So, I'm already updating my basic income plan slightly after deciding to mess with the numbers on things and do things slightly differently this time. I'll largely be copy/pasting large amounts of what I did with my previous plan as it's only 2 months old, but I'll be updating certain aspects of it too, to make the funding go a bit more smoothly.
So what's the target amount for this basic income?
The poverty line is $12,880 with an additional $4,540 per extra member of a household. That said, the basic income needs a raise. For the purpose of this article, the amount will be set at $1,100 a month, or $13,200 a year for adults, with an additional $400 a month, or $4,800 a year for children.
Who gets this basic income?
Every adult citizen or long term legal resident over the age of 18 gets the full basic income, and any child who is a citizen or dependent of a citizen or long term legal resident will receive the partial basic income for children.
As of 2019, there are 255,220,373 adults in the US, and 73,039,150 children in the US. There are roughly 11 million illegal immigrants in the US. Let's assume 8.5 million are adults, and 2.5 million are children, roughly. In addition there are 2.3 million people incarcerated in the US. This means roughly 244,420,373 adults and 70,539,150 children would be eligible for basic income.
How much will it cost?
Based on the above information:
244,420,373*13200 = $3,226,348,923,600
70,539,150*4800 = $338,587,920,000
Basic income will cost a total of $3,564,936,843,600, or to put it simply, $3.565 trillion
So how will we pay for it?
The snapshot for paying for it is as follows.
Spending cuts
$275 billion from welfare cuts
$156 billion from military cuts
$238 billion from eliminating tax credits
+
$669 billion from spending cuts
Taxes
$187 billion from carbon tax
$2.736 trillion from 17% flat tax on all earned and taxable income
+
$2.923 trillion from taxes
Together
$669 billion from spending cuts
$2.923 trillion from taxes
+
$3.592 trillion to fund a UBI ($27 billion surplus)Spending cuts
Many spending cuts can be drawn
from the existing social safety nets. I know this will be controversial
for a lot of people, but I want to ease peoples' fears here. These
numbers will be drawn in a way to ensure we only cut programs that are
worth less than basic income, and to cut programs larger than UBI only
in ways that would make people on those programs at least as well off as
they are today. I want to take a scalpel and do surgery to the current
safety net, not just hacksaw it to death in some right wing neoliberal
plot like some progressives think. I want this basic income to make
people better off, and not worse off.
Based on USgovernmentspending.com, $365 billion from the federal government includes "other welfare", meaning welfare other than social security and medicare/medicaid. $274.7 billion is spend on "families and children". I'm guessing this is stuff like SNAP, WIC, etc. I will cut all of it. I will keep the 54.2 billion in housing, because let's be honest, section 8 provides much more value than $1100 a month in a lot of cases. I'll be keeping unemployment this time, but treating it as taxable income later on, so we will only save $275 billion.
This time around I will not be cutting social security. I would rather tax it. The 28% cut I had last time might have made seniors at least as well off, but given I tax their income instead at the rate I tax regular income, they will likely save money and be better off. I'll draw less revenue from them, but again, taxing social security is probably easier than cutting it, while leaving seniors and the disabled better off than under my previous plan.
I want to address military spending. We spent $767.1 billion in defense, whereas in the Obama era, which in itself deserved a cut, we spent $611 billion. Just reversing Trump's military spending increases that we didn't need would give us $156 billion. That should still be more than enough to keep ahead of our largest geopolitical foes like Russia and China.
Finally, I want to remove some major tax credits that exist currently. After all, if we have UBI, we won't need them. The ones I will cut will include the child tax credit ($118 billion) and the earned income tax credit ($70 billion). Biden's child tax credit expansion also costs an additional $50 billion a year so I'll redirect that too. I could remove more, but many of those tax credits I would rather save for when I want to fund healthcare potentially. This will save us an additional $238 billion.
I originally was going to eliminate the standard deduction, raising $207 billion, but that would raise taxes significantly on the poor, effectively adding a 10-12% tax burden on "low incomes", which might put the poor in a worse off situation at times than they are now. That said I'm scrapping this aspect of my proposal.
All in all, this means:
$275 billion from welfare cuts
$156 billion from military cuts
$238 billion from eliminating tax credits
+
$669 billion from spending cuts
This means total reductions in spending would amount to a whopping $669 billion. Reducing existing tax credits and deductions really helped a lot!
Raising the rest of the revenue from taxes
At this point, we reduced the amount of money that needs to be raised to $2.896 trillion.
A smaller tax that might be good would be a carbon tax bringing in roughly $187 billion a year.
I was considering expanding the social security tax cap here as that would hit the rich harder, but I'm concerned about taxes hitting the laffer curve if I do, and I still want to tax them on healthcare, so I'm leaving that out.
Beyond that point, we got to look at income, payroll, and VAT taxes. I will not be doing VAT, because I don't believe it's a good way to tax people. Andrew Yang did it, but it's basically a regressive consumption tax that could end up eating into the very UBI we give people. I want to tax people based on what they earn, similar to a clawback mechanism you would find in a negative income tax. So I'm going to go with an overall payroll tax when applicable, where people pay income taxes if they don't pay payroll taxes. I'd prefer payroll as much as possible though because it basically takes the taxes out of peoples' paychecks with minimal effort for them.
To figure out how much income is there, we have to turn to the Bureau of Economic Analysis' "Personal Income and Outlays"
chart. I am specifically looking at table 1. In January 2021, total
wages and salaries make up $9.967 trillion and should be taxable.
However, employer contributions on various public and private funds are
not. Personal income receipts on assets seems to be capital gains and
income from retirement funds that weren't previously taxed. That said, I
would consider it taxable. That's an additional $2.868 trillion.
Unemployment benefits are considered taxable, so that's another $571
billion. I'll also be including social security here, as I did not cut it above. That's $1.105 trillion. Proprietors'
income with inventory valuation and capital consumption adjustments is
small business revenue and not all of that is taxable. As a matter of
that they will have to deduct the vast majority of their earnings as
business expenses, so their profits are far less than the amount shown.
Based on research they typically pay taxes on about 22% of their income after deductions. That gives us $359 billion in profits that are taxable. With rental income given that the median rent in the US is $1097 and your typical profit is $300, I'm going to assume 27% of the $811 billion is taxable, giving us $219 billion.
Adding that all up:
$9.967 trillion in wages and salaries
$2.868 trillion in investment/dividend income
$0.571 trillion in unemployment benefits
$1.105 in social security benefits
$0.359 trillion in small business income
$0.219 trillion in rental income
+
$14.789 trillion in taxable income
I was really selling myself short on my previous plan, especially with small business and rental income.
At this point, we only need $2.709 trillion to fund UBI.
Applying a flat tax across all income, including the parts we just taxed, that's a 18.3% tax on all income, but I'm going to move it to 18.5% for the sake of simplicity.
Adding that up:
$187 billion from a carbon tax
$2.736 trillion from a 17% tax on all earned income
+
$2.923 trillion in total tax revenue
How UBI affects real people
Like my previous plan I'm going to test how this plan impacts every day people. You can test your own situation with this formula.
#Adults in household($13,200) + #Children in household($4,800) - income from all sources mentioned above(.185) = total net income after transfers
Admittedly this does not include the effects of losing the EITC or child tax credits, but UBI is still far more generous than any of those and seems to mostly apply to children looking at the benefit structure.
Single adult, no job
UBI: $13,200
Wages: $0
Taxes: $0
Net Income: $13,200
Single adult, minimum wage
UBI: $13,200
Wages: $15,080
Taxes: $2,790
Net Income: $25,490 (69% increase in income)
Single adult, median income ($36,000)
UBI: $13,200
Wages: $36,000
Taxes: $6,660
Net Income: $42,540 (18% increase in income)
Single adult,break even point ($71,351)
UBI: $13,200
Wages: $71,351
Taxes: $13,200
Net Income: $71,351
Single adult, $100,000
UBI: $13,200
Wages: $100,000
Taxes: $18,500
Net Income: $94,700 (5% effective tax rate)
Single adult, $250,000
UBI: $13,200
Wages: $250,000
Taxes: $46,250
Net Income: $216,680 (13% effective tax rate)
Family of four (2 adults, 2 children), no job
UBI: $36,000 ($13,200 + $13,200 + $4,800 + $4,800)
Wages: $0
Taxes: $0
Net Income: $36,000
Family of four, median income ($69,000)
UBI: $36,000
Wages: $69,000
Taxes: $12,765
Net Income: $92,235 (34% increase in income)
Family of four, break even point ($194,595)
UBI: $36,000
Wages:$194,595
Taxes: $36,000
Net Income: $211,764
Family of four, $500,000
UBI: $36,000
Wages: $500,000
Taxes: $92,500
Net Income: $443,500 (11% effective tax rate)
Two average social security recipients ($3086/month)
UBI: $26,400
Social Security: $37,032
Taxes: $6,851
Net Income: $56,581 (53% increase in income)
Two social security recipients, maximum benefit ($7,790/month)
UBI: $26,400
Social Security: $93,480
Taxes: $17,294
Net Income: $102,586 (10% increase in income)
Most people are vastly better off on this plan versus my previous plan. Admittedly the tax credits weren't included in this analysis, but those mostly target lower to middle income families with children. And given my UBI is $4800 each, and it's unconditional regardless of benefit level, you're most likely going to be better off. Biden's child tax credit offered up to $3600 for a child, and the EITC offers wildly varying amounts depending on income. In a handful of situations you could argue the EITC and child tax credit are more generous than my childrens' UBI, but at the same time the adult UBI makes it no competition. Just to compare the best case scenarios head to head:
Single mom, 3 children, earning $20,000 a year
UBI: $27,600
Wages: $20,000
Taxes: $3,700
Net income: $43,900
Old system
Wages: $20,000
Child tax credit: $10,800 ($3,600 each)
EITC: $6,660
Net income: $37,460
That said on basic income, that family is 17% better off. That said, I don't wanna hear from progressives about how I'm so horrible for removing those tax credits because I hear this stuff constantly from "progressives" whining about everything. This is the best your system does. Sorry, mine works better. Deal with it.
Conclusion
I'm still going to refer people to version #4 if people want a simplier version of my idea. This version is more complicated. But still, I feel like it's more comprehensive and the numbers just work better. My previous plan was a bit too cautious if anything. I lowballed the numbers I could draw funding from, and did things in less than ideal ways. I like this version better.
No comments:
Post a Comment