IDS 1: A Negative War on Poverty Act

[Flake]

A Negative War on Poverty Act
1. For taxpayers earning under $25,000, their income tax rate shall be -1%.
2. For taxpayers earning over $25,000, their income tax rate is the same 5.8%.
3. Welfare spending, including under the Basic Compassion Act, shall hereby be phased out over the next two years.
[/quote]

Sponsor: Maxwell

[Fmr. Pres. Duke]

What? What is this?

[Maxwell]

I've embraced the Libertarian arguement for the negative income tax and have decided to change the way welfare works in the IDS. I'm imposing a negative income tax of -1% on the poorest individuals, allowing them to get some of their hard work back so they can pay the bills. This is far more efficient than the old ways of welfare where we put it through a lot of government waste and obstacles. I put my trust in the individual ahead of the Government.

[Donerail]

The problem I see with this is that it has the potential to create a poverty trap - you stay under $25K because if you earn more you now have to pay more taxes.

[Simfan34]

...what about Nixcome?

[Donerail]

...what about Nixcome?

This is restructuring our regional welfare programs to mirror and supplement Nixcome.

[Maxwell]

yes Sjoyce, and you make a good point. I suppose we could have a scaling effect? 1% of 25,000 is $250, so suppose something like that or a little bit higher is the maximum for poor families, and it scales so it either stays the same or lowers as families become closer and closer to solvency?

[Fmr. Pres. Duke]

This will encourage people to not make a certain amount because then they'd be getting money from the federal government. I'm not sure how to fix this to make it work and not create an incentive to either hide income to work to not get a raise.

[Pingvin]

This will encourage people to not make a certain amount because then they'd be getting money from the federal government. I'm not sure how to fix this to make it work and not create an incentive to either hide income to work to not get a raise.

Have to agree here. The whole thing should be reworked.

[Fmr. Pres. Duke]

This will encourage people to not make a certain amount because then they'd be getting money from the federal government. I'm not sure how to fix this to make it work and not create an incentive to either hide income to work to not get a raise.

That argument can be applied to all means-tested welfare. Better get rid of medicaid/food stamps/public housing....

But this is a huge change. If you make $25,000 or less a year, you are paid by the government, effectively raising your income. If you make more, you have to give 5.8%. If I was smart, I'd do everything I could to make sure I didn't make over $25k on paper a year.

[Southern Senator North Carolina Yankee]

Avoiding cliffs in programs. That was Shua's forte I would point out. He did the healthcare formula with such an approach. Perhaps we could bring him in on this matter.

[Maxwell]

Avoiding cliffs in programs. That was Shua's forte I would point out. He did the healthcare formula with such an approach. Perhaps we could bring him in on this matter.

I'll message him about it.

[🐒Gods of Prosperity🔱🐲💸]

The basic structure of a negative income tax starts with the assumption that at some amount of money you pay no taxes on anything below that amount of money. So for instance if you make $25,000 you pay zero in taxes but you start paying for anything above that so that if you are making $25,100 then if there is a flat tax rate of 5.8% you pay $5.80.  For $26,000 you pay $58, etc.

Then you decide on a percentage to help people when they fall below that number.  So if that percentage is 1%, then if someone makes $24,000, that is a shortfall of $1000, so they get $10.  If they make $5,000 that is a shortfall of $20,000 so that person would get $200, etc.

[Maxwell]

That sounds like an easy solution, I will get around to writing the formula tomorrow.

[Pingvin]

That sounds like an easy solution, I will get around to writing the formula tomorrow.

Really good to hear this.

[Maxwell]

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Not sure if the phrasing is right, but I think this is the gist of what shua was saying.

[🐒Gods of Prosperity🔱🐲💸]

Yes, it looks like that would work.

Of course if you wanted to go for a more generous benefit you could do this all with one formula:  (.058)(Taxable Income - $25000)

[Maxwell]

Yes, it looks like that would work.

Of course if you wanted to go for a more generous benefit you could do this all with one formula:  (.058)(Taxable Income - $25000)

I could, but then again, the issue is if it blows too much of a whole in our budget.

[Maxwell]

Is there a way we can put both this and the Small Business Growth bill on hold until we get GM estimates so we can discuss other bills?

[Flake]

I could start up bills for other threads and then someone could bump these ones when we have something from the GM.

[Maxwell]

That's a good idea, I'll message Sirnick both bills again.

[Maxwell]

Okay we got something of a GM estimate.

Now one area I will need to change is the portion of the bill that mentions the Basic Compassion Act, because otherwise we add $27.7 Billion to the cost. Wording it different would save us the full amount of welfare spending, which is about $8.6 Billion. But here's income tax revenue before and after this legislation -

Income Tax Before - $57.15 Bil
Income Tax After - $48.65 Bil (Income Taxes from incomes above $25,000) - $8.5 Bil (Negative Income Taxes) = $40.15 bil
Cost of Negative Income Tax Program before elimination of Welfare Spending = $17 Bil
Eliminating welfare spending= $8.6 Bil
Total Cost of Negative Income Tax bill = $8.4 Bil

So we need to find a way to close the gap in this bill.

This is my intrepretation of the GM's numbers if the bill is edited properly.

So here's my first amendment to make this more cost effective.

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[Donerail]

I guess I can support this - I question what regional welfare is supposed to be covering with the expansive federal program as it is already.

[Yelnoc]

I guess I can support this - I question what regional welfare is supposed to be covering with the expansive federal program as it is already.

Does anyone know what IDS regional welfare already exists and how it overlaps with the federal system?

I think I would support this amendment simply because it would simplify our books quite a bit.

[Yelnoc]

Bumping this, since most legislators probably haven't looked at this bill in at least two weeks. Let's get a vibe check to see how we're feeling about this bill in it's current state. If there is no debate over the next 24 hours, I will bring it to a vote.