Comment by brendanyounger a day ago
The current US federal tax system already is progressive in this way. Your first $X are taxed at 0%, the next $Y at 10%, etc. up to 37%. Your UBI in your formula is basically the standard deduction in the current system. But you still need to work or invest to make the first $X which are federal tax-free.
> money laundering
Just for the sake of precise communication: it’s tax evasion.
For instance, you can time (usually, defer) your income to make sure you are never in a higher tax bracket. That doesn’t worth with flat tax with UBI.
One big problem with stock based compensation is that it pushes income into a big windfall year. The top marginal tax rate in the US is something like 52%. So, someone that would pay 25-30% effective tax in a fictional average year ends up paying 52% on multiple years worth of income.
Also, you can’t use the standard deduction to make your taxes negative. Assuming the average effective federal tax rate is 25%, to convert the standard deduction to UBI, it’d be reduced from $22,500 to $5600, but applied to the total tax owed, leading to the IRS paying you if you paid less than $5600 in taxes pre-deduction.
I think $5600 is too low. It should be enough to live off of. The 25th percentile household income in the US is $40000. $10,000 UBI per person seems more reasonable (probably still too low) to me.
those percentages only apply if you decide not to do any of the various legal variants of money laundering