CMV: We cannot afford UBI

[u/shaim2]

I like the UBI idea. It has tons of moral and social benefits.

But it is hugely expensive.

Example: US budget is ~3.8 trillion $/yr. Population is ~314M. That works out to ~$1008.5 per person per month.

One would need to DOUBLE the US budget to give each person $1K/month. Sadly, that is not realistic. Certainly not any-time soon.

So - CMV by showing me how you would pay for UBI.

[u/JonWood007]

My most up to date projection.

http://www.reddit.com/r/BasicIncome/comments/250gtd/how_can_a_basic_income_be_possible/chcujpg

[u/shaim2 → u/JonWood007]

thanks.

Comments there.

[u/FaroutIGE]

IMO, we should update our marginal tax brackets. We currently have a ceiling where all yearly incomes over $400,000 pay the same 39.6% marginal rate.

Here's how our current tax brackets shake out:

1. $8,925 and lower pay 10%

2. $8,925-$36,250 pay 15% (up to 4x the salary pays 5% more for $ amounts over previous bracket income)

3. $36,250-$87,850 pay 25% (up to 10x the salary pays 15% more)

4. $87,851-$183,250 pay 28% (up to 20x the salary pays 18% more)

5. $183,251-$398,350 pay 33% (up to 45x the salary pays 23% more)

6. $398,351-$400,000 pay 35%

7. 400,000+ pay 39.6%

That means that:

1,000,000 pay 39.6% (112x salary pays 29.6% more)

10,000,000 pay 39.6% (1120x salary pays 29.6% more)

1,000,000,000 pay 39.6% (112044x salary pays 29.6% more)

Personally, I would think updating marginal rates to account for the high end would do a lot.

Tax all income over a million dollars at 50%, all income over a billion dollars at 65%.

Also, getting rid of corporate welfare would help tremendously.

[u/shaim2 → u/FaroutIGE]

Makes sense.

We would also need to take care of corporate tax, so that multinationals actually pay tax (and not siphon off everything to tax havens).

[u/JayDurst]

Total government spending in the U.S. was $6.1 trillion in 2013. This in includes all levels of government.

Of that amount, $1.7 trillion is spent on pensions (Social Security and similar programs) and welfare (excluding health care).

The adult population is closer to 250 million. If we divide the existing amount of welfare and pension programs against the adult population, we get an amount of $6,800 per year.

If we simply wanted to double that amount, the total U.S. Government spending would only need to go up by about 28%.

.

In 2013, the taxable income base was $11.691 trillion. The taxable consumption base was around $11 trillion, and at least another trillion dollars in corporate net income (based upon 2010 IRS data.

.

More than enough liquid cash available to tax to fund a BI.

[u/ONAMOVINGTRAIN → u/JayDurst]

There are also significant changes that can be made to the existing budget (i.e. bringing defense, military and intel spending down below a trillion/year as well as closing tax loopholes for corporations) in order to free up a lot of funding which could be used for UBI.

[u/shaim2 → u/ONAMOVINGTRAIN]

That is orthogonal to the BI debate.

We haven't been able to do any of it for the last 20 years. And I don't expect we'll do it for the sake of BI.

[u/ihlazo]

One would need to DOUBLE the US budget to give each person $1K/month. Sadly, that is not realistic. Certainly not any-time soon.

Well, you're using the wrong limit. Total annual personal income was (at last reckoning) about $12 Trillion. If distributed among everyone, this would leave an annual income of about $60,000 per, or over $5,000 per month.

Using the 'government' as a limitation for that is kind of silly; the government is just a basket of services that society pays for through taxes. We pay for healthcare services through insurance premiums and PoS. We pay for auto services through PoS. There's not really any reason to say "the government" pays for BI.

Keep in mind that the majority of Americans already work to earn their Basic Income, so if you really want to use the "government" as your mechanism for accomplishing this, you would not be giving a net $1000 to most of the people in this country, because they are already earning income.

[u/shaim2 → u/ihlazo]

BI is re-distribution of income, like all social programs.

Not re-distribution with the goal of achieving equality, but with the goal of setting some morally-motivated lower-limit ("in a rich country people should never starve", for example).

If total taxable income is $12T, then one could manage a $1K BI with a 25-30% average tax rate. Which may actually be doable.

I find it amazing how in such a Christian country like the US, Jesus's message of helping the weak, "it is easier for a camel to go through the eye of a needle than for a rich person to enter the Kingdom of God" is actively opposed, which the secular countries of Europe have a much more Jesus-approved policies.

[u/MarcusOrlyius]

What does CMV mean?

[u/shaim2 → u/MarcusOrlyius]

"Change My View"

There's a sub-reddit dedicated to such debates, but I though it would make more sense for me to ask this here, where people are generally supportive and there is a real discussion.

[u/m0llusk]

We cannot afford not to have a basic income. There are too many people without jobs.

If the money spent on a basic income had to be written off the way government subsidized loans to banks are then it would be a problem. There is, however, every reason to expect that the majority of money used for basic income will be spent in the short term. Because of that it works as a kind of economic stimulus. Instead of trickling up or even gushing up as money usually does the money used to provide a basic income would splash around the very bottom rungs of the economic ladder and then start working its way back up.

[u/shaim2 → u/m0llusk]

We cannot afford not to have a basic income

That's not how "afford" works.

Regardless of the social importance, you need to be able to actually do it. And even if the alternative may be chaos and Armageddon, that does not mean we can make it work.

[u/wildclaw]

The US economy with all its wealth production is more than capable to provide enough basic supplies, food and housing for everone. in fact, it already pretty much does except for people falling outside the system. And if the economy can sustain it, then the government can afford it.

As for making a specific budget estimation. You always have the +-0 solution where you introduce a minimum wage while simultaneously removing a similar amount of income from every person in the form of less welfare or higher income taxes. On average everyone will end up with a similar amount of income as before, but you will no longer have the absurd situation where honest people who only goes for welfare only as a last resort ends up benefiting less than welfare leeches.

And that is the truth that I think most people seem to be in denial about. It is the current system that allows for welfare leeching and doesn't protect ordinary honest people, while UBI is far more fair and less abusable.

[u/shaim2 → u/wildclaw]

I agree BI is a fair-er program than the current hugely-complex social support structure.

[u/2noame]

Right now, I favor a plan of $12,000 per citizen over 18, and $4,000 per citizen under 18. This amounts to a need of $2.98 trillion, which after the programs we can eliminate are rolled into it, means we need an additional $1.28 trillion or so.

So where do we come up with an additional $1.28 trillion?

A land value tax has been estimated to be a source of revenue of about $1.7 trillion.

We could reform the income tax as we know it, to be a flat tax of around 40%. This would effectively be a reduction in taxes to about 80% of the population.

A 10% value added tax has been estimated to be a source of revenue of about $750 billion. That could be increased to reach our target or added to other sources of revenue.

These other sources of revenue could be a financial transaction tax, a carbon tax, new tax brackets for those earning over $1 million, $10 million, $100 million, and $1 billion, as well as taxing capital gains.

We could do as Iran has done, and eliminate the subsidies in place to make things cheaper for corporations, by just giving people money.

We could do what Norway has done, and create a huge sovereign wealth fund, to which we could add money from a great many sources, one of which would be like our own state of Alaska, funding its own permanent fund with a percentage of oil revenue.

We could get more creative, by thinking about how we go about giving away things to corporations like the use of public airwaves, and patents/copyrights that should have expired long ago but haven't thanks to lobbying from those like Disney to protect their profits off of creations like Mickey Mouse. Did you know the Happy Birthday song isn't even in the public domain? Companies should pay us to keep things out of the public domain.

Speaking of corporations paying, look at all the huge fines being levied lately. Why don't we just have them go to us? We're the ones paying for them in ways like our health and livelihoods, that they are being fined for in the first place.

But let's not just stop at how we can come up with money. Let's talk about what kind of money UBI will save us from ever spending in the first place.

In Manitoba, visits to hospitals dropped 8.5%, due to reduced stress and work injuries. How much do you think that would save extended to the entire country?

In Namibia, there was a 42% reduction in crime. The cost of crime in the U.S. has been estimated to exceed one $1 trillion every year.

A study in Canada found that $1 invested in the early years saved $3 to $9 in future spending in the health and justice systems.

Presenteeism (when people go to work when they should actually be staying home) costs us about $150 billion to $250 billion every year.

What other costs are there out there to discover? Is there an Einstein somewhere stuck in poverty or a min wage job? How do we calculate that kind of cost?

But let's not even stop here. How much would our productivity improve with a basic income, such that what we do spend and the work we already do, goes even further?

Well, thanks to the multiplier effect, we know that $1 to the rich adds 39 cents to the economy, and $1 to the poor adds $1.21 to the economy. This means that a basic income would actually fuel our economy more efficiently and to greater heights.

We also know that the creation of the choice to do nothing, has a psychological effect on us. People given a choice to do nothing ended up working 40% longer than those given no choice.

Then there's what we have learned about motivation, and how money actually functions as a disincentive for complex and creative work. Money only works as an incentive for the cognitively easy and physically laborious stuff, which also happens to be exactly the stuff that we are automating away, leaving only the cognitively complex stuff left, which money does not help but hurts. So we actively need to free people to do this kind of work.

And of course, there's the final card to play. We've already talked about how we can raise the money easily, how much we will save by doing so, and how much our productivity will rise even further, but then there's one more thing we have yet to face, and that's the automation of work mentioned above. We have 20 years before half of our current work is potentially gone. And if you are among those that think we'll always have more jobs, the result of that outcome is a larger economy such that a basic income suddenly becomes even easier to afford with greater GDP.

And here's yet another deadline. Due to the convergence of food, water, and energy crises, we have about 15 years to get our act together.

So not only can we afford the money for basic income...

Not only can we afford it by spending less money...

Not only can we afford it by doing more with less...

We can't NOT afford basic income.

[u/r_a_g_s]

This will already have been covered, but there are three basic foundational places where the funding comes from:

1. You replace, not "add to", existing social programs. That includes everything from food stamps to deductions you use to calculate your taxes on your 1040 or T1 form.

2. You reduce government spending on bureaucracy. Current welfare programs require a lot of resources to spend time deciding "who's eligible" or "who deserves this". Much cheaper to just cut a bunch of electronic deposits every month.

3. You raise taxes on the rich and the upper middle class enough to "claw back" the BI from those who basically don't really "need" it.

Another key point that I push is that BI can be phased in. For example: On your 1040, you have a basic $6100 deduction that everyone gets. The lowest tax bracket is 10%, so if you make more than $6100/yr., that deduction is worth $610/yr. to you. So nuke the deduction, and take that $610 and just give it everyone as the first step of a BI, as $51/mo.

Do the same thing for stuff like the Earned Income Tax Credit. "For tax year 2013, the maximum EITC benefit for a single person or couple filing without qualifying children is $487. The maximum EITC with one qualifying child is $3,250, with two children it is $5,372, and with three or more qualifying children it is $6,044." So again, nuke the credit, and just give every adult that $487 ($41/mo.), and provide around $2000 ($167/mo.) for each child.

I think that a phase-in, done well and carefully, would make the entire concept of BI much more politically palatable, and would be an excellent demonstration of what BI really is and how it would really work to the citizens of a nation.

[u/DorianGainsboro]

I'll make it really short (and therefore somewhat incorrect). There is money.

US GDP 2014 ≈ $16 Trillion.

[u/NomDePlume711]

I never thought it was feasible today. It doesn't really need to be, it's not necessary yet. But it makes sense as a response to automation, as that will both make it necessary as well as feasible. Anyone who thinks it could/should be implemented now has their head in the clouds.

[u/[deleted]]

"~$1008.5 per person per month" is better than what we currently have. We just do that. Boom, UBI afforded.

[u/TiV3]

I just know the numbers for germany but scrapping low income and middle clas tax exemptions (that are in place specifially to not tax the living expenses, something the basic income would make redundant) in favor of applying the top tax rate (45%) would generate nearly half (400-450bil) of the cash needed (960bil) to pay every german resident 1000€

Usually overlooked because it technically increses the budget c;

(this isn't even concerning current spending yet, but everyone knows about the volume of that already)

[u/SocratesLives]

It is possible that a federal level UBI may be too cumbersome or expensive to maintain. I have been thinking lately that we need city, county or (at most) state level UBI to actually make it work.

[u/shaim2 → u/SocratesLives]

I believe only the federal government collects enough taxes (per person) to make UBI potentially possible

[u/EmperorOfCanada]

Two factors. Effectively past a certain income level UBI would be taxed away. Let's say that if you only get UBI and it is (number out of my ass) $30,000 and that is your entire income then that UBI needs to be added to the cost of UBI.

But if your income is say (again out of my ass) $100,000 you would still get UBI but your taxes would be increased by $30,000 so the net is that person's UBI doesn't go onto the total cost.

And presumably there would be a sliding scale of people say at $50,000 income who might lose half of their UBI to taxes. So they count as only $15,000 added to the cost.

But then you get a whole other factor. If someone is on welfare right now there are huge expenses involved in managing the welfare system. So switching that person to UBI would negate many of the welfare system costs.

Then there are all kinds of other more difficult to calculate factors such as taxes on the increased spending. If you have people who are on welfare right now someone with little or no income has little or no disposable income. Given UBI there would be an increase by these people in spending. This money then will flow through the economy being taxed at each step. So much of the UBI would be returned to the government quite quickly.

I see UBI as an interesting way to get convection going in the economy. People have talked about trickle down economics but the reality is that if you give 30,000 to a zillionaire they will throw into into a sophisticated savings account where it basically stagnates. But if you give 30,000 to someone who has nothing and is presently far behind the curve on basic needs they will spend that money quickly (and often locally). They will move into better housing, they will buy their kids shoes, they will buy their kids proper food, they will buy themselves an education, they will stress less. And yes some people will go straight to the strip club; but keep in mind that even the strip club is a viable part of our economy.

Then you get other more subtle benefits; such as people now would have a bottom to their income. This would probably have the effect of ending the lowest part of any bust cycles in the economy. And seeing that an effective UBI would not be collateral for any debt then it would somewhat moderate the boom cycles when people are leveraging various forms of income to absurd levels.

Basically the costs of UBI would actually be very tricky to calculate for a number of reasons.

[u/veive]

It has been shown that a one time payment of ~$600 per household increased per capita spending by ~3.4%. ^1

Another study showed that unemployment benefits increased the economy by ~110% of the amount spent on benefits. ^2

Thus, the issue at hand is not the cost of UBI, but getting it started. Once started it will quickly grow to become a self-sustaining system.

that said I'll go ahead and address your initial question:

For the years listed, average unemployment outlays run ~$71B^3per year. With UBI that would not be needed.

From social security and medicare $774.8B per year is paid in Old-Age and Survivors Insurance, and Disability Insurance. ^4 This could be re-purposed without touching Hospitalization Insurance or Supplementary Medical Insurance - So poor people get UBI and still get medicare/medicaid if needed.

That brings our total up to $845.8 Billion.

How do we get the rest? simple.

From Forbes comes this gem.

If the capital gains tax were to be raised from 15% to 20%– a rise of 33%– then, the tax collected on the record 2007 revenues (by no means available today) would rise to about $155 billion or net increase of $40 billion.^4

Rather than raise capital gains from one arbitrary number to another arbitrary number, simply remove the special designation for capital gains and treat all income equally.

This would amount to doubling or more most capital gains, as the highest tax bracket is 39.6%, rather than the current 15% for capital gains.

Thus current programs could easily cover ~$1 trillion/year in UBI. That's without covering the money that we are already spending to stimulate the economy. If we were to repurpose that as well we could give everyone in America $30,000/year.