Market Mad House

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


Progressive Basic Income vs Income Inequality

A Progressive Basic Income is inevitable because it would be the fairest and most effective means of rectifying Income Inequality.

Income Inequality is out of control in America; our richest man Jeff Bezos reportedly has a fortune of $150 billion. The average U.S. household has an income of around $59,055 a year.

Therefore, the Amazon (NASDAQ: AMZN) CEO’s fortune is two million times greater than the average family’s income, The Atlantic’s Annie Lowrey noted. To make matters worse, Bezos’ fortune increased by $50 billion over the last year, while the average American family is making less than it did in 2000.

When adjusted for inflation the average US household took home $60,319 at the turn of the 20th Century, Seeking Alpha Political Calculations’ writer “Iron Man” calculated. The National Median Household Income was $59,055 in January 2018.

Bezos’ Fortune represents a policy failure

Lowrey correctly calls Bezos’ vast fortune a “policy failure.” The failure is that the benefits of the wondrous platform and corporation Bezos built are not reaching average people.

Around half of Amazon’s US employees earn around $28,446 a year, Lowrey estimated. That means they earn less than half the National Median Household Income.

Disturbingly, those Amazon employees are not even earning a “middle class income.” Pew Research defined a middle class income as more than $39,554 a year.

Even a married couple who both worked at an Amazon fulfillment center would not earn the National Median Income of $59,055. Two workers; each earning $28,446 a year, would only earn $56,892 annually.

Obviously, this system is neither fair nor sustainable. A means of equitably redistributing Bezos’ wealth must be found if America is to avoid political upheaval.

 Is a Progressive Basic Income the Answer to Income Inequality?

A Progressive Basic Income is a regular, unconditional payment made individually to every citizen

The advantage to a Progressive Basic Income is that everybody that met certain criteria would receive it. Every citizen of the nation would share equally in the benefits of industry and technology.

Politicians or bureaucrats would decide who gets what. Everybody that wanted it would receive the basic income.

Tax the Rich to Fund Basic Income

A high progressive income tax on the wealthy would finance a Progressive Basic Income. This idea is neither radical nor un-American; the highest marginal income tax rate was 91% during the Eisenhower years of the 1950s.

Bezos’ should pay a far higher tax because he built his fortune with an infrastructure provided by Uncle Sam. The Defense Advanced Research Project Agency (DARPA) created the basis of Bezos’ business; the internet, back in 1973.

DARPA is a government agency financed by Americans’ tax dollars. Bezos built his vast fortune on the backs of the American taxpayers. It is time those taxpayers got something back for their “investment” besides the ability to play Angry Birds on the unemployment line.

Can Basic Income Rectify Income Inequality?

An obvious solution would be to return to the Eisenhower-era tax rates on individual incomes with one critical difference.

Simply earmark half the funds collected for a basic income scheme. The half earmarked for basic income would go into a Sovereign Wealth Fund, Congress cannot touch.

A Sovereign Wealth Fund is a national hedge fund used to store part of a country’s wealth for the public benefit. The United States Sovereign Wealth Fund can be independent, or administered by the Federal Reserve.

A good example of such a fund is Alaska’s Permanent Fund which pays a “dividend” to every resident of the Final Frontier. The US Sovereign Wealth Fund would pay Americans a “dividend” on the “investment” they; or their parents or grandparents, made in the Internet and other technology.

That way Americans would see a tangible benefit from those taxes. The money would not disappear into the black hole known as Congress.

High taxes that go only to government will not rectify income inequality. Instead, such taxes shift the wealth and power from the rich to the politicians. Worse, the rich can easily bribe Congress to give them the money back in the form of “tax cuts” or government contracts.

An inherent advantage to a Progressive Basic Income is that it would not transfer wealth from one ruling class to another. A high marginal tax rate without a basic income is a blank check to Congress.

The only beneficiaries from high-progressive income taxes without basic income would be politicians, bureaucrats, and campaign contributors. Everybody else would end up footing the bill for their party.

No Bureaucracy Needed

The greatest advantage to a Progressive Basic Income is that it requires no new bureaucracy because of modern technology.

The federal government or the Federal Reserve System can deposit the funds into digital wallets or bank accounts. A basic income is easy to distribute to most Americans with existing technology.

Uncle Sam already distributes Social Security payments to around 61 million people in this manner. The Fed can make same-day payments of almost unlimited amounts of money through its Fedwire Funds Service.

Most citizens already have the basic tools necessary to receive a basic income. Around 80% of U.S. households have a bank account and 77% of Americans own smartphones.

The Fed or Uncle Sam can make receiving a basic income easier by creating a digital wallet similar to Apple Pay or PayPal. Anybody with a Smartphone would download the “Fed Pay” app and receive the basic income.

The Federal Reserve can make the system seamless and more secure by creating a national cryptocurrency. The Fed would distribute Fed Coin directly to digital wallets and bank accounts.

Progressive Basic income would be Real Economic Stimulus

Such a mechanism would lead to real economic stimulus by increasing the buying power of average Americans.

A $500 a month basic income would give the Amazon worker making $28,446 a year, a $6,000 annual boost income. That would raise his or her pay to $34,446 a year.

A married couple that worked at Amazon would receive $12,000 which will raise their annual income to $68,842. That would put them well over the National Median Income of $59,095.

An Amazon fulfillment couple with a child would receive $18,000 a year, raising their income to $74,842, a year. Married fulfillment workers with two children would receive $24,000 a year raising their income to $80,892 a year.

Even Bezos would benefit from a Progressive Basic Income

Obviously, a Progressive Basic Income would benefit Bezos because people would have more money to spend at Amazon.

A terrifying paradox in today’s economy is that many of the employees in the new economy are not earning enough money to support it. A Progressive Basic Income might correct that flaw.

The Amazon workers would now afford the basic trappings of middle class life. Those trappings would include a house, a mortgage, two new vehicles, a Costco membership, Instacart grocery delivery, Amazon Prime, a boat or motorcycles, Disney vacations, perhaps a recreational vehicle, Netflix, new furniture, a home entertainment center, and a kitchen full of the latest gadgets.

That would create a lot of jobs and increase economic activity. A Progressive Basic Income would create economic activity without expanding bureaucracy or increasing government spending.

The money would go to average Americans not to bureaucrats, politicians, and government contractors. They would spend the money in America’s communities not in Washington or Wall Street.

The choice facing America is clear. Do we continue with the same old system of free money for the rich? Or do we create a Progressive Basic Income that can benefit call Americans?

For a good overview of the Progressive Basic Income see this guide from Britain’s Royal Society for the encouragement of the Arts, Manufactures and Commerce: