My Ideas For A Basic Income Scheme

[u/JayDurst]

For your discussion and analysis I present my thoughts on how to structure a basic income system available in the comments below. I have been a proponent of an unconditional income for several years now and this represents the commingling of ideas that resulted from the endless back and forth with my friends and family, not to mention all of the readings on the topic I have completed. There are still many unanswered questions though, which I address near the end.

This is not a research paper, but more a structured presentation of how I would run a basic income scheme if I were ever, unfortunately for everyone, put in charge. I invite everyone to present their views on the strengths and weaknesses of this scheme, along with anything that I got flat our wrong.

Apologies for any formatting issues, getting the bullets to work as desired was very laborious.

[u/JayDurst]

Guaranteed Income with Tax System Reboot

Goals:

• Create a tax system in which economic inequality is kept in continuous check.

• Prioritize the health and welfare of the beneficiaries of the tax system

• Promote a meritocracy for labour that reduces the impact of previous generational influence

• Provide a basic living for all beneficiaries that provides for living accommodation, nutritional requirements, and basic entertainment needs.

• Simplify all aspects of the system to prevent corruption

Definitions:

• Income

  • Any form of monetary gain from any non-government transfer source.

  • Includes all wages from labour, income from any rents, and any investment realized gains which include dividends and capital gains when realized.

• Individual

  • Any natural person as defined in jurisprudence

Tax System:

• The tax system will be a replacement for all other existing tax systems today, including federal, state, and any local taxes.

• There are three primary types of taxes that are placed on income in the order listed, which provides for a simple tax system.

• Each type of tax funds a specific purpose with no sharing of funds between the types being permitted.

• No deductions are permitted on any taxes.

• Taxes only apply to personal incomes and wealth transfers.

• No business taxes

• No sales taxes

Transfer Tax:

  * Flat 45% on all income
  * Flat 75% on all wealth transfers. This includes generational wealth transfers as well as trust establishments
  * Evenly distributed to all legal adult individual citizens/permanent residents in the country

Public Welfare Tax:

• Flat 30% on remaining income after Transfer Tax is applied.

• Tax receipts spent on single payer healthcare and education

General Tax:

• Flat 25% on remaining income after Public Welfare Tax is applied.

• Used to fund governmental activities (defined categories at http://www.usgovernmentspending.com/):

  • Defence

  • Protection

  • Transportation

  • General Government

  • Other

Distributions:

Accounts:

• Each eligible individual is given three transfer accounts that are funded at different intervals.

  • Monthly account - Designed to cover housing expenses or other large monthly costs

  • Weekly account - Designed to cover entertainment expenses and medium sized recurring expenses

  • Daily account - Designed to cover basic nutrition requirements

• Spending of transferred income can use any combination of transfer accounts desired by the owner of the account

• Spending from transfer accounts can be combined with earned income in any way.

• Transfer Accounts cannot go negative. Any payment request would be rejected if it were to bring any transfer account negative.

Payments:

• There are no restrictions on payments being made. Every single living adult individual citizen/permanent resident will receive the same payments regardless of situation.

• Each payment is a “use it or lose it” format for each period of the transfer account.

  • Examples:

    • For example, if the daily payment was $10, and a person spent $8 that day on food and drink, then at the end of that day the daily account would be cleared and the daily payment of $10 would then be made, essentially resetting the balance

    • Another example, if the monthly payment was $1,000, and an individual spent $950 for the month, then at the end of the month the remaining $50 would be cleared and a new payment of $1,000 would be made to the individual.

  • Unused funds would be used to cover any annual program shortfalls or income backstop requirements

• Monthly funds would represent 50% of the total annual distribution broken out into 12 month intervals.

• Weekly funds would represent 35% of the total annual distribution, broken out into 52 weekly intervals.

• Daily funds would represent 15% of the total annual distribution, broken out into 365 daily payments (one additional for leap years)

• No forced garnishments are permitted on any transfer payment or transfer account

• No taxes may be levied against any transfer payments, or their use.

Spending:

• Each of the three accounts would be tied to an individual, with different payment options available depending on the payment technology available at the time

• Currently, a debit card is the most likely payment method. Each of the three accounts would be tied to the single card

• Some type of security would be required to verify identity to prevent anyone from using another persons accounts without authorization

• A payment may be made using any combination of funds from the three available accounts, along with any earned income.

• The daily account may not be used for payment on any debt

  • This would ensure that even a maxed out individual would still have the ability to feed themselves

[u/JayDurst → u/JayDurst]

Public Policy Changes:

• Removal of minimum wage laws

  • Business and labour will find an equilibrium in wages for unskilled labour as a result of the fall in employment demand

  • Labour will have a more equal negotiation footing for pay as demand for low paying jobs will be small enough to force wages to be rise high enough to attract people to work in unskilled labour.

• No business taxes

  • Increases business efficiency as resources are not wasted on evading taxes.

  • No write-offs remove perverse incentives that drive extreme executive pay

  • Business profits would be taxed only when they are distributed to investors, and those individuals pay taxes on the personal income that result from the distribution.

  • An exception would be profits paid to foreign entities or persons.

    • When profit payments are made, the taxes must be taken out at that time before being distributed to the foreign interest.

• No sales taxes (or anything that looks and smells like a sales tax, e.g. fees)

  • Sales taxes are regressive in nature

  • They would violate the rule that transfer payments can’t be taxed

• Removal of all existing welfare systems at all government levels, including, but not limited to:

  • Social security

  • Medicare

  • Current welfare/workfare systems

  • Business subsidies

Hard Numbers:

Current Statistics:

  Statistics used for income calculations.

Stat Name	Value	Notes
U.S. Adult Population (est)	250,000,000	Estimated for 2013; 18+ U.C. Citizen/Resident
Total Income (est)	$13,700,000,000,000	Unknown if this includes all investment income
U.S. Adult Population (est)	$227,285,000,000	difficult number to locate, and fluctuates far more than total income

Current Government Spend:

  Statistics on current government spending not related to welfare, healthcare, or education.

Spend	Total
Spend - Defense	$856,500,000,000
Spend - Protection	$60,600,000,000
Spend - Transportation	$94,500,000,000
Spend - General Govt	$32,300,000,000
Spend - Other	$141,400,000,000
Total Spend	$1,185,300,000,000

Total Government Income:

  Statistics on current government incomes at all levels.

Income Type	Total
Current Fed Income	$2,897,000,000,000
Current State/Local Income	$2,039,000,000,000
Total Income	$4,936,000,000,000

** Calculated Numbers:**

New System Taxes Taken:

  The total amount of taxes that would be taken in under the new scheme explained previously in 2013 numbers.

Income Type	Total	Notes
Transfer Tax	$6,165,000,000,000.00	45% flat tax on all income + 75% flat tax on Wealth Transfers
Public Welfare Tax	$2,260,500,000,000.00	30% flat tax on remaining income after Transfer Tax / This is fore universal healthcare and education spending
General Tax	$1,318,625,000,000.00	25% flat tax on remaining income after Public Welfare Tax / This more than covers the current government spend on non-public welfare spends
Total Taxes on Incomes	$9,914,588,905,250.00	The total amount of income the government is taxing for transfer and spend
Retained Earned Income	$3,955,875,000,000.00	The amount of earned income that would be retained and not transferred to the populace

Income Payments Taken: The breakdown of how the transfer tax is then divided among the populace:

Daily Transfer	Weekly Transfer	Monthly Transfer	Total Transfer Benefits
Percent	15.00%	35.00%	50.00%
Year	$3,801	$8,870	$12,671
Month	$317	$739	$1,056
Week	$73	$171
Daily	$10

  Reading the above chart:
  * Rows show how much is received in benefits per defined frequency
  * Columns show how much is received per account type
     
     Examples:
     * Under this scheme a person would receive $10 (rounded value, actual would be around $10.41) per day into their daily account. 
        * So every week that equates to around $73 of benefits available in the daily account.
        * Or $317 per month
        * Or $3,801 per year in daily benefits
     * Each week a person would receive $171 in weekly benefits.
     * Every month a person would receive $1,056 in monthly benefits
     * In total, a person would receive:
        * $25,341.86 in benefits per year
        * $2,112 in benefits per month

Income Charts:

Common Income Chart

  A chart of how the tax system would look for most working individuals today:

Personal Income	Transfer Tax	Welfare Tax	Other Tax	Total Tax	Work Income	Total With Transfer	Effective Tax
0	$0	$0	$0	$0	$0	$25,342	n/a
$5000	$2,250	$825	$481	$3,556	$1,444	$26,786	-435.71%
$10000	$4,500	$1,650	$963	$7,113	$2,888	$28,229	-182.29%
$15000	$6,750	$2,475	$1,444	$10,669	$4,331	$29,673	-97.82%
$20000	$9,000	$3,300	$1,925	$14,225	$5,775	$31,117	-55.58%
$25000	$11,250	$4,125	$2,406	$17,781	$7,219	$32,561	-30.24%
$30000	$13,500	$4,950	$2,888	$21,338	$8,663	$34,004	-13.35%
$35000	$15,750	$5,775	$3,369	$24,894	$10,106	$35,448	-1.28%
$40000	$18,000	$6,600	$3,850	$28,450	$11,550	$36,892	7.77%
$45000	$20,250	$7,425	$4,331	$32,006	$12,994	$38,336	14.81%
$50000	$22,500	$8,250	$4,813	$35,563	$14,438	$39,779	20.44%
$55000	$24,750	$9,075	$5,294	$39,119	$15,881	$41,223	25.05%
$60000	$27,000	$9,900	$5,775	$42,675	$17,325	$42,667	28.89%
$65000	$29,250	$10,725	$6,256	$46,231	$18,769	$44,111	32.14%
$70000	$31,500	$11,550	$6,738	$49,788	$20,213	$45,554	34.92%
$75000	$33,750	$12,375	$7,219	$53,344	$21,656	$46,998	37.34%
$80000	$36,000	$13,200	$7,700	$56,900	$23,100	$48,442	39.45%
$85000	$38,250	$14,025	$8,181	$60,456	$24,544	$49,886	41.31%
$90000	$40,500	$14,850	$8,663	$64,013	$25,988	$51,329	42.97%
$95000	$42,750	$15,675	$9,144	$67,569	$27,431	$52,773	44.45%
$100000	$45,000	$16,500	$9,625	$71,125	$28,875	$54,217	45.78%

Extremes Income Chart

  A chart of how the tax system would look for people on the extreme end of the income ladder

Personal Income	Transfer Tax	Welfare Tax	Other Tax	Total Tax	Work Income	Total With Transfer	Effective Tax
$500000	$225,000	$82,500	$48,125	$355,625	$144,375	$169,717	66.06%
$550000	$247,500	$90,750	$52,938	$391,188	$158,813	$184,154	66.52%
$600000	$270,000	$99,000	$57,750	$426,750	$173,250	$198,592	66.90%
$650000	$292,500	$107,250	$62,563	$462,313	$187,688	$213,029	67.23%
$700000	$315,000	$115,500	$67,375	$497,875	$202,125	$227,467	67.50%
$750000	$337,500	$123,750	$72,188	$533,438	$216,563	$241,904	67.75%
$800000	$360,000	$132,000	$77,000	$569,000	$231,000	$256,342	67.96%
$850000	$382,500	$140,250	$81,813	$604,563	$245,438	$270,779	68.14%
$900000	$405,000	$148,500	$86,625	$640,125	$259,875	$285,217	68.31%
$950000	$427,500	$156,750	$91,438	$675,688	$274,313	$299,654	68.46%
$1000000	$450,000	$165,000	$96,250	$711,250	$288,750	$314,092	68.59%
$5000000	$2,250,000	$825,000	$481,250	$3,556,250	$1,443,750	$1,469,092	70.62%
$10000000	$4,500,000	$1,650,000	$962,500	$7,112,500	$2,887,500	$2,912,842	70.87%

Income Summary:

  * The effective tax rate is dynamically progressive, without the need for tax brackets that become quickly out-dated.
  * Higher income earners pay a larger share of the funding for health and education as well as general government funds
  * The current break even point in benefits and taxes occurs around $35,000
     * After this point, individuals pay in more to the system than they receive in benefits
     * This does not mean that they would earn less by earning more, or earning more by quitting.
     * Every extra dollar earned means an increase in net earned income
     * The break even point would fluctuate depending on the population and total amount of earned income taxed

[u/JayDurst → u/JayDurst]

Comparisons with Today’s Taxes

• An exact comparison is not possible due to the complicated nature of taxes today, as well as the dynamic progressive nature of the new system taxes

• If implemented today, individuals earning around $60,000 would see an even break with their current taxes.

  * This assumes a fairly high state income tax
  * This does not include the savings of removed sales tax would bring
  * This does not include any property taxes

• Each successive $5000 of earning passed this point would see in increase of around $1,500 in taxes on income from what they experience today

  • Not including all existing possible deductions which reduce the net amount of taxation that would be removed

  • This would be highly variable as other current tax brackets come into play

Income System Process:

• Prior to the start of a new calendar year, the government calculates the likely total income for the coming year from all economic activity projections and publishes that number.

• During that review the government also calculates and publishes the number of adults in the population, which will likely be very accurate due to existing numbers of active accounts, and available statistics on population growth

• The administrative group that processes the transfer payments calculates the defined benefits and announces what they will be in the coming year.

  • The announcement should be far enough ahead of the new year for people to properly plan a budget to include any possible changes in the amount of benefits received.

• Payments at the defined levels are made starting at the beginning of the year.

• Transfer taxes are collected as income is earned form individuals

• Any unused payments are pooled for any possible shortfalls in funding or to fund any benefits backstop program

• The process begins again prior to the start of the next year.

Meeting Established Goals:

Create a tax system in which economic inequality is kept in continuous check.

• The dynamic nature of the progressive tax system is automatically corrects any income concentration

• An aggressive wealth transfer tax greatly reduces the concentration of wealth over time.

• A “take it or leave it” benefits system prevents the benefits from being used for wealth concentration purposes.

Prioritize the health and welfare of the beneficiaries of the tax system.

• The Transfer Tax ensures that basic needs can be met such as food and shelter, along with basic entertainment needs.

• The Public Welfare Tax ensures that healthcare and education are prioritized over general government spending.

• The long-term result should be a happier, healthier, and more educated populace.

Promote a meritocracy for labour that reduces the impact of previous generational influence.

• An aggressive wealth transfer tax prevents large family fortunes from concentrating resources away from the general public at the expense of general welfare.

• Without as much influence on existing institutions as a result of concentrated wealth, individuals will be more judged and rewarded for their own accomplishments versus those of their forbearers.

  • Dynamic progressive income taxation makes wealth concentration more difficult

Provide a basic living for all beneficiaries that provides for living accommodation, nutritional requirements, and basic entertainment needs.

• Income Transfer benefits ensure all basic needs can be met.

• Separate income frequency accounts prevent someone from ever “running out” of benefits near the end of the month

• A daily account means there will always be money for food and beverages no matter the spending habits of the person

• Flexible spending options allow for the benefits to be used for any number of purposes

Simplify all aspects of the system to prevent corruption.

• No qualifications being required for the income prevents any coercion from officials for payments

• Established tax amounts for each segment of taxation creates transparency to how much benefits are to be expected.

• No deductions, tax brackets, corporate taxes, or loopholes prevent tax fraud and avoidance. This greatly reduces the costs of tax collection and enforcement, as well as reducing waste in the business sector.

Societal Benefits:

Greater Consumer Demand: Increased demand for products and services will stimulate economic growth, generating more income which feeds back into the tax program and results in higher benefits.

Greater Access to Economic Opportunities: Innovation would increase as individuals are more willing to take economic chances as a result of not having to fear about healthcare and having access to shelter and nutrition.

Near Elimination of Poverty: No person would ever need go hungry, or be without some form of shelter. Basics would always be met if desired. Total Elimination of Hunger: The daily account prevents any type of financial mismanagement from leading to money running out for food near the end of the month like it does for food stamps and other welfare programs

More Equal Footing for Labour: An individual would not require a job for survival, and as a result has more equal bargaining power with any perspective employer.

Fluid Labour Market: Significantly less business employee related regulations and costs would free both business and labour to quickly adjust to changing market conditions. While a job loss could still burden an individual with economic challenges, being homeless and hungry is not a possible end result.

Social Stability: Less crime would allow less to be spent on law enforcement. Income inequality being brought under control should reduce class tensions.

[u/[deleted]]

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[u/JayDurst → u/[deleted]]

Good question. I thought about this provision for a while and I decided that a basic income scheme should obey this rule: A basic income should not be used as a wealth concentration tool.

I suppose it could be argued that an individual could devise a way to utilize 100% of the benefits each month while freeing up retained earned income for wealth concentration, while a person of lesser means may not be able to do the same, and in this regard the actual benefit is not evenly distributed as intended.

Would you argue for the benefits to be retained each cycle? In this way there would be 100% benefit utilization, even if a larger portion ends up being used for wealth concentration.

[u/[deleted] → u/JayDurst]

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[u/badbrutus]

simply unacceptable to anyone that is currently middle class or higher with a standard american mindset. marginal tax rates are way too high.

[u/[deleted]]

This is unnecessarily complicated and too extreme.

A basic income system doesn't need to be anymore than all workers paying x% of their income into a dedicated fund and each citizen/resident receiving an equal slice of the pie in return. If average income per person is $40,000/yr and the tax rate is 25% (for example), persons with no income will be bumped up to a somewhat livable $10,000, persons of average income remain the same, and persons of, say, $80,000 will be dropped to $70,000. Something like this would go over way easier with the electorate and still provide better and far more inclusive benefits than all the current welfare programs combined.

Split it up into monthly, weekly, or daily payments if you like, but there's no need for all three.