I totally just stole this image from Gawker.
I fundamentally believe that we are already living in a post-scarcity economy and that the only problems that remain unsolved are distribution. This is a contestable claim. So here’s my thought experiment.
Could a reasonable tax code finance universal basic income?
I take my ceiling for tax levels on income brackets to be the WWII levels. You could probably push them a bit higher, but I’m going to set a hard limit there to ensure reasonability.
Try and guess what it is.
I won’t tell you yet.
Ok did you guess?
Write it down, I don’t want you to change your answer.
Drum roll please?
It was 94% on $200,000 per year or higher. To be fair, that’s about 2.7 million adjusted but this basically means I can run tax rates up as high as I want and, with intelligent economic policy, I can still pull out of the Great Depression. And if you think wartime is unfair, it stayed at 91% for 18 years after the surrender of Japan. Source.
With regards to UBI, I’m just going to mail every household in the United States checks that would set them at exactly poverty level. Poverty level isn’t exactly where you want to be, but this is theoretical anyway.
Well, how much would that cost?
According to the US Census Bureau, there were 118.68 million households in the US in 2011. We’re using 2011 numbers for everything for reasons we’ll get into in a bit. I like round numbers, so let’s call that 119. Source.
In 2015, base household poverty line was $10,890 for a single person. Each additional person raised it by $3,820. Source.
In 2015, the US population was 312 million. Obviously it changed throughout the year. Whatever. Source.
So there will be 119 million base households as $10,890, and (312 – 119 = 193) million additional people at $3,820 each.
That comes out to $2,033,170,000,000 or almost exactly $2 trillion. Incidentally, this is good news because I already know off-hand that the US Federal budget was $2.7 trillion sometime when I was in high school, I believe in 2009. Well let’s see what it was like in 2011.
Now, I tend to think one of the reasons that UBI is great is that, rather than paying people to do nothing, it would effectively be paying people to have time to do people stuff, like volunteering and parenting. It’s hard to know exactly what portion of the Federal government is going to jobs programs and what isn’t, especially as one tangles with the military industrial complex, so for now I’m just going to pull all social programs that aren’t related to goods purchased in the open market, such as healthcare and public education. I bet you can cut a lot more than that, but whatever.
Just digging through the numbers, there’s an interesting little chart on Wikipedia about social spending in 2011. What a total coincidence we were doing this for 2011. Source. Mirror.
Just a reminder, I’m pitching this as a federal program.
So taking a look at federal spending on social programs, we have about 2.3 trillion. But roughly 290 million is on Medicaid, 60 million for education, and 575 million for Medicare. We don’t really want to cut any of those things – maybe some early childhood could be cut since more parents might be home, but that’s splitting hairs. That leaves us at approximately 1375 million in spending that would be freed up. Which means to switch to UBI would cost an additional 625 million over current social programs. You don’t really seem to save a lot at state level because most of that spending is education and healthcare anyway.
Now let’s play a fun game. In 2011, the Bush Era Tax Cuts – one of the leading drivers of the recession and income inequality according to many experts – were still in effect. If we roll those back, we capture an additional tax income on earners making more than $400,000 (exact) annually. So how much would we have to raise taxes?
It turns out I just independently re-developed Occupy here, since the cut-off to be top 1% of earners in 2011 was $389,000 which isn’t so far off. Especially since those households would be getting a check for at least $10,890 so it’s actually only $110 off. Source.
This quote is the one we’re looking for:
As a group, the top 1% earned nearly 19% of all adjusted gross income reported in 2011…
Now we just need to find gross income in 2011. A smidge over $15.7 trillion it turns out. Source.
Well this is easy now. 15.7 * .19 * (n/100) = .675 gives us exactly the percentage increase in taxes – over the historically low 35% – top earners would have to pay to finance UBI.
It’s 22.6%. That gives us a top income tax bracket level of 57.6% which is, incidentally, lower than taxes ever were on that bracket in the fifty years from 1932 to 1982. Moreover, it is more than 12% lower than any year from 1936 to 1982.
Note that this rate hike is valid only if we do deficit neutral with no other changes to spending. You could gamble UBI would stimulate the economy and cut the tax rate a little closer, drop some jobs programs in defense, save a ton of money because you don’t really need minimum wage in the classical sense in this environment and probably save some expenses in distribution, but I think that’s all besides that point.
It’s also worth noting that top earners already pay considerably lower than their bracket level because it’s cheaper to high professional tax evaders than do their civic duty and, in at least one case, they hate America, so I’m not really concerned about this hurting anyone’s feelings.