It is time to ask can data pay for a basic income, because of the huge profits Silicon Valley generates.
Notably, several politicians are discussing a “data dividend;” in which some of the money Big Data and Big Tech make goes back to average citizens. In fact, California Governor Gavin Newsom (D-San Francisco) is among those proposing a data dividend.
Moreover, insurgent Democratic presidential candidate Andrew Yang proposes a $1,000 a month “Freedom Dividend” for all Americans. In detail, the Freedom Dividend is a modified data dividend.
Can a Data dividend pay for Basic Income?
To explain, the term data dividend is a euphemism for a basic income paid for by taxes on Big Data.
Furthermore, the phrase dividend sounds more American and less socialist than the phrase basic income. For instance, dividend sounds like something people earn rather than a handout.
In addition, people are more likely to support new taxes that do not disappear into the black hole known as bureaucracy. To explain, most of the popular anger against taxes arises from levies from which people see no benefits.
Average Americans correctly understand that they will never see most money paid into the federal treasury again. Notably, the Pentagon diverts a percentage of federal taxes for questionable warfare and defense spending.
What is a Data Dividend?
The idea behind the data dividend is embodied in the Alaska Permanent Fund.
In detail, the state of Alaska collects oil and mineral royalties and places them in the Permanent Fund. Then once a year the Permanent Fund pays every resident of Alaska a cash dividend payment.
Similarly, basic income advocates like Yang, Newsom, and myself want a similar arrangement nationwide to share the profits of Big Data and Big Tech with all Americans. In particular, advocates believe a Data Dividend can redress America’s growing income inequality.
Specifically, a data dividend could distribute Silicon Valley cash to groups not sharing in American prosperity. For instance, African Americans, rural whites, working-class whites, Millennials, the less educated, and working families.
Furthermore, companies like Facebook, Google, and Amazon make most of their money from data harvested from ordinary people. Yet, most of the people are not sharing in the profits. Hence the term data dividend.
An obvious benefit of a data dividend could be to head off the social and political unrest that income inequality is generating. Notably, the Occupy Protests, the Trump election, and the riots at the Trump inauguration are being blamed on income inequality.
Can Big Data pay for Basic Income?
Essentially, the data dividend takes the theory that “data is the new oil” or the oil of the 21st Century to its logical conclusion.
In detail, The Economist’s editors labeled Data “the world’s most valuable resource” in May 2017. To clarify, The Economist editors believe data is a lucrative commodity because it generates a lot of revenue. Moreover, the editors think data drives the 21st Century Economy the way oil drove the 20th Century economy.
Importantly, data-based companies are making a lot of money right now. For instance, Google; or Alphabet (NASDAQ: GOOG), records a gross profit of $21.358 billion for 4th Quarter 2018.
Plus Alphabet (NASDAQ: GOOGL) reports a $77.270 billion annual gross profit for 2018. Moreover, Alphabet’s gross profit grew by 18.29% in 4th Quarter 2018 and by 18.38% for the entire year, Macrotrends estimates. To explain, Alphabet makes money by monetizing data from its search engine through advertising.
Meanwhile, Facebook (NASDAQ: FB) reports a $14.118 billion gross profit for 4th Quarter 2018. Additionally, Stockrow estimates Facebook’s gross profit for all of 2018 at $46.483 billion. Like, Alphabet Facebook makes money through data using digital advertising.
In addition, companies are proposing monetizing many other sources of data including self-driving cars, and streaming. For instance, Ford (NYSE: F) plans to harvest and sell data collected by autonomous vehicles.
No Big Data Cannot Pay for a Basic Income alone
Thus, Big Data is making a lot of money however it is far from enough to pay for a basic income. Specifically, a $1,000 a month basic income for America’s 327.2 million residents will cost $3.272 billion a month, or $3.9264 trillion a year.
Consequently, we will need many other taxes to pay for a basic income for all Americans as Yang points out. For instance, Yang proposes a Value Added Tax (VAT), increased capital gains taxes, and a financial transactions tax to pay for his Freedom Dividend scheme.
However, a data tax could help pay for a basic income scheme if we combine it with other levies. For instance, a higher income tax, a VAT, or a wealth tax. Thus, a data dividend is not the unlimited source of wealth some people think it could be.
How Silicon Valley could pay for Basic Income
Interestingly, there are several ways Silicon Valley could pay for basic income. Some ways Big Tech can help pay for basic income include:
- A Data Tax. This will be hard to collect because data is hard to quantify and difficult to monetize. Moreover, it is often hard to see how companies make money from data.
- A Data Sales Tax. Collect a sales tax everybody time somebody pays for data. The advantage to this is it is simple. The disadvantage is that such a tax will be easy to avoid.
- A Digital Advertising Tax. Collect a sales tax every time they sell digital advertising.
- A Digital Products Tax. Collect a tax on the sales of digital products like video games, software, cryptocurrencies, crypto assets, insurance policies, apps, songs, and streaming videos.
- A Digital Value Added Tax (VAT). In detail, a VAT is a sales tax collected at each stage of a product’s life. For instance, the manufacture, wholesaler, and retailer each pay the VAT. An advantage to a digital VAT will be that both the creators of content; like Disney (NYSE: DIS), and resellers like Netflix (NASDAQ: NFLX) pay the tax.
Why we need to Tax Corporate Cash
Taxing corporate cash and revenues is a better method financing basic income. Importantly, corporate cash and revenue taxes will make from Detroit and Wall Street and Silicon Valley.
Some means of taxing corporate tax include:
- Corporate Revenue Tax. To explain, the revenues of corporations often exceed the income. For instance, Amazon (NASDAQ: AMZN) reports revenues of $72.383 billion and a net income of $3.786 billion for 4th Quarter 2018. Consequently Amazon only pays income taxes on $3.786 billion even though it ran $73.383 billion through its till. A revenue tax allows government to tax all of Amazon’s money.
- A Cash and Equivalents Tax. Essentially tax the cash big tech has in the bank. For instance, Oracle (NYSE: ORC) had $40.03 billion in cash and short-term investments on February 28, 2019. Meanwhile, Apple (NASDAQ: AAPL) had $86.427 billion in cash and equivalents on the same day.
- A big advantage to the cash and equivalents tax is that it will also raise a lot of money from financial institutions. For instance, Goldman Sachs (NYSE: GS) had $138.547 billion in cash on December 31, 2018.
- Another cash tax benefit could be to encourage companies to invest rather than horde cash which can stimulate the economy. For instance, Warren Buffett’s Berkshire Hathaway (NYSE: BRK.B) had $111.87 billion on December 31, 2018.
- A Gross Profits Tax. The advantage to this it will collect money from finance and tech companies which generate high profits. For instance, Apple (NASDAQ: AAPL) reports a gross profit of $37.031 billion for 4th Quarter 2018.
In conclusion, a national dividend generated by corporate revenues and profits is a great idea. Such a dividend will be popular with average Americans as Andrew Yang’s success in fund raising shows.
A Basic Income and a Data Dividend are in America’s Future
However, politicians, Big Business, and bureaucrats will oppose a national dividend.
To explain, these groups will fear they will make less money from a dividend so they will oppose it. In particular, politicians, corporations and bureaucrats will have a harder time diverting tax money into their bank accounts.
For example, we can distribute a basic income to bank accounts or digital wallets without the help of social services bureaucrats. Consequently, social services bureaucrats have a strong incentive to oppose basic income – it threatens their jobs.
Hence, I predict a basic income financed by a data dividend or a corporate dividend is in America’s future. However, establishing that dividend will require a series of brutal political battles.