From: cbbrowne@csi.uottawa.ca (Christopher Browne)
Subject: Re: Negative Income Tax (Was: Social programs)
Organization: Dept. of Computer Science, University of Ottawa
Date: Wed, 16 Dec 92 22:20:07 GMT

In article <craigen.47.724538518@ace.acadiau.ca> craigen@ace.acadiau.ca (DOUGLAS CRAIGEN) writes:
>>In article <craigen.46.724514935@ace.acadiau.ca> craigen@ace.acadiau.ca (
>DOUGLAS CRAIGEN) writes:>>   This all sounds good to me, but I fail to see 
>why every scheme that has >>been posted that gives any details (and it is 
>the details of people's >>schemes that I am the most interested in) seem to 
>be centered on an annual >>basis.  
>>
>>I gather that you've never been involved with payroll accounting...
>>You would NOT suggest "monthly" if you had.
>>
>>If the job of reporting were done on a "monthly" basis, there would
>>essentially be twelve times as much verification work required.
>>(Well, maybe only 10 times as much.  But still a LOT more work.)
>>
>   
>   If you read the dislaimers I gave to get this discussion going, I don't 
>claim to be an economists etc, and I don't actually take any position on 
>whether a negative income tax would be a good idea, because I was never able 
>to figure out what people were talking about before.  

I didn't mean the comment above as suggesting "stupidity," just
perhaps a little bit of ignorance.  Fortunately, ignorance is
something that is easy to solve :-).

>That one comment in 
>"Social Programs" finally drove me over the edge to try directly to find out 
>what people mean by this phrase, starting with an interpretation of what I 
>thought they might mean.  The first replies said "yes that is approximately 
>what we mean", but all subsequent replies which have contained any details 
>have led me to suspect that what they mean is a lot more complicated than 
>what I suggested.  The amount of work involved for an employer in making up 
>a pay cheque in my original proposal would be something as simple as "here 
>is the total amount, we give 60% to the employee and 40% to the 
>government".  It doesn't sound that complicated to me, but then what do I 
>know?  

Well, the IDEA is simple, but when you have to go about actually
IMPLEMENTING it, the policies that have to be created to make it work
wind up being, um, somewhat less simple.  That's frankly ALWAYS going
to be true.  Whether it's talking about monthly reporting of incomes,
or of other things.

>How about if we forget about my proposal.  

I think that the "monthly" proposal probably isn't practical.  It was
certainly worth mentioning, because the reasons you stated that were
"PRO"-monthly were certainly quite valid, i.e., the fact that people
kind of ought to receive the support throughout the year, and not just
at the end.

Unfortunately, there's a number of things that can make it difficult
to pro-rate this sort of thing over a year.  People get varying sorts
of incomes, and sometimes the income comes in at "weird" times.

If the only income sources were from employers and from government,
then the process would be pretty easy.  

Salaries tend to get verified just when it's necessary to report them
to the government.  It's not such a big deal for large employers; they
tend to keep things more up to date because mistakes can cost BIG $.
Small employers tend not to have the same sort of auditing expertise
in-house, and thus are really unable to report things as often.  Thus,
a monthly reporting requirement might be reasonable for a large
business, but would be seriously costly to a small business.  It's
going to take at least half a day's worth of work to put such a report
together; in a sufficiently small business, that time may be difficult
to find.  If it were as simple as "letting the computer do it", that
would be really nice.  In practice, it seldom works that way.

>What I would really like 
>to see is details from someone who supports the idea and who presumably 
>knows what they are talking about.  The vagueness of the discussions so 
>far still hasn't gotten me anywhere.

Dave Sherman, who's something of an income tax expert, has at times
been on the net.  (He's published several books that I've seen
advertised in "serious" places like CA Magazine, the magazine that
goes to every Chartered Accountant in Canada.)

I used to be in the "tax business", as I was working towards the CA
designation a couple of years ago.  I'm maybe the most
bookkeeping-knowledgeable person around can.general these days; there
don't tend to be too many accounting types around here.  Only 3 of my
accounting classmates also majored in CS; none of those tended to do
the Usenet thing.

If you want to have seriously GOOD answers on Negative Income Taxes,
you'll probably have to look off-line, as that's where most of the
thought on it tends to be done.

Remember that there are definitely two sides to ANY sort of tax
reform:

a) The theoretical economic side where you are allowed to assume
perfect information), and

b) The implementational side.  Here you have to try to ask the
question: "How am I supposed to find out the information that I
assumed when I made up the theory?"

The theoretical side allows you to look at lots of neat numbers, and
is probably the more interesting part.  The implementation side
requires people that have devious minds :-), in order to try to see
how people might try to take advantage of the theory.  I've spent
enough time trying to find ways to keep money out of Revenue Canada's
hands that I've learned some of the devious side :-).

Theoretically speaking, a Negative Income Tax looks like it would be
pretty neat.  By tuning the parameters, you can do almost anything you
like with it.  And it seems to be somewhat more fair than the
patchwork of systems that are in place.  Unfortunately, since it does
SO MUCH redistribution, it's not terribly useful to consider the
theory separate from the implementation.

-- 
Christopher Browne                |     PGP 2.0 key available
cbbrowne@csi.uottawa.ca           |===================================
University of Ottawa              |  The Personal Computer:  Colt 45
Master of System Science Program  |  of the Information Frontier
Newsgroups: soc.culture.canada