So, I normally include this in my UBI plan, but I was making it a bit more extensive this time, and figured it would be better to include this as an appendix.
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($15,000) + #Children in household($5,400) - income from all sources mentioned in my UBI plan(.200) = total net income after transfers
UBI Scaling for single adult
Single adult, no job (2nd percentile)
UBI: $15,000
Wages: $0
Taxes: $0
Net Income: $15,000
Single adult, minimum wage (~16th percentile)
UBI: $15,000
Wages: $15,080
Taxes: $3,016
Net Income: $27,064 (+79%)
Single adult, median income ($46,001) (50th percentile)
UBI: $15,000
Wages: $46,001
Taxes: $9,200
Net Income: $51,801 (+13%)
Single adult, break even point ($75,000) (~73rd percentile)
UBI: $15,000
Wages: $75,000
Taxes: $15,000
Net Income: $75,000 (+0%)
Single Adult, $100,000 (82nd percentile)
UBI: $15,000
Wages: $100,000
Taxes: $20,000
Net Income: $95,000 (-5%)
Single Adult, $250,000 (98th percentile)
UBI: $15,000
Wages: $250,000
Taxes: $50,000
Net Income: $215,000 (-14%)
UBI scaling for a single parent with 1 kid
Single parent with 1 kid, no job (1st percentile)
UBI: $20,400
Wages: $0
Taxes:$40
Net Income:$20,400
Single parent with 1 kid, minimum wage (10th percentile)
UBI:$20,400
Wages: $15,080
Taxes: $3,016
Net Income: $32,464 (+115%)
Single parent with 1 kid, median individual income ($46,001)(33rd percentile household income)
UBI: $20,400
Wages: $46,001
Taxes: $9,200
Net Income: $57,201 (+24%)
Single parent with 1 kid, median household income ($70,181)(50th percentile)
UBI: $20,400
Wages: $70,181
Taxes: $14,036
Net Income: $76,545 (+9%)
Single parent with 1 kid, break even point (66th percentile)
UBI: $20,400
Wages: $102,000
Taxes: $20,400
Net Income:$102,000 (+0%)
Single parent with 1 kid, $250,000 (93rd percentile)
UBI: $20,400
Wages: $250,000
Taxes: $50,000
Net Income: $220,400 (-12%)
UBI scaling for a single parent with 2 kids
Single parent with 2 kids, no job (1st percentile)
UBI: $25,800
Wages: $0
Taxes: $0
Net Income: $25,800
Single parent with 2 kids, minimum wage (10th percentile)
UBI: $25,800
Wages: $15,080
Taxes: $3,016
Net Income: $37,864 (+151%)
Single parent with 2 kids, median individual income ($46,001)(33rd percentile household income)
UBI: $25,800
Wages: $46,001
Taxes: $9,200
Net Income: $62,601 (+36%)
Single parent with 2 kids, median household income ($70,181)(50th percentile)
UBI: $25,800
Wages: $70,181
Taxes: $14,036
Net Income: $81,945 (+17%)
Single parent with 2 kids, $100,000 (65th percentile)
UBI: $25,800
Wages: $100,000
Taxes: $20,000
Net Income: $105,800 (+6%)
Single parent with 2 kids, break even point (75th percentile)
UBI: $25,800
Wages: $129,000
Taxes: $25,800
Net Income: $129,000 (+0%)
Single parent with 2 kids, $250,000 (93rd percentile)
UBI: $25,800
Wages: $250,000
Taxes: $50,000
Net Income: $225,800 (-10%)
UBI scaling for a single parent with 3 kids
Single parent with 3 kids, no job (1st percentile)
UBI: $31,200
Wages: $0
Taxes: $0
Net Income: $31,200
Single parent with 3 kids, minimum wage (10th percentile)
UBI: $31,200
Wages: $15,080
Taxes: $3,016
Net Income: $43,264 (+186%)
Single parent with 3 kids, median individual income ($46,001)(33rd percentile household income)
UBI: $31,200
Wages: $46,001
Taxes: $9,200
Net Income: $68,001 (+48%)
Single parent with 3 kids, median household income ($70,181)(50th percentile)
UBI: $31,200
Wages: $70,181
Taxes: $14,036
Net Income: $87,345 (+24%)
Single parent with 3 kids, $100,000 (65th percentile)
UBI: $31,200
Wages: $100,000
Taxes: $20,000
Net Income: $111,200 (+11%)
Single parent with 3 kids, break even point (82nd percentile)
UBI: $31,200
Wages: $156,000
Taxes: $31,200
Net Income: $156,000 (+0%)
Single parent with 3 kids, $250,000 (93rd percentile)
UBI: $31,200
Wages: $250,000
Taxes: $50,000
Net Income: $231,200 (-8%)
UBI Scaling for a couple, no children
Couple, no jobs (1st percentile)
UBI: $30,000
Wages: $0
Taxes: $0
Net Income: $30,000
Couple, one minimum wage job (10th percentile)
UBI: $30,000
Wages: $15,080
Taxes: $3,016
Net Income: $42,064 (+178%)Couple, two minimum wage jobs (23rd percentile)
UBI: $30,000
Wages: $30,160
Taxes: $6,032
Net Income: $54,128 (+79%)
Couple, median household income ($70,181) (50th percentile)
UBI: $30,000
Wages: $70,181
Taxes: $14,036
Net Income: $86,145 (+23%)
Couple, two median individual income jobs ($92,002)(62nd percentile)
UBI: $30,000
Wages: $92,002
Taxes: $18,400
Net Income: $103,602 (+13%)
Couple, break even point (81st percentile)
UBI: $30,000
Wages: $150,000
Taxes: $30,000
Net Income:$150,000 (+0%)
Couple, $500,000 (99th percentile)
UBI: $30,000
Wages: $500,000
Taxes: $100,000
Net Income: $430,000 (-14%)
UBI Scaling for a couple, 1 kid
Couple with 1 kid, no jobs (1st percentile)
UBI: $35,400
Wages: $0
Taxes: $0
Net Income: $35,400
Couple with 1 kid, one minimum wage job (10th percentile)
UBI: $35,400
Wages: $15,080
Taxes: $3,016
Net Income: $47,464 (+214%)
Couple with 1 kid, two minimum wage jobs (23rd percentile)
UBI: $35,400
Wages: $30,160
Taxes: $6,032
Net Income: $59,528 (+97%)
Couple with 1 kid, median household income ($70,181) (50th percentile)
UBI: $35,400
Wages: $70,181
Taxes: $14,036
Net Income: $91,545 (+30%)
Couple with 1 kid, two median individual income jobs ($92,002)(62nd percentile)
UBI: $35,400
Wages: $92,002
Taxes: $18,400
Net Income: $109,002 (+18%)
Couple with 1 kid, break even point (86th percentile)
UBI: $35,400
Wages: $177,000
Taxes: $35,400
Net Income: $177,000 (+0%)
Couple with 1 kid, $500,000 (99th percentile)
UBI: $35,400
Wages: $500,000
Taxes: $100,000
Net Income: $435,400 (-13%)
UBI Scaling for a couple, 2 kids
Couple with 2 kids, no jobs (1st percentile)
UBI: $40,800
Wages: $0
Taxes: $0
Net Income: $40,800
Couple with 2 kids, one minimum wage job (10th percentile)
UBI: $40,800
Wages: $15,080
Taxes: $3,016
Net Income: $52,864 (+251%)
Couple with 2 kids, two minimum wage jobs (23rd percentile)
UBI: $40,800
Wages: $30,160
Taxes: $6,032
Net Income: $64,928 (+115%)
Couple with 2 kids, median household income ($70,181) (50th percentile)
UBI: $40,800
Wages: $70,181
Taxes: $14,036
Net Income: $96,945 (+38%)
Couple with 2 kids, two median individual income jobs ($92,002)(62nd percentile)
UBI: $40,800
Wages: $92,002
Taxes: $18,400
Net Income: $114,402 (+24%)
Couple with 2 kids, break even point (90th percentile)
UBI: $40,800
Wages: $204,000
Taxes: $40,800
Net Income: $204,000 (+0%)
Couple with 2 kids, $500,000 (99th percentile)
UBI: $40,800
Wages: $500,000
Taxes: $100,000
Net Income: $440,800 (-12%)
UBI Scaling for a couple, 3 kids
Couple with 3 kids, no jobs (1st percentile)
UBI: $46,200
Wages: $0
Taxes: $0
Net Income: $46,200
Couple with 3 kids, one minimum wage job (10th percentile)
UBI: $46,200
Wages: $15,080
Taxes: $3,016
Net Income: $58,264 (+286%)
Couple with 3 kids, two minimum wage jobs (23rd percentile)
UBI: $46,200
Wages: $30,160
Taxes: $6,032
Net Income: $70,328 (+133%)
Couple with 3 kids, median household income ($70,181) (50th percentile)
UBI: $46,200
Wages: $70,181
Taxes: $14,036
Net Income: $102,345 (+46%)
Couple with 3 kids, two median individual income jobs ($92,002)(62nd percentile)
UBI: $46,200
Wages: $92,002
Taxes: $18,400
Net Income: $119,802 (+30%)
Couple with 3 kids, break even point (92nd percentile)
UBI: $46,200
Wages: $231,000
Taxes: $46,200
Net Income: $231,000 (+0%)
Couple with 3 kids, $500,000 (99th percentile)
UBI: $46,200
Wages: $500,000
Taxes: $100,000
Net Income: $446,200 (-11%)
Discussion
So, before I begin, let me just say if your situation is not approximated above, use this formula to figure out your relative tax burden vs the status quo.
#Adults in household($15,000) + #Children in household($5,400) - income from all sources mentioned in my UBI plan(.200) = total net income after transfers
Generally speaking, this plan looks extremely generous to most households. If anything, it probably looks too generous on the surface. We're talking tripling some peoples' incomes. However, that's how this is supposed to work. This is basically like a negative income tax, except done on the UBI side. People who make relatively little money should get a lot back from the plan, whereas middle class people get a smaller bump, almost like a tax credit. Your typical household with 2 adults and 1 child will get $35,400 in UBI but then pay $14,036 back in taxes.
Obviously, the plan will hit single income people the hardest. One UBI means that they will only be able to make $75,000 before effectively paying into a UBI plan. But most people do not live alone. Most people live with at least one other person. If they're living with another adult, that household is not paying in until $150,000. A single parent might end up paying in closer to $100-130k.
I feel like this is generous enough. People might wonder about the justice of the exact situations. Why do couples get it easier than single mothers? Alternatively, others will complain why we are subsidizing people for having children in the first place. I've contemplated these questions in the past and here are my answers.
In order for UBI to guarantee real freedom for all, it needs to be given out on an individual basis, and to be unconditional. This means that each adult in a household will have their own UBI. And they can take their UBI and leave the household at any time if it no longer suits their needs. Compare this with an NIT or household based income scheme where you need to file in accordance with your household size, and then if you want to leave you would need to notify the government you no longer live at an address, and then you're doing paperwork, and waiting for the government to give you the money you are owed, and you could be stuck in bureaucratic limbo when you need your money now. It's better just to give it to every individual. This makes UBI kind of scant for people who live in individual situations, but also quite generous, possibly overly generous for those living in a household with multiple adults. I am willing to accept this, and if we need to scale back UBI, I would do so on the basis of the UBI amount as a whole.
Now, children. Children is a tricky question with UBI plans. You got two major camps on this. First of all, you have the camp that is generally defined as being "caring", and everything with these guys is "we gotta take care of the kids". And I would agree with them. If we did not give UBI to children, a lot of left wing welfarists would be screaming about how this plan harms single mothers and blah blah blah. It would turn people against it, and we would get the common rallying cry that UBI supporters want to destroy welfare and make people worse off. This is untrue.
However, we do not want to give a FULL UBI to children. If we did, each child would be getting $15,000. This would cause the opposing side to scream that we're literally incentivizing women to spread their legs and pop out kids like they're clown cars. And I have to admit, the incentives WOULD be too generous toward having kids. So how do I balance those incentives? Well, just as the core UBI for adults is based off of the federal poverty line rounded to some nice flat amount slightly above it, so is the case for my child benefit. The goal is to give people enough money to take care of their kids, without incentivizing people to do nothing but pop out kids and never work or something. While reduced work incentive among single mothers on a UBI is far above the average, I'm okay with it. Part of the reason why so many children grow up into deviant adults, for example, is because the parents are working too hard at jobs to properly raise their kids. We love to pride ourselves on working, but then we want to force single mothers into the work force, where their kids grow up without supervision, join gangs, etc. It's not good. And the alternative to that would be to...send them to daycare or get a babysitter? Well, then we would just be creating yet another "job" to take care of the job that the single mother could arguably be doing all along. So yeah. Let them drop out of the work force and raise their kids if they want. Or work, and then have someone else take care of their kids. It doesn't matter to me. Jobs exist to fulfill our wants and needs. It is up to every individual person to figure out what they wish to do with the economic calculus here. I am not trying to force people to do any which thing.
But yeah. This means that we will have households that sometimes have very high UBI amounts, especially if multiple adults are in a household. But, again, that's kind of a valid strategy with my UBI. Cohabitation is common, and my UBI encourages it. This should, if anything, make conservatives happy. One of their biggest complaints about welfare is that it breaks up families and discourages work. UBI removes the perverse disincentives with the system such as welfare traps and stuff that requires family members present to work. You can have bureaucracy, or you can have a UBI, but you cannot have both.
More targetted aid may allow the government to scale benefits in a way that might make more sense in some cases, but it comes at the expense of the efficiency of the system. Again, if we went with an NIT and targetted it per household, it would require a lot of paperwork. it would be slow, and unresponsive to peoples' needs, and it might trap people, like battered spouses and children, in abusive relationships. Given a paramount concern is mine is freedom, I believe implementing it on the individual level is better.
People might also wonder about the amount. Again, I'm kind of working off of a Rawlsian veil of ignorance framework here. I am trying to ensure that everyone, even the most worst off person, is out of poverty under my plan. Anyone who is better off, is better off. Keep in mind, the poverty line for one is $14,590, and it's $5,140 per additional person. My UBI plan is $15,000 per adult, and $5,400 per person, slightly above it. People complain that the poverty line isn't enough. But at the same time, in households, this likely fits a better standard of what a living income looks like. It might look irrational I give a whopping $46,200 for a family of five, but given their poverty line is $35,140, that doesn't really make it excessive in practice. That's only 131% of the poverty line. I mean, sure, some might get significantly above the poverty line, but that's to ensure no one is below it.
You might wonder about work effort reductions. Well, based on my study of UBI, amounts of up to the poverty line generally don't seem to discourage work much. Moreover, given I expect the total tax rates, not just from UBI, but other expenditures to be around 35-70% depending on income bracket. The poor would pay more like 35-45%, whereas the richest Americans would pay closer to 65-70%. 70% is close to the laffer curve peak, which I'd consider the absolute maximum rate of acceptable taxation, while most would pay closer to 45-55%. This is not much different than what is paid in Europe under social democracy, and should not greatly disincentivize work incentive. Once again, compared to the existing welfare system with welfare traps, where people pay close to 100% marginal tax rates, at times, UBI might encourage work effort among those especially at the bottom. It would allow people to earn extra income, without imposing strict limits on what they can earn or lose benefits.
One more thing that should be mentioned. You might wonder about the excessive gains among people at the bottom. Well, those would often be blunted by the reduction of welfare itself. I don't expect the poor to be worse off on UBI than welfare, especially given how I implement the idea. But it would help blunt the gains.
Supplemental security income would disappear. It has a maximum benefit of $914 a person, less than the $1250 my UBI offers, but still substantial. But we would lose all of the income and asset limits that accompany that.
SNAP would disappear to, but you're talking, at most, $281 per individual, and $197 on average. Given my UBI gives $1250 per adult and $450 per child per month, it's clear to see what's the better deal.
TANF offers a benefit of $498 on average for a family of three, but with insane time limits, and all kinds of work requirements and asset limits. Yuck.
WIC seems to give food directly, but with UBI you can buy all the food you want, so it's probably better.
EITC can give benefits of up to $560 a year for an adult, $3733 for one child, $6164 for 2 children, and $6935 for three children. That's about $3200 for the first child, $2400 for the second, $800 for the third. My UBI gives $5400 per child, and $15000 for the first adult. It clearly wins here.
The Child Tax credit gives $2000 per child. Again, I give $5400.
So, are people better off on welfare? Or are they better off on UBI? I seriously think most people would be better off on UBI. Even if you got like, every single program above, and you just edged out my UBI plan, i dont think it would be worth it. Because you would be subject to insane asset limits, income limits, work requirements (or alternatively restrictions), and time limits. And as Scott Santens would tell you, like a majority of people eligible for these programs don't even get them. Welfare is a mess, and leftists shouldn't defend it. it was created by people with the backwards mindset, that we had to simultaneously care for the poor, but also force them into the work force. That's not freedom.
Now, people will wonder, finally, would this cause inflation? I've address this issue before, but TLDR? Eh, increased incomes concentrated in the bottom and middle of the distribution might cause some localized shifting in demand, but things like tax increases and the removal of the aforementioned welfare programs should offset a great deal of the extra demand. Keep in mind, I pay for my UBI with taxes, this is a net transfer from roughly the top 20% of income earners, to roughly the bottom 80%. The rich will pay up to 20% more points in taxes, and the everyone else will see an income increase of around, 30%, but it can vary significantly. You might see demand go up for stuff on a localized level. But all in all, inflation shouldn't be massive.
And finally, how would we address any concerns with inflation, work reduction, etc? Well, I certainly don't support implementing UBI overnight. I would phase this in over say, 6 years. $3000 a year, and then adjust it to whatever $15000 is for inflation on the 6th year. If we see increased inflation or work reductions in the middle of the process of phasing it in, we can just slow or draw back the phase in. If we need a lower UBI level like say, $10,000 a year or $12000 a year for society to function without a wage price spiral, then we can settle for those levels. I'm not a rigid ideologue. I'll settle for whatever basic income happens to be sustainable if I need to compromise.
And with that, I hope I've made a basic income supporter out of you.
Hi, Jon. I found this in a link to your post yesterday on the BI subreddit where we were both commenting on an old CBPP paper. Apparently, you've been doing this awhile. So have I - and I have to say I really like your approach. I focus on Social Security reform, apply a negative income tax, and use more granular IRS data. Please read my blog posts on Medium (starting with the Negative Income Tax link in the Reddit thread, where my username is "ndependent") and comment if you like. Too few BI supporters take the trouble to craft a real plan by doing more than back-of-the-envelope calculations. And examples like this of how people across the income distribution will be affected are absolutely critical to having serious discussions of implementation. Your work encourages mine; thanks!
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