like, say, a nightwatchman state...?

That's actually the model in my (hopefully soon defictionalised) Terran Commonwealth (okay, Terran is a bit of a misnomer, given that it's the one major planet that's not actually under their nominal authority). In space, even the most diehard propertarian should be happy - okay, *especially* the most diehard propertarian, since all the land that is inhabited will be the product of someones labour, so no-one can begrudge them that (until the terraforming starts, of course, and the discussions about people owning planets begins). The socialist and communist anarchists won't be, but we can ignore them.

JoshNH4H · 2013-11-08 16:30:44

No, somewhat more than the international law framework. E.g. the new colony is 100% independent but if they try to get away with killing people or not teaching the women to read it won't last long.

I would expect space colonies to be quite communal, by the way. In the early stages people will find that a capitalist system simply doesn't make sense-- the groups of people are too small-- and with no progenitor class of propertied interests I wouldn't expect capitalism to really take root. From each according to ability and to each according to need will likely be the principle that guides the development of colonies on Mars for quite a while.

Tom Kalbfus · 2013-11-09 23:03:12

You ever read up on the Plymouth colony in Massachusetts? They started out with a communal arrangement too, and they found out that some people will slack off and not contribute their fair share of work unless they could own the product of their labor as incentive to perform the work. For instance pilgrims that would not contribute to building shelter would find they have no shelter to live under, those that didn't grow food would find they had nothing to eat. Capitalism developed pretty quickly in the Plymouth colony.

http://en.wikipedia.org/wiki/Plymouth_Colony

JoshNH4H · 2013-11-09 23:29:05

I don't think your interpretation would be familiar to the actual settlers of plymouth, whose organization approximated a command economy for as long as was feasible given their low technology level and poor channels of communication.

Also compare to Jamestown, which started off without any kind of central direction and soon determined that that kind of attempt at capitalism would lead to everyone dying.

Tom Kalbfus · 2013-11-10 07:31:51

I believe they did some social experiments, one where everyone pooled their resources and labor for the good of the colony, some worked harder than others, while others took it easy, they found that people worked harder when they directly benefited, that is if you built your house you got to live in it. The larger the group the greater the temptation to slack off and let other people take up the work load, fewer people are then working and less gets done. At Plymouth at first they had collect plots some people were doing the planting and harvesting others were not, the leaders of the colony discovered if people had their own farms that worked harder to advance them than if they worked on a communal plot and relied on social pressure to get everyone working. If someone works really hard for the collective good, it is very demoralizing for that person to watch others slack off and take it easy, especially when your hard work goes to feed those people who could contribute but aren't. There needs to be a method to connect one's results to the amount of effort put into it.

Contrast McMurdo base in Antarctica with the Plymouth colony, which would you say is the more successful colony? At McMurdo, everyone is a government employee, they are paid to work their, and as soon as they're done, they go home, The pilgrims actually lived in their colony raised children started farms, the McMurdo Base personelle simply did time there and collected their paychecks. I think one good way to prepare for a Mars base would be to turn McMurdo into an actual Antarctic colony rather than just a base.

JoshNH4H · 2013-11-10 15:24:12

Again, I don't think your analysis would be in any way familiar to the settlers of Plymouth. But then how about I make this comparison: In the Plymouth colony, the Native Americans shared the food they grew with the helpless and hapless Europeans. If they hadn't the Europeans would have starved and died because they had no idea what they were doing and nothing to pay for it with other than smallpox.

Comparing McMurdo to Plymouth is ridiculous.

McMurdo is a scientific base.

Plymouth was a North American colony formed by Pilgrims, a fundamentalist sect of Puritanism, who sought to bring about the apocalypse and the Kingdom of God through the formation of an ideal community, a "City on a Hill" which was morally perfect and would cause God and Jesus to take the Pilgrims into Their Kingdoms in Heaven while the impure rest of Society were dragged to Hell because of their weak moral character.

McMurdo has done a lot of great science.

Plymouth was a backwater compared to the Puritan settlements in the Massachusetts Bay by the 1650s. The Apocalypse has not happened, and the US state of Massachusetts currently contains zero person who identify with the religious concepts of the Pilgrims; In fact it is one of the least christian and most secular states in the US. Catholicism, the antithesis to the Pilgrim's beliefs, is the largest single religious sect in the USA.

You're making ridiculous comparisons.

Tom Kalbfus · 2013-11-10 17:12:20

You know there might be a good story there. What if the colony of your short story were to meet a very different colony on Mars, one set up by a group or religious fundamentalists. One good candidate religion would be for instance the Church of Scientology What if a few hundreds of kilometers away from the colony you described in your short story their was another one of similar size set up by a religious group, they are technically literate, and they have a few million adherents who put their money on the collection plate to set up their own Mars colony, and lets say some disaster happened and the call for assistance went out, you could have a very interesting culture clash here.

Terraformer · 2013-11-10 17:26:41

I'm presuming that's directed at me, because looking back, that's the nearest relevant post. A good while back, mind, and it was a throwaway post with only a slight bearing on the actual conversation...

I could have plenty of culture clashes easily. Mars is not going to be settled by a monoculture. But I doubt the Scientologists would go there. SpaceOrg would be more likely to set up shop on an asteroid.

JoshNH4H · 2013-11-10 18:13:25

Or even fundamentalist Christianity again.

I could also see the Tea Party trying to set up shop somewhere other than Earth, especially if their ideology is rejected here.

Tom Kalbfus · 2013-11-10 21:06:08

Terraformer wrote:

I'm presuming that's directed at me, because looking back, that's the nearest relevant post. A good while back, mind, and it was a throwaway post with only a slight bearing on the actual conversation...
I could have plenty of culture clashes easily. Mars is not going to be settled by a monoculture. But I doubt the Scientologists would go there. SpaceOrg would be more likely to set up shop on an asteroid.

Don't the Scientologists believe they are descended from space aliens? I would think that would be a very logical reason for them to build a base on Mars, perhaps they want to investigate the "Martian Pyramids" or the "Face on Mars" to see if any of those have religious artifacts that are significant to their religion, and if they don't find anything, they could make something up and claim to their followers that they found something and appeal to their sense of faith to believe in it, just like the Shroud of Turin, don't underestimate religion, just because their beliefs might seem silly to you, doesn't mean they couldn't build a base on Mars for that reason. Humans are very good at compartmentalizing their beliefs, they don't let their beliefs get in the way of the practical knowledge they'd have to develop to settle on Mars, they'll learn what they need to learn, just as the Muslims had to learn astronomy to find out which way they had to face in order to pray toward Mecca.

Last edited by Tom Kalbfus (2013-11-10 21:11:03)

Tom Kalbfus · 2013-11-10 21:10:18

JoshNH4H wrote:

Or even fundamentalist Christianity again.
I could also see the Tea Party trying to set up shop somewhere other than Earth, especially if their ideology is rejected here.

The Tea Party made a country in North America called the United States of America, I don't see why they couldn't make a nation on Mars as well. The people who settled North America were often trying to get away from something they left behind in Europe, such as an oppressive government for instance.

As for Fundamentalist Christians, you know that Werner Von Braun was one? It didn't stop him from building Moon rockets of course, Von Braun was a rocket engineer, not a scientist, so he could keep his fundamentalist beliefs and build rockets at the same time

JoshNH4H · 2013-11-10 21:22:26

The Tea Party is a political movement that started around the inauguration of President Obama in 2008. They certainly did not build the country, which had already been existence for more than 2 centuries.

Werner Von Braun was also a Nazi. Just saying... Not someone to idealize.

If you'd like to take another look at my post, you'd notice that I was mentioning those people as groups that might try to settle the planet Mars.

Terraformer · 2013-11-11 04:45:27

When the price gets low enough, I'm sure lots of cults will try to move offworld. Keyword there is, try. If all traffic is being routed through L1, then they're going to have to make sure no-one there gets suspicious and decides that selling them a ship and fuel would be a bad idea. If they try to settle Mars, they'll have to avoid the negative attentions of anyone else. If they pluck for an unsettled asteroid, they're going to have to have a lot of spare parts, because help will be a few months travel away - if they get lucky with the timing (obviously, if fusion is developed, that becomes a few weeks. I suppose a monkey might fly out of my butt...).

If they try anything funny on anyone else, though, then they'll be terminated in short order. No-one's going to tolerate a colony that goes around attacking others.

RobertDyck · 2013-11-11 09:47:46

Canada actually has something like this. Has for years, on a small scale. A few income tax deductions are called "refundable". In Canada, the income tax form starts by calculating "taxable income". If you are self-employed or run a business, there are the usual expenses. Include a statement of income and expenses. "Gross income" means all revenue, everything you get from customers. "Net income" means after all business expenses. For example, if you buy a widget for $100, spend $10 advertising, then sell it for $150. Your gross income is $150 but net income is $40. Your net income as added to "taxable income". Then subtract your deductions. Everyone has a basic personal exemption. There's a deduction for dependant children. You are allowed to deduct a portion of tuition if attending college or university (there are a host of conditions and limits). Politicians keep changing how deductions work, they change almost every year. After subtracting all that, the result is "taxable income". Then calculate income tax. Federal tax is a certain percentage of for taxable income up to a certain income. A higher percentage for the remainder, up to another level. An even higher percentage for what's left, up to another cut-off. There are 4 tax brackets in all. Provincial tax is a little different; usually based on the same "taxable income" from the federal income tax form. But notice the "basic personal exemption". That's for everyone, and that means anyone who earns less than that will never pay income tax.

There are tax credits. If you do certain things the government wants, then they will add a tax credit. That is, the credit is deducted from income tax payable.

What makes this similar to "negative income tax" are tax credits. Some are "non-refundable". Which means if calculated income tax is less than zero, then make it zero. However, other credits are "refundable". Which means if calculated income tax is negative, then the Canada Revenue Agency pays you. The government keeps changing these, but there are some. That means people with extremely low income can get an "income tax refund" even though they never paid any income tax. For a single adult, usually they have to earn less than $10,000; but deductions work so a couple with children can earn more.

Last edited by RobertDyck (2013-11-11 10:04:27)

Tom Kalbfus · 2013-11-12 13:38:07

JoshNH4H wrote:

The Tea Party is a political movement that started around the inauguration of President Obama in 2008. They certainly did not build the country, which had already been existence for more than 2 centuries.
Werner Von Braun was also a Nazi. Just saying... Not someone to idealize.
If you'd like to take another look at my post, you'd notice that I was mentioning those people as groups that might try to settle the planet Mars.

The idea existed before 2008, it originates in the original Boston Tea Party, the basic idea is that government serves us, and we do not serve government!

Right now our government has gotten out of control, it has legislated against the people and enacted legislation that we did not want, the Media has become less a watchdog and more of a servant to this government. So when the media and the government are on the same side, the government can get away with lots of stuff that it otherwise couldn't. Take the Affordible Healthcare Act for instance, if NASA launched a rocket the way the HHS launched the ACA website, we'd have rockets blowing up on the launch pad! If NASA exercised the same due dilligence that the Department of Health and Human services did in launching the ACA website, we'd never launch anything into space, because NASA tests its vehicles before it launches them, the HHS does not, and so we have a website that doesn't work after spending $680 million on it, now imagine what kind of space mission we could launch for the cost of this website which doesn't work? NASA doesn't launch rockets before they are ready, they don't say thing like, "We launch this rocket on October 1st whether its ready or not!", and when the rocket blows up on the launch pad the President doesn't act "shocked and surprised!" So we Tea Party members have a lot to grumble about, especially when government is not doing what its supposed to do and costing too much! I'm all for a vigorous space program and for colonizing Mars and the Solar System, but I'm not for wasting money, and a website shouldn't cost $680 million dollars no matter what it does and especially if it doesn't work!

Last edited by Tom Kalbfus (2013-11-12 13:39:40)

RobertDyck · 2013-11-12 15:50:24

I may be Canadian, but we pay attention to the US. I am very interested in politics. I noticed the number of candidates listed for US presidential elections was 17 in year 2000. It's been about that ever since. One of the candidates in year 2000 was the nominated candidate for a political party called the Tea Party. So they started as a political party, failed, then decided to join the Republicans and take over their nomination process. They're basically taking over the Republican party.

I also noticed candidates for the Reform party, Green party, and others. For some reason the media keeps ignoring all parties and candidates other than the Republican and Democratic. Voters aren't getting information, often don't even know the others exist. That's a problem.

Much of the agenda for the Tea Party makes a lot of sense: power by the people, accountability, etc. Unfortunately they're extreme right-wing. Political parties tend to be farther right in the US than Canada, but even Americans see the Tea Party as so far to the extreme right that they have to be described with expletives.

Tom Kalbfus wrote:

Right now our government has gotten out of control, it has legislated against the people and enacted legislation that we did not want, the Media has become less a watchdog and more of a servant to this government.

Yes Tom, that is true. However, the Affordable Healthcare Act is something the voters want. The last presidential election was campaigned on this. Polls show Americans do want it. However, the extreme right just doesn't understand it.

I was invited to a group on LinkedIn. The purpose of the group is impressive; I was honoured to be invited. However, during the government shutdown, one members said the members of that group were smart people, so proposed they brain-storm to find a solution. One member likened the Act to Marxism. I tried to explain that Democrats had extreme expectations for president Obama; many of which were unreasonable and he never stated he intended to do that. But president Obama has failed on almost every issue important to Democrats, both ones he never said he would do, and ones he did. Healthcare is his only success. So there's no way Democrats can back down. Any solution to the shutdown cannot involve de-funding Healthcare. Then I got attacked. The founder of that group pointed out 85% of that group are Republicans, and I noticed the founder is a Texas Republican. Ooooohhhh! What did I get into? So I shut up, and they changed the subject.

I've never understood why America doesn't have a healthcare system. I've read media reports of an individual, a working middle class man with a house and family, who was diagnosed with cancer. He was worried healthcare expenses would consume all his savings, require he sell his house, lose everything. His wife and children would be left with nothing. So rather than see treatment, it committed suicide. Closed himself in his garage and ran the car, poisoned himself with carbon monoxide. There's more than one report of this. The current system in the US means only the rich can live, everyone else dies.

In 1997 I worked in a suburb of Richmond, Virginia. I just finished a work contract in Calgary, Alberta. My employer in Calgary insisted all programmers incorporate as one-person corporations, that way they didn't have to pay the employer's portion of Employment Insurance and Canada Pension Plan (Canada's equivalent to Social Security), or the employer's portion of health insurance premiums. All contractors for that company had to pay both the employer and employee portions. Alberta rules require the employer pay 2/3, the employee pays 1/3, but I had to pay both. This means I paid triple what a typical employee paid in Alberta. While in Virginia, I called Alberta Health to ask about coverage. They said they would continue to cover me for up to one year, provided I continue to pay premiums. And if I got sick, they would pay the hospital at the usual Alberta rate. If an American hospital charged more, I would have to pay the difference. Ok, I was young and healthy. But I paid quarterly (once every three months). When you convert what I paid from Canadian dollars to American, using the exchange rate at the time, what I paid quarterly is equal to what my American colleagues paid monthly. So despite the fact I paid triple what a typical Alberta worker paid, my American colleagues paid triple what I paid. That means Americans paid nine times what someone in Alberta paid.

And Republicans still claim the American system didn't need fixing! Obama Care isn't perfect, but it's a step in the correct direction.

Last edited by RobertDyck (2013-11-12 17:43:04)

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#1 2012-12-25 12:55:14

Negative income tax

#2 2012-12-25 13:15:05

Re: Negative income tax

#3 2012-12-25 14:39:31

Re: Negative income tax

#4 2012-12-25 15:12:17

Re: Negative income tax

#5 2012-12-25 19:57:21

Re: Negative income tax

#6 2012-12-26 23:45:58

Re: Negative income tax

#7 2012-12-27 13:08:02

Re: Negative income tax

#8 2013-11-01 21:11:26

Re: Negative income tax

#9 2013-11-07 10:33:11

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#10 2013-11-07 14:08:29

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#11 2013-11-08 16:30:44

Re: Negative income tax

#12 2013-11-09 23:03:12

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#13 2013-11-09 23:29:05

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#14 2013-11-10 07:31:51

Re: Negative income tax

#15 2013-11-10 15:24:12

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#16 2013-11-10 17:12:20

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#17 2013-11-10 17:26:41

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#18 2013-11-10 18:13:25

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#19 2013-11-10 21:06:08

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#20 2013-11-10 21:10:18

Re: Negative income tax

#21 2013-11-10 21:22:26

Re: Negative income tax

#22 2013-11-11 04:45:27

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#23 2013-11-11 09:47:46

Re: Negative income tax

#24 2013-11-12 13:38:07

Re: Negative income tax

#25 2013-11-12 15:50:24

Re: Negative income tax

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