From: cbbrowne@csi.uottawa.ca (Christopher Browne)
Subject: Re: Negative Income Tax (Was: Social programs)
Organization: Dept. of Computer Science, University of Ottawa
Date: Sat, 2 Jan 93 20:35:19 GMT

In article <1993Jan2.194938.11001@athena.mit.edu> cmk@athena.mit.edu (Charles M Kozierok) writes:
>In article <1993Jan2.034012.25456@csi.uottawa.ca> cbbrowne@csi.uottawa.ca (Christopher Browne) writes:
>>In article <1993Jan2.013912.12749@ee.ubc.ca> jmorriso@ee.ubc.ca (John Paul Morrison) writes:
>>>First, some negatives of negative income tax (does that make it positive ;-)
>>>
>>>1. Doesn't change the motivation (or lack of) for working vs.
>>>starving
>>
>>I disagree on two counts: 
>>(a) the issue is not "working vs. starving," but rather "working vs.
>>living on the dole."
>
>fine, then it doesn't change the motivation for working vs. living on
>the dole.

I disagree.  Because of (b) below, the level of motivation WOULD
change.  Right now, there is an ABSOLUTE disincentive to work because
people would in fact get LESS money if they worked.  NIT would change
this.

>>(b) Right now, there is an absolute DIS-incentive to work if your
>>income is below about $20K.  NIT would at the very least smooth the
>>"discontinuity" here.
>again, what about those who are currently working for less than $15K, who
>if they were smart would immediately quit their jobs under NIT?

The case about which you speculate is one which is not made WORSE
under NIT; it should actually get BETTER under NIT.

Right now, it would be advantageous for those <$15K earners to quit
and go on welfare.  RIGHT NOW.  They'd benefit economically from
quitting their job.  NIT would make it worthwhile for them to work.

NIT would remove the absolute advantage to quitting the game.  I could
present some cost functions that would show how it would work; that'll
probably eventually happen.

>>>2. Could fail as splendidly as any other government program
>>
>>Always a risk.
>
>overwhelmingly so. so why do it? because we want to defy the odds yet
>again and hope this time will be different? *why should it be different*?

Unfortunately, there hasn't been any clear THIRD alternative
presented.  So far, the discussion has related to comparisons of TWO
systems:

a) NIT, and
b) Status quo

It's not likely that NIT could really foul things up THAT much worse
than things are fouled up now.  All that you've said is that NIT
doesn't solve all of the problems.  You haven't clearly shown how "The
Status Quo" is better.  Or how anything else is better.

The fact is, ANY choice is risky.  ANY choice might not work, for any
number of reasons.  That's not sufficient reason to reject ALL
attempts at improvement.

>>>Some positives:
>>>1. Could simplify things, by sacking a lot of civil servants
>>>   (eliminate the social ministries, and let Revenue Canada collect
>>>   taxes and print cheques...seems simpler(?))
>
>>The improvement would be in the removal of "social ministries."
>
>not likely to happen. people just scream "i want" and up they pop.

There seems to be a level of dissatisfaction in the populace that
might actually let people stop and think.

>>>2. could let private sector, free enterprise expand:
>>>   Ie, if Governments withdraws from running social services, and instead
>>>   merely hands out money, letting recipients spend it, and letting
>>>   the private sector compete to provide cheaper, better services.
>>
>>Good thought.
>
>as i pointed out in another post, the giving of money via the current
>system or the new one has nothing to do with privatization of services,
>which i am all for. so why wasn't it done with the current system?

When spending goes specifically through government agencies, as is the
case for welfare, the law of the land makes it somewhat difficult to
privatize services.

Services that lie pretty much at the commodity level are easy to
contract out.  The provision of "social services" is not an obvious
"commodity."

>>>And why do we have so many different levels of subsidies, payments,
>>>handouts etc.? At least if we are going to stay with handouts, just
>>>give individuals one big lump sum. Surely the administrative costs
>>>would go down? 
>>
>>Even if admin. costs don't go down, it at least becomes more clear
>>that it IS a handout.  People can't ignore it anymore then.
>>
>>I have a feeling that the TOTAL PAYOUT would go up
>
>then NIT is unacceptable. because we need to cut the total payout.
>it is bankrupting us.

If the efficiency goes up, then total COSTS may go down despite the
PAYOUT going up.

As it stands, for every dollar that actually goes out, three are spent
on administration (social case workers, offices, and the likes).  It's
a whopping big cost.

We could double the payout, and yet cut the COST to the taxpayer in
half.

I.e.:
Case #1:  1992 - Under the current system

Welfare Recipient received $10000.
Administration cost $30000.

Total Cost to Taxpayers:  $40000

Case #2:  199X - Under NIT

Welfare Recipient received $20000.
Administration cost $1000.

Total Cost to Taxpayers:  $21000

Note that the payout doubled (let's ignore inflation/COLA here), but
the cost to you, the taxpayer, went down by half.

In theory, payouts could quadruple without increasing the cost to
taxpayers.  That ratio of 3:1 admin. costs leaves a LOT of room to
increase payouts, or to increase the number of people that get such
payouts.

Without real numbers from some place like Stats Can, it's hard to
determine the exact effects of an NIT scheme; but it wouldn't be hard
to determine the impact of varying tax rates/minimum income levels.  I
suggest that you try playing with a few numbers.  It might become more
clear just how NIT would work.

-- 
Christopher Browne                |     PGP 2.0 key available
cbbrowne@csi.uottawa.ca           |======================================
University of Ottawa              | Genius may have its limitations, but
Master of System Science Program  | stupidity is not thus handicapped.