A Case for UBI - Part Two

Welcome to part two. I hope I have at least piqued your curiosity.

All UBI payments would come from the UBI trust fund. The trust fund would receive all the proceeds from a special UBI income tax. The features of this tax are as follows:

• • • • No deductions or credits of any kind, including no personal or standard deduction. The first dollar of income would be subject to the tax.
      • Capital gain income would be treated as regular income.
      • Like social security taxes, the UBI tax would have an income cap per person. (My suggestion: $400,000 - tied to inflation). Unlike Social Security, employers would pay nothing.
      • Married individuals would be taxed the same as non-married individuals.
      • There would be a single Tax Rate applied to everyone.
      • Each person would pay the full tax, and each person would receive the full stipend. If you do the math, a flat percentage tax, paired with a flat dollar amount stipend, becomes a progressive tax plan that blends seamlessly with a UBI welfare plan.

    
    
    
    
  
  
  
  

The UBI stipend and the UBI tax rate would be firmly linked. The trust fund would not be authorized to run deficits. (Surpluses would be permissible.)

The size of the stipend and the size of the tax rate will be the two most widely known numbers in the country. All will know the numbers, and, all will know that both numbers apply to everyone equally, and they will also know the two numbers are linked. Neither can go up or down without the other going up or down accordingly. Setting those two numbers will be an annual obligation of Congress.

So, what is affordable? Not my call. This post advocates paying for welfare by taxing everyone the same flat percentage of income, and paying everyone the same flat dollar amount. Currently, our country ignores the affordability of welfare by obscuring all the numbers and we are $40 trillion in debt. A transparent UBI plan with no deficit spending forces us to confront affordability head-on.

The congressional debate over setting the amounts will be intense and divisive. Reasonable people can reasonably defend a wide range of numbers. And, the amounts as set can greatly affect the success of the program. It is possible for Congress to err in either direction. It is possible the amounts will change significantly after an election. The “sweet spot” might be found only after a trial-and-error period.

Nothing in the above paragraph, however, detracts from the wisdom of having transparency, nor provides justification for abandoning the principle of treating everyone the same.

Final Cheerleading

• • • Stipend won’t drop by getting a job. More recipients will seek work. Less financial dependency.
    • No stigma and no soul-crushing monthly begging. Less mental dependency.
    • Minimal bureaucracy. Minimal fraud. No social workers. No eligibility monitors. Only possible fraud involves citizenship. Cost of fraud detection will be a fraction of current costs. Government would no longer pay others to “help” the poor. This is where the bloat and the fraud are.
    • Increased home sharing by mother and father. Increased home sharing by adult children and their parents. Increased home sharing by low-income earners.
    • Government gets out of low-cost housing business.
    • Full nationwide mobility with no bureaucratic hassle. (Cities become affordable when people can, and do, easily leave them.)
    • More children will grow up in two parent homes. More children will grow up in a home with an ambitious, working, role model.
    • While congressional debate will be divisive, the program itself will strengthen national sense of unity. It is not about equal outcomes. It is not selective help to particular victims. It is help that does not see race, sex, or any other criteria used to divide America. It is treating all Americans in the same way.
    • This also sends a necessary message to the poor: this is it. You will get exactly what everyone else gets. Not a penny more. There is no reward for being a victim. If you want more, earn more. No excuses.

  
  
  
  

Final Thoughts

The ends of ambition are zero-sum. The more ambitious government is to improve the lives of its citizens, the less ambitious the citizens, themselves, become. America is the greatest country on Earth due to individual ambitions, not government ambitions. The War on Poverty began 60 years ago, and if we measure success by the number of people who have escaped welfare, we have failed. If we measure success by shrinking the size of the underclass, we have failed.

This post ignores the other parts of government. The UBI tax does not replace the existing income tax, although it creates an obvious need to tweak it. This UBI would go to people over age 65, allowing a golden opportunity to reinvent Social Security.

Income over $400,000 will continue to be taxed, but it won’t pay for welfare. Welfare is the moral responsibility of all. All of us need to pay for welfare. Voting to compel “the Rich” to pay for welfare does not fulfill our personal moral duty. Speaking of said moral duty, UBI will not eliminate the need for charities. Many people need non-cash assistance, and private charities are best able to provide such help.

Everything above is just theoretical vapor. Without hard numbers it is impossible to evaluate, but ponder this: If transparency leads us to conclude we can’t afford welfare, what is gained by being non-transparent? Who is fooling who? If these two posts make you curious about what real numbers would look like, the posts have succeeded.

G-Pub

PS: In response to comments—in today’s opaque, pay-with-debt world, Congress is pressured to be more generous without a corresponding counter pressure. In a transparent world with no debt financing, and a dedicated trust fund financed by a transparent tax rate, Congress can’t be so generous without all taxpayers knowing that their tax rate just went up. The net taxpayers, one would think, could generate more pressure on Congress than net benefit recipients. Politically, the odds are greater that the Congress would set benefits too low than too high. If the labor participation rate goes down, benefits should (would) go down. It is not a ratchet.