What does tax-back rate mean exactly?

September 9, 2020 5:06 PM

I was reading an academic article on the pros and cons of universal basic income, and the term tax-back rate came up, but I cannot seem to find a literal definition of the term.

Here is the term I found in verbatim from the basic income paper: "Restricting the programme to those between 18 and 64 reduces the costs of the programme significantly, as does increasing the tax-back rate (to 50 percent from 35 percent."

posted by RearWindow to Education (4 answers total)

It would help if you can link to the article or at least give a full citation.

There are various notions of how to tax and how to account for money that is granted to people or institutions, but without context it may be a crap shoot.
posted by SaltySalticid at 5:22 PM on September 9, 2020

I wasn't able to find any definitive answer via googling. I did find this result, which is apparently an old document about Canadian "Universal Income Security Program "
https://policyoptions.irpp.org/magazines/january-february-1986/a-guaranteed-income/

It references tax-back a few times. As best as I can surmise without reading the entire document, it seems to refer to the amount of money that's given out through universal basic income, but then regained by the government via income (or other) taxes.
posted by lalunamel at 5:37 PM on September 9, 2020 [1 favorite]

Means-tested programs provide benefits to people with low income; the benefit generally declines with income. This is more typically called the phase-out rate, at least in the US. It is also equivalent to a tax, so it's sometime also referred to as an implicit tax, or apparently here as a tax-back. This comes up often in discussions of the Earned Income Tax Credit, a benefit that first increases with wages and then phases out as wages increase further. So in this context it sounds like the benefit would decline by either 35 or 50 percent of each additional dollar (or pound) received in other types of income.
posted by Mr.Know-it-some at 7:24 PM on September 9, 2020 [1 favorite]

As I understand it, and I am not a tax expert just someone who pays more taxes than I think appropriate, this is when the government taxes an individual on monies the government gave that individual. So, if an individual was given a $2,000 per month basic income and the tax rate for someone earning between $0 and $30,000 is 10%, then that is also the tax back rate. Or, one could look at it as the government is really only giving the individual 90% of what they say they are giving because 10% is recouped by taxes or is taxed back.

I believe that when you collect unemployment, the government gives you a form similar to a w-2 with your unemployment income that is then taxed at whatever your tax bracket rate is.

Of course the cost of the program mentioned in the paper will be reduced if the tax back rate is increased. I think it should say "... reduces the net costs of the programme significantly..."
posted by AugustWest at 11:06 PM on September 9, 2020 [1 favorite]