> The correct comparison would be of the marginal cost of eligibility testing (both in terms of false positives and false negatives) vs the marginal cost of fraud.

There is a much better way to do this, because the way we do it is entirely asinine.

On the one hand we say that people who make more money should pay higher marginal tax rates, and set marginal rates on lower income people to low or zero rates. On the other hand we demand means testing at lower income rates, which is equivalent to a tax on marginal income.

We should just let these things cancel out, using a flat tax that funds unconditional cash benefits (i.e. UBI) and delete an epic amount of unnecessarily complexity.

A flat tax disproportionately favors the rich and hurts the poor; a progressive tax is much, much more fair. A poor person making $2k a month can make more use of $200 to improve their lot vs what the person making $2M can do with $200k to improve theirs

You've missed the part where we've already removed -- no, inverted -- the progressive rate structure via benefits phase outs.

>On the one hand we say that people who make more money should pay higher marginal tax rates, and set marginal rates on lower income people to low or zero rates. On the other hand we demand means testing at lower income rates, which is equivalent to a tax on marginal income.

Isn't this already the case? It's true that you need to means testing to get access to additional benefits, but the tax rate itself is already progressive even if you don't any means testing.

Means testing does the opposite of progressive marginal tax rates. It cancels them out by increasing the marginal tax rate on people who make less money, by the amount of the benefit phase out. There is no point in incurring the complexity of doing both at the same time just to have them delete each other.

Another way of saying this is that a flat marginal tax rate combined with a fixed-amount universal tax credit (UBI) is a progressive tax system. But it's a much simpler progressive tax system which is harder to game and doesn't result in unintended nonsense like phase out cliffs or higher marginal rates on lower income people than higher income people.

I love the idea of a UBI, but there is a real risk of the UBI being impacted like the minimum wage. When initially passed it's set to a barely reasonable level, and then not adjusted for decades.

Not saying it can't be solved, tie it to inflation or CPI, but I doubt that could pass.

Index it to inflation and someone that wants to attack the program just needs to make the Bureau of Labor unable to issue accurate inflation metrics.

I think UBI would need some sort of scaling factor but you can't just hand wave it away to some other corruptible government group.

This has nothing to do with a UBI. What happens if the government doesn't raise the benefits amount for a food stamp program? In both cases you can either index the amount to inflation or you have the same concern, so it doesn't matter which one you use and isn't a reason not to use a UBI.

If anything it's a reason to use it, because raising the amount that everybody universally gets would be easier to pass when there are more beneficiaries. Nobody cares about the minimum wage because hardly anybody actually makes minimum wage, whereas around half (and plausibly a slight majority) of the population would be a net beneficiary with a UBI.

I would argue progressive taxes are less complex than your proposed flat tax because you can load all the expenses on the high brackets who won't miss a meal if you set the value too high instead of trying to pick a single value that works for everyone.

To begin with, that isn't what "complex" means. Having to track every income source to every citizen in order to impose differential marginal rates is always going to be more complex than not doing that. We nominally do it so people who make more money pay higher effective tax rates -- but a flat tax with a UBI does the same thing. If everybody paid a 30% marginal rate and everybody got a $12,000 UBI then the effective tax rate on someone with $30,000 in income would be -10%, at $60,000 it would be 10% and at $200,000 it would be 24%. That's a progressive tax system.

Meanwhile you don't really want low marginal rates when you're providing benefits, because then the benefits phase out too slowly. Suppose you were providing $12,000 in benefits and the phase out rate was only 10%. Then someone making $100,000/year would still be a net recipient of benefits, which would bankrupt the government. In practice the phase out rates we currently impose on the poor are higher than the marginal rates in the highest formal tax brackets, which is probably bad, but making them uniformly the same is certainly not going to result in something less progressive than we have now.

>Having to track every income source to every citizen in order to impose differential marginal rates is always going to be more complex than not doing that.

It's the same exact load as tracking everyone's income source to impose a flat tax. Taxing income is the same "tracking load" whether the tax system is progressive, flat, or regressive.

>That's a progressive tax system.

No it's a flat system with a $12k UBI. The effective tax rate of a millionaire and a billionaire is the same in your system because it's flat.

>but making them uniformly the same is certainly not going to result in something less progressive than we have now.

A million of income would pay 29.64%, a billion of income 29.99%. That's literally less progressive than those incomes would pay today.

> It's the same exact load as tracking everyone's income source to impose a flat tax. Taxing income is the same "tracking load" whether the tax system is progressive, flat, or regressive.

It is not. If you go and work for a corporation and they pay you a salary without a flat tax, they don't know what your tax rate will be. It depends on whether you do any work for someone else, or sell any property with a taxable gain, or have any tax deductions, all of which change your taxable income and therefore your tax rate, so now you have to keep track of all of them.

With a flat tax the rate is always the same, so your employer withholds the tax from your paycheck, the seller of some deductible product simply doesn't pay tax on it to begin with, and there is no individualized calculation to do because the rate for each thing is always the same and known ahead of time.

> No it's a flat system with a $12k UBI. The effective tax rate of a millionaire and a billionaire is the same in your system because it's flat.

The effective tax rate of a millionaire and a billionaire are as much the same in the existing system. Someone who makes $5 million currently pays ~36% compared to someone who makes $5 billion who pays ~37% (because the highest bracket is 37%).

> A million of income would pay 29.64%, a billion of income 29.99%. That's literally less progressive than those incomes would pay today.

That has nothing to do with the mechanism, it's just because the example rate was 30% instead of 37%. You can make it arbitrarily more or less progressive by changing the flat rate and the amount of the UBI.

But also notice that you wouldn't need tax rates to be as high, because in a simpler system less of the money would be wasted on administrative overhead or arbitrary constraints on what the poor can do with the money which causes it not to go as far for them. And they would spend less time doing benefits paperwork which they could instead spend doing work that earns money, or use the time for DIY instead of paying someone else to do things they didn't have time to do. Allowing everyone -- including them -- to pay lower tax rates from the increase in efficiency.