Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


How to Pay for Basic Income

The biggest question facing basic income advocates is how to pay for basic income. In fact, I think financing the scheme is the most important and legitimate problem facing basic-income advocates.

The biggest question facing basic income advocates is how to pay for basic income. In fact, I think financing the scheme is the most important and legitimate problem facing basic-income advocates.

Fortunately, financing basic income will be easier than most of its critics claim. Here are few proposals for paying for basic income.

How to Pay for Basic Income

Some of the best ways to pay for basic income include:

The Wealth Tax

This proposal has been in the news lately because of U.S. Senator Liz Warren (D-Massachusetts). The good thing about a wealth tax is that it hits the people who have the money – the rich.

Intriguingly, even a modest wealth tax could raise a lot of money. In fact, University of California at Berkeley Economist Emmanuel Saez claims Warren’s wealth tax could raise $2.75 trillion in 10 years.

Importantly, a well-designed wealth tax will collect money regardless of how it is made. For instance, a modern-wealth tax will affect people who make most of their money from investments or technology.

To explain, most of the wealth in America is being generated by investments or technology. Yet, we finance many of our safety-net programs; like Social Security, with salary taxes. However, Pew Research estimates real wages for Americans (salaries) have not grown in decades.

Why a Wealth Tax is a Better way to Finance Basic Income

Hence, the rich get richer while everybody else struggles to survive. A wealth tax and basic income could partially fix this income inequality by transferring money from the rich to the middle and working classes.

Additionally, a straight tax on all wealth is better than an estate tax for two reasons. First, people are living a lot longer hence it could be decades before we collect the tax on Jeff Bezos’ or Bill Gates estates. Notably, American’s third richest man Warren Buffett is 88 years old, and the richest American in history; John D. Rockefeller Sr., lived to 97.

Second, wealthy people can easily evade an estate tax by donating to charity. In fact, both Buffett and Gates are planning to give most of their money away. Thus, Uncle Sam will never get a cent of taxes on that money.

How a Wealth Tax can finance Basic Income

However, a straight wealth tax with no loopholes will allow government to capture a large percentage of rich people’s money before they donate.

Consequently, I propose a straight wealth tax of 10% on all Americans that make more than $10 million a year. Moreover, we can double the wealth tax percentage for every $50 million a rich person makes. Thus, a person who makes $100 million a year will pay a 40% wealth tax.

Finally, I propose that two-thirds of the wealth tax funds go to finance basic income. Plus, I will use 70% of the other third to finance the federal government.

I will place the other 9.9% in a United States Sovereign Wealth Fund. The Sovereign Wealth Fund will make strategic investments in the US economy, finance scholarships to elite universities for average Americans, and finance future basic income.

A Carbon Tax

A carbon tax is an attempt to discourage fossil-fuel use by placing a high-tax on natural gas, oil, and coal.

Strangely, big oil companies like Exxon-Mobil (NYSE: XOM) are lobbying for a carbon tax. Exxon likes a carbon tax because it could encourage oil use by helping government raise more money from oil, Vox reports.

A French carbon tax led to violent protests because working people correctly realized most of the proceeds will disappear into the black hole known as government. However, the public will support a carbon tax is 50% or 75% of the proceeds are paid out as Basic Income.

Moreover, a carbon tax financing basic income could convince average people to accept a carbon tax high enough to significantly, cut greenhouse gas emissions. Revealingly, Vox calculates it will take a $50 a ton carbon tax to reduce greenhouse gas emissions.

A Value-Added Tax

A government collects a value-added tax, or VAT, at each stage of a product or services’ production or sale.

For example, they will collect a VAT on an Apple Smartphone when it leaves the factory. When the manufacturer sells the phone to a wholesaler, and when they sell it directly at a retail store. In addition, under many schemes retailers or distributors pay part of the VAT back to the manufacturer to encourage tax collection.

Theoretically, a VAT could raise a lot of money. For instance, a 15% VAT could raise $3.225 trillion in 2019. To clarify, I base this number on 15% of America’s projected 2019 gross domestic product (GDP) of $21.5 trillion. Importantly, the GDP is the sum of all the income America produces in one year.

The American people will accept a federal VAT if the government pays two-thirds of the proceeds back to them as basic income. I would use 80% of the other third to finance the federal government, and place 20% of the other third or 9.9% of the total in a sovereign wealth fund. (See above).

A Border Adjustment Tax

A border adjustment tax; or BAT, is a VAT the government levies on imports. On the positive side, a BAT encourages manufacturing by raising the price of imports. On the negative side, consumers pay more for imported goods.

An added benefit to a BAT is that it can discourage fossil use by reducing the amount of oil used in transportation. Notably, many Republicans and Trumpists like the BAT because it reduces imports. However, Big Retail hates the BAT because it could increase merchandise prices.

I think the public could accept a BAT if two-thirds of the proceeds go to a basic income scheme. In addition, we can use BAT money for job-training for workers, unemployment insurance, and a sovereign wealth fund. Moreover, the Sovereign Wealth Fund could invest BAT money in manufacturing companies, infrastructure, and research and development to help industry.

A Robin Hood Tax

The Robin Hood Tax is a sales tax on financial transactions. For instance, sales of stocks, bonds, exchange traded funds, private equities,, cryptocurrencies and other investments.

Intriguingly, a 1% US Robin Hood tax could raise $300 billion a year, supporters claim. If those calculations are correct, a 5% the Robin Hood Tax could raise $1.5 trillion a year and a 10% Robin Hood tax could raise $3 trillion a year.

America can Pay for Basic Income

Fortunately, there are many ways that America can pay for Basic Income. Other means of paying for Basic Income include; higher income taxes, a national sales tax, a flat tax, luxury taxes, a national real estate tax, the Fair Tax, a corporate revenue tax, and higher corporate income taxes.

For instance, Amazon (NASAQ: AMZN) records revenues of $232.887 billion for 2018. Thus a 5% revenue tax on Amazon could have generated $11.64 billion in 2018. In contrast, the 15% corporate income tax on Amazon’s net income of $10.73 billion could yield $1.61 billion.

Answering the question how to pay for basic income is easy. Therefore, the real question when we need to ask: “is does America have the political will to implement basic income.”

Sadly, my personal suspicion is that a few of our cities will have to burn in riots sparked by wage stagnation, poverty and, income inequality before our leaders seriously consider basic income. Hence, the real question America needs to ask which is cheaper civil unrest or basic income?