The Death of the Middle-Class Musician

> Universal basic income is impossible to justify morally.

It's pretty easy to justify morally. I mean at least as easy as any other welfare.

The net payments for UBI plus (income) taxes don't have to look to different from what many countries already do today. It's just the accounting that looks a bit different.

By morally, he might mean it creates a moral hazard. I know that when I was poor, I worked only the minimum to support myself. If I had UBI that covered those costs, I certainly wouldn't have worked, so there'd be less productivity in the economy.

Well, exactly that problem already exists qualitatively with current tax and welfare systems.

Whether UBI would make the problem quantitatively worse depends on the exact design of the UBI system you have in mind and the current system you want to compare it with.

UBI means giving money to people, which means that money has velocity because it would be promptly spent.

We did this during Covid as furlough payments, and the result was high inflation. Wages didn’t significantly increase to match, so in my country anyway people feel that the cost if living is significantly worse post-Covid.

Anywhere that implemented UBI would also have to implement rent controls, otherwise Landlords would just see it as money on the table. But you couldn’t have controls for all prices, so inflation would still result.

This is what most people miss when they criticise UBI - for most people, it will be immediately spent, taxed, and put back into the economy. As long as the velocity is there, it's not an entirely bad idea as long as inflation can be kept under control.

> as long as inflation can be kept under control.

Nice trick if you can pull it off.

So for the 1GBP you print, you recoup up to 20p in VAT, or less for foodstuffs.

And more money chasing the same goods and services means…?

If you have an inflation targeting central bank, velocity of money doesn't really matter.

If velocity speeds up and inflation goes up, the central bank will remove money from circulation to hit their target. If velocity goes down, the central bank will inject money into circulation.

The fiscal multiplier is zero.

(Or rather, any deviation of the fiscal multiplier from zero is evidence of an incompetent central bank.)

> We did this during Covid as furlough payments, and the result was high inflation.

No. The high inflation was a result of Fed policy, not fiscal tricks like furlough payments.

> Anywhere that implemented UBI would also have to implement rent controls, otherwise Landlords would just see it as money on the table. But you couldn’t have controls for all prices, so inflation would still result.

You are right that UBI can lead to higher relative prices for rent.

And that's why you would want to pair UBI with land value taxes, not rent control.

(UBI would not lead to inflation, and would not necessarily lead to higher absolute rents. The overall level of inflation is something an inflation targeting central bank, like the Fed or ECB, controls.)

Are you suggesting that UBI should be paid out of freshly printed money?

I don't think that's how people commonly understand how UBI should be financed.

> And that's why you would want to pair UBI with land value taxes, not rent control.

In the last place I rented (London), the private landlords were unlikely to own the land. Fixed term leasehold was overwhelming common, not freehold.

I can only speak for the UK. But given the fiscal headroom for the foreseeable, I don’t see where else it would come from? If they don’t have it, they either borrow or print it?

For any meaningful scheme, you would be talking about hundreds of billions.

That's were things such as wealth tax kicks in.

The money that just sits untaxed on the vaults of the extremely wealthy should be taxed to finance this.

This is trickle down economics done right. Remove money from the wealthy and redistribute it to benefit society.

I would imagine the extremely wealthy have passports, global homes, and the vaults you mention might well be in Switzerland.

The extremely wealthy will also have an army of lawyers and accountants to mitigate against this, not to mention trusts and holding companies.

It’s a nice idea, but the implementation is tricky.

I’m not arguing for them, just being realistic.

As you've figured out, you can't sustainably raise a lot of money via printing. At least not in real terms when adjusted for inflation. (Of course, in nominal terms you can raise arbitrary amounts by printing.)

Now how to finance a UBI is a good question.

A land value tax would be an interesting choice. Especially since a UBI will probably lead to higher rents.

> The money that just sits untaxed on the vaults of the extremely wealthy should be taxed to finance this.

Approximately no one has vaults of gold like Scrooge McDuck. The richest people largely hold their wealth in company shares.

So you are suggesting to raise the cost of capital for companies?

That doesn't make a difference to how land value tax works. If a landlord doesn't own the land, he leases it from someone who does.

But to make LVT simpler to understand (and economically equivalent): you can imagine the government owns all the land, and rents out plots for eg 20 years at a time to the highest bidder. To help people plan better, the auctions can be done 5 years ahead of time. So leases for 2036 - 2056 will be auctioned off in 2031.

You can stagger the auctions, so a few leases get auctioned off every week.

What they actually have is an inordinate power to lobby governments.

No army of lawyers would save them from actually effective regulation.

> Approximately no one has vaults of gold like Scrooge McDuck

Yeah, I also like to be pedantically literal when I don't have good counter arguments. I feel your pain, brother.

You can replace my "vaults of gold" analogy for propety, yachts, real estate, company shares, etc. Whatever someone holds in their own name that constitutes wealth above a certain threshold should be taxed.

> So you are suggesting to raise the cost of capital for companies?

Corporations also should contribute to society, as they also benefit from the common infrastructure.

There's this pervasive idea that "if we tax the rich they will stop investing in companies and us filthy peasants will be out of jobs" which is the bullshit of the ages. If there is demand for goods and services, there will be those that supply them.

But the company whose shares we are talking about is out there in the real world and doing stuff with its capital. It's not idle.

Voting with your feet will save you from that.

Of course, if you want to do business in country X, you are subject to the laws of that country X.

But otherwise, you can leave that country and settle down elsewhere and do your business there. No matter how 'actually effective' that regulation is. (Unless you do an 'East Germany' and don't allow people to leave.)

If we step away from the realms of imagination, then in the UK typical leaseholds are legally valid for about 100 years, with some going up to 999 years. Of course, many leaseholders - the rent seeking Landlords - may come and go within those lease cycles.

Or are you proposing State confiscation and management of the land? I can’t quite tell from your post.

I was describing a simpler system for implementing UBI. You are right that I left out how to transition to that system.

For example, you could do more or less the same thing that the UK did to abolish slavery: buy out all the existing land owners / lease holders.

I suggested 20 years as a reasonable time frame for leases. In principle, 100 years might would also work. 999 years is probably far too long.

Now, instead of auctioning off the leases, you can also have individuals officially owning the land, but instead you tax them a certain fraction of the market value of the land every year. Economically that's equivalent.

A 999 year lease is basically economically the same as owning the land. So you should more or less treat it the same.

No one has money "sitting in vaults"

They keep money in bonds (lending money to people, corps, govs that need it), stocks (raise the value of companies that are valuable thus letting them borrow more etc) or they consume which pays for all the poor peoples salaries

The immaturity of people when it comes to economics is a problem

> They keep money in bonds (lending money to people, corps, govs that need it), stocks (raise the value of companies that are valuable thus letting them borrow more etc)

That's wealth that should be taxed.

> The immaturity of people when it comes to economics is a problem

I agree. Just not in the way you imagine.

> Voting with your feet will save you from that.

When relevant countries act in tandem, it would work.

I would really like to see a billionaire vote with their feet to protect their wealth by moving ro Somalia or something like that.

A country can also limit their ability to operate from abroad when they move.

In real life, value producing is inherently tied to the society which allows value to be produced.

I am talking about the individual holding the shares.

Are you just being obtuse to deflect from the actual argument?

You're broadly correct.

Don't let the uneducated messenger distract from UBI itself though. Proposed seriously, it's about reducing asset values and high incomes to redistribute that value to everyone who isn't losing more value than the UBI. The real argument is that it would mean short-term economic costs to build a more robust system with a bigger pool of people with the safety net and risk appetite to start/join companies.

The interesting question about UBI is how to finance it. It's far from a settled question what would be the best or even just a good way to do so.

You seem to have something very specific in mind?

> That's wealth that should be taxed.

Wealth taxes are fairly controversial, and not very common around the world.

But they have been implemented in a few places, and we can look at what real world effects have been observed.

Tax incidence is a non-trivial topic. See https://en.wikipedia.org/wiki/Tax_incidence

Basically, the people a tax is nominally levied upon don't necessarily bear the economic burden, and vice versa.

A silly example: do you think it makes a difference if your employer transfers your whole gross income into your account and you pay income taxes, or whether your employer pays the income tax first, and then transfers you the net amount?

The primary factor behind high inflation was supply chain disruption.

Thats because the state basically printed money and handed it out.

Ask yourself when you have a normal working class person who roughly breaks even on their income vs. their spending where does all that money go?

They pay rent. And then what? They pay mortgage, they car insurance, they utilities.

One way or another the money ends up to the top of the pyramid, i.e. the wealthy individuals who own capital assets, properties, businesses etc.

You had high inflation because the government essentially printed money. But what if instead of printing that 1 trillion dollars (or however much it was), the state had actually taxed the that money off of the rich individuals and corporations and then handed that out.

The same money would again flow through the system back to the same rich people where it could be taxed again and handed out and put back into the circulation. This would not cause inflation by itself since the monetary value of the money would not be devalued.

It would require a government that actually gave a damn about its citizens and had balls to tax people and corporations and when the said corporations and individuals run the government its of course not going to happen.

I don't really. You're right, ofc. The details about what taxes pay for UBI and who pays them are obviously of key importance.

I don't claim to have the answers. My point is just that there are interesting benefits that are worth weighing against those costs.

Btw, land value taxes (or as a second best, property taxes) are worth looking into.

In the UK, council taxes also roughly have the right structure. Though the discount you get for unoccupied property is crazy. It's exactly the opposite of what you'd want to encourage.

No. It's money printing.