So, it's 2023, and you know what that means! It's time for another yearly basic income plan. If we had relatively low levels of inflation, I would have probably waited another year or two before a rewrite, but given we apparently had an inflation rate of 6.5% in 2022, and the poverty line now exceeds last year's basic income plan, I will be doing a rewrite for this year. Like last year's version, I expect mostly tweaks around the edges.
So what's the target amount for this basic income?
This year, I am going to aim for $15,000 per adult, and $5,400 per child. This amounts to $1,250 per adult and $450 per child every month. While I admit that this falls short of what I had last year accounting for inflation, I was very aggressive last year with raising it, and $15,000 is a very nice flat amount. The numbers also don't work out as well as last year's plan due to much lower welfare spending to draw money from and more reluctance to cut the military budget due to ongoing support for Ukraine. Generally speaking the poverty line is literally slightly above last year's UBI plan, at $14,580 for one, and $5,140 for every additional member of a household, so these numbers are adequate for my goals (above the federal poverty line).
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.
At the moment of writing, the US population is estimated to be roughly 336,068,000.
I still can't find updated numbers on illegal immigrants, so I will be using the 11,047,000 number again. It still is the top result on google and the most reliable number I can find, so I will stick with it. To be fair, the number seems to be largely stagnant as of late and may have dropped if anything. I'll just use the current number.
As for prisoners, there are roughly 2,102,400 according to latest numbers. These seem to be stagnating or declining too, so despite being a little old, the trend should be somewhat accurate.
Illegal immigrants and prisoners do not get a UBI as the illegals should not be here and giving UBI is a bad idea for a variety of reasons, and of course, prisoners are...in prison and are having their needs taken care of there. This means that 322,918,600 people will be eligible for basic income this year. Given that the population statistics seem to remain stable at 78% of people being adults and 22% being children, we can deduce that 251,876,508 adults and 71,042,092 children will be eligible for a basic income.
How much will it cost?
Based on the above information:
251,876,508*15,000 = $3,778,147,620,000
71,042,092*5,400 = $383,627,296,800
Basic income will cost a total of $4,161,744,916,800 or put simply, $4.162 trillion.
So how will we pay for it?
The snapshot for paying for it is as follows.
Spending cuts
$366.4 billion from welfare cuts
$288.9 billion from eliminating tax credits
+
$655.3 billion from spending cuts
Taxes
$187 billion from carbon tax
$3.320 trillion from 20.0% flat tax on all earned and taxable income
+
$3.507 trillion from taxes
Together
$0.655 trillion from spending cuts
$3.507 trillion from taxes
+
$4.162 trillion to fund a UBISpending 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, $513.7 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 $366.4 billion in reduced welfare spending, which is a significant cut from last year.
I will not be touching military spending this year due to our aid with Ukraine. Yes, I know our military spending is completely insane, but it seems clear, given the state of other militaries around the world vs ours, that we are getting our money's worth. We can revisit cuts when the current crisis with Ukraine has blown over.
As far as tax credits go, 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), and the deduction for charitable contributions ($49.6 billion) though. This leaves us with $288.9 billion in tax credits removed from the system.
All in all, this means:
$366.4 billion from welfare cuts
$288.9 billion from eliminating tax credits
+
$655.3 billion from spending cuts
Yikes. This is a major drop from last year. Well, that's what happens when you cut $500 billion from the welfare budget due to pandemic aid running out, and not cutting the military. If we did cut the military 20% like last year, we would be cutting it by $159.4 billion, but again, I'm gonna back off of that for this year at least.
Raising the rest of the revenue from taxes
At this point, we reduced the amount of money that needs to be raised to $3.507 trillion.
A smaller tax that might be good would be a carbon tax bringing in roughly $187 billion a year. I know I keep reposting this every year, but it's an estimate that's expected to be good through roughly 2029, so I'll stick with it.
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 December 2022, total wages and salaries make up $11.4158 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 $3.4178 trillion. Unemployment benefits are considered taxable, so that's another $21.6 billion. I'll also be including social security here, as I did not cut it above. That's $1.2217 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 $412.5 billion in profits that are taxable. As I said in previous articles landlords often make around a 13% profit margin. That gives us $105.8 billion to be taxed.
Adding that all up:
$11.4158 trillion in wages and salaries
$3.4178 trillion in investment/dividend income
$0.0216 trillion in unemployment benefits
$1.2217 in social security benefits
$0.4125 trillion in small business income
$0.1058 trillion in rental income
+
$16.595 trillion in taxable income
Compared to last year, not a huge change. The only real major jumps are investment/dividend income and to a lesser extent wages. We only gained around $1 trillion in total income this year.
At this point, we only need $3.320 billion to fund UBI.
Applying a flat tax across all income mentioned above, that's a 20.0% tax on all income.Yikes. Having less money to draw from welfare and refusing to cut from defense spending really took their toll here. For the record, if I had included my normal military spending cuts, the rate would be 19.0%. Well, again, that's why I was conservative with my numbers. 20% is around the maximum tax rate I'd support before cutting the UBI rate, and we just hit it on the dot.
Adding that up:
$187 billion from a carbon tax
$3.320 trillion from a 17.5% tax on all earned income
+
$3.507 trillion in total tax revenue
Conclusion
So, this year's UBI plan did not work as well as last year's, mainly due to changes in welfare spending and my refusal to touch military spending while our aid to Ukraine is going on. While the tax rate is a little higher than I'd like, it's still what I'd consider to be within the tolerable range.
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.
While normally I include a section in these blogs discussing the details of how UBI affects normal people, I plan on adding that separately. However, I will give some basic details here.
EDIT: here is the appendix
You can calculate how my UBI plan will affect you via this formula:
#Adults in household($15,000) + #Children in household($5,400) - income from all sources mentioned above(.200) = total net income after transfers
I estimate that my UBI plan will benefit up to 73% of individual income earners, and generally speaking, over 80% of households. The median individual income earner ($46,000 a year) is expected to gain 13% more income under this plan, while the median household's benefit will vary depending on household size. Assuming 2 adults and 1 child, with a median household income of $70,181 a year, your typical household is expected to gain 30% more income from my plan.
That said, 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" worse off. I take average to mean "median" here because average income is skewed upward significantly by how much inequality we have. Median, on the other hand, means 50th percentile. 50% better and 50% worse. Generally speaking, my plan is guaranteed to help everyone below the 73rd percentile ($75,000 a year), and potentially much more with households. Assuming 2 adults and 1 child, we're talking the 86th percentile here, or $177,000 a year.
And with that, I hope you enjoyed my plan, and I hope that I just made a basic income supporter out of you.
EDIT: Second appendix showing extra data modifying the model.
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