So, I decided up update my basic income plan a mere year after the last one because I just got the updated poverty line numbers and last year's plan is now officially below it because of inflation. My UBI plan was $13,200 and the federal poverty line is now $13,590. That said, my numbers are now in need updating. Now, if this inflationary spike was due to UBI or government spending, I would be inclined to just leave the pieces where they may for now, and wait for the market to stabilize. But given it's mostly supply chain issues and attempts at price gauging, I'm going to increase the amount and recalculate my numbers. This is not going to be a major policy change from last year's plan. I'm just taking what I did last year roughly and updating it.
So what's the target amount for this basic income?
Given the poverty line is now $13,590, and because I would like to set this higher than just the bare minimum, I'm going to aim for $1,200 a month or $14,400 a year for an adult. For a child, I'll aim for $425 a month or $5,100 a year, given last year's $4,800 barely cuts it for this year's plan, and I want to raise the amounts a little keep ahead of the curve.
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.
In 2022, the US population is roughly 332,403,650. I don't see updated numbers on illegal immigration so I'm just going to go by the 11,047,000 estimate here. And I'm going to assume 2 million people in jail. This brings the population down to 319,356,650. This is the eligible pool of basic income recipients. We know from previous estimates that roughly 78% of the population is adults and 22% is children, so we're going to use that to estimate 249,098,187 adults and 70,258,463 children. This is who will receive this basic income.
How much will it cost?
Based on the above information:
249,098,187*14400 = $3,587,013,892,800
70,258,463*5100 = $358,318,161,300
Basic income will cost a total of $3,945,332,054,100, or put simply, $3.945 trillion.
So how will we pay for it?
The snapshot for paying for it is as follows.
Spending cuts
$631.3 billion from welfare cuts
$156.4 billion from military cuts
$239.3 billion from eliminating tax credits
+
$1.027 trillion from spending cuts
Taxes
$187 billion from carbon tax
$2.734 trillion from 17.5% flat tax on all earned and taxable income
+
$2.921 trillion from taxes
Together
$1.027 trillion from spending cuts
$2.921 trillion from taxes
+
$3.948 trillion to fund a UBI ($3 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, $816.3 billion per year comes from "other welfare", which is the only form of welfare I want to target. based on past experience, this includes stuff like WIC, SNAP, TANF, and other disposable programs that we would be better off having a UBI under. I do not want to touch medicare, medicaid, or section 8 housing. Social security and unemployment will instead be taxed later on, just like last year's. Considering how recipients of those programs also get UBI, they will be better off in net even with increased taxes than they are now. This leaves us with $631.3 billion in reduced welfare spending.
Military spending...eh, this is tricky. While our $782 billion military budget is obviously overkill, we can't cut too much of it if we want to stay ahead of Russia and China. Still, if I followed what I did last year, I would propose roughly a 20% cut in military, which would save us $156.4 billion, and leave us with a still fairly bloated $625.6 billion military budget.
For tax credits, I'll pull the child tax credit ($118.8 billion), and EITC ($73.1 billion). UBI simply replaces them as it is basically a superior program anyway. People might wonder why I don't target the capital gains tax credits. This is because I assume I'll be taxing capital gains later with my UBI tax, which will push up rates anyway. A lot of these tax breaks are like that. I could remove them here, but if I tax them at higher rates later on, it evens out. Many tax credits are there for specific purposes and I don't want to touch those if I don't know what impact that will have. Healthcare type tax credits will be saved for a universal healthcare plan. I would remove the deduction on qualified business income though, as it seems to be a temporary break introduced by Trump that primarily helps rich people ($47.4 billion). This leaves us with $239.3 billion in tax credits removed from the system.
All in all, this means:
$631.3 billion from welfare cuts
$156.4 billion from military cuts
$239.3 billion from eliminating tax credits
+
$1.027 trillion from spending cuts
This is a lot more than last year. In part because welfare spending was so high this past year. Part of me would have liked to wait for a "normal" year to do another UBI plan, but hey, with inflation I feel like I should do it now, so, that's the numbers we get at this time.
Raising the rest of the revenue from taxes
At this point, we reduced the amount of money that needs to be raised to $2.918 trillion.
A smaller tax that might be good would be a carbon tax bringing in roughly $187 billion a year.
The rest of the revenue will be raised on a flat income tax on all income. This will simply be added on top of the existing tax system. 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 2022, total wages and salaries make up $10.8874 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 $3.0119 trillion. Unemployment benefits are considered taxable, so that's another $26.7 billion. I'll also be including social security here, as I did not cut it above. That's $1.1937 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 $406.5 billion in profits that are taxable. As I said in previous articles landlords often make around a 13% profit margin. That gives us $97.6 billion to be taxed.
Adding that all up:
$10.8874 trillion in wages and salaries
$3.0119 trillion in investment/dividend income
$0.0267 trillion in unemployment benefits
$1.1937 in social security benefits
$0.4065 trillion in small business income
$0.0976 trillion in rental income
+
$15.624 trillion in taxable income
Compared to last year, some stuff is up, some stuff is down. All in all total income has increased by almost a trillion though, so the pool is bigger.
At this point, we only need $2.731 trillion to fund UBI.
Applying a flat tax across all income, including the parts we just taxed, that's a 17.5% tax on all income. This is actually a decrease in tax rates by 1 point. And I went with the most generous amounts of UBI I was considering overall.
Adding that up:
$187 billion from a carbon tax
$2.734 trillion from a 17.5% tax on all earned income
+
$2.921 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($14,400) + #Children in household($5,100) - income from all sources mentioned above(.175) = total net income after transfers
Admittedly this does not include the effects of losing the EITC or child tax credits, but as we discussed last year, UBI is more generous than those programs anyway.
Single adult, no job
UBI: $14,400
Wages: $0
Taxes: $0
Net Income: $14,400
Single adult, minimum wage
UBI: $14,400
Wages: $15,080
Taxes: $2,639
Net Income: $26,841 (78% increase in income)
Single adult, median income ($36,000)
UBI: $14,400
Wages: $36,000
Taxes: $6,300
Net Income: $44,100 (23% increase in income)
Single adult,break even point ($82,286)
UBI: $14,400
Wages: $82,286
Taxes: $14,400
Net Income: $82,286
Single adult, $100,000
UBI: $14,400
Wages: $100,000
Taxes: $17,500
Net Income: $96,900 (3% effective tax rate)
Single adult, $250,000
UBI: $14,400
Wages: $250,000
Taxes: $43,750
Net Income: $220,650 (12% effective tax rate)
Family of four (2 adults, 2 children), no job
UBI: $39,000 ($14,400 + $14,400 + $5,100 + $5,100)
Wages: $0
Taxes: $0
Net Income: $39,000
Family of four, median income ($68,000)
UBI: $39,000
Wages: $68,000
Taxes: $11,900
Net Income: $95,100 (40% increase in income)
Family of four, break even point ($222,857)
UBI: $39,000
Wages: $222,857
Taxes: $39,000
Net Income: $222,857
Family of four, $500,000
UBI: $39,000
Wages: $500,000
Taxes: $87,500
Net Income: $451,500 (10% effective tax rate)
Two average social security recipients ($3314/month)
UBI: $28,800
Social Security: $39,768
Taxes: $6,959
Net Income: $61,609 (55% increase in income)
Two social security recipients, maximum benefit ($8,388/month)
UBI: $28,800
Social Security: $100,656
Taxes: $22,655
Net Income: $106,801 (6% increase in income)
Conclusion
All in all, compared to last year's plan, most people benefit more. This is due to a combination of a higher UBI overall, with a lower tax rate. The fact that I axed more welfare spending this year also helped a lot in reducing the taxes. It's terrifying how much the welfare budget has gone up in the past year. And given how unemployment went way down, you can probably see what's happened. People who lost their unemployment are probably on welfare. And you know what I say to that? These people need a UBI.
But yeah. I make these plans because I feel like funding basic income is one of the largest hurdles that we come across in terms of selling it to people. You have this almost $4 trillion proposal and then people ask "OH YEAH? HOW YOU GONNA PAY FOR THAT?!" Well...now you know. I hope I also put people at ease who didn't previously understand UBI. Particularly, I hope you guys understand that no, I don't supporting indiscriminately eliminating all welfare programs to fund UBI. I left much of the safety net intact such as medicare, medicaid, and section 8 housing, and made reasonable compromises on social security (this includes disability) and unemployment benefits that leaves people better off. And finally, I hope that I have convinced the average person that my UBI plan would help them. A huge misconception people have with UBI is that it will lead to nebulous tax increases that will make the "average person" not better off. Well, you can see above precisely what happens to the "median" person. Medians are better here as that means 50% are richer and 50% are poorer. "Averages" are poor for measuring income because of how insane income inequality is. An "average" income earner might actually be closer to the 60-70th percentile of earners than the 50th. Speaking of which, this plan will greatly reduce income inequality. In net, I expect the top 20-25% or so to pay for it overall, with the bottom 75-80% benefitting.
And with that, I hope you enjoyed my plan, and I hope I just made a basic income supporter out of you.
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