Income Guarantee and Tax Incentives

Despite being an anarchist I follow politics relatively closely and I often think about what I would do if I were dictator of the country. One of the things I would put forth is replacing our current welfare system with a Basic Income Guarantee (BIG). The BIG is essentially a check that every adult in the country receives regardless of income. It is a social safety net that helps ensure everyone has food, shelter, etc. Basically, it takes care of the lowest rung of Maslow’s Hierarchy of Needs. This would also provide stability for new families raising children, people going back to school to get new skills if their industry collapses (expect to see a lot of this in the near future), women with children could escape abusive relationships, and families would have the ability to move to a place where there is a work instead of being trapped in small towns with no opportunities. Money is a better way to provide support than food stamps.

Now, I realize something like this isn’t a current reality in the US because of politics and social views, but I think it would be a great substitution to our current system. It would eliminate the bureaucratic bloat that comes from needing a massive group of people to determine who gets welfare and in what form because it could be a simple computer program that sends checks or direct deposits money into every bank account.  It would eliminate some of the perverse incentives that keep people on welfare because getting a job would not result in losing benefits.

One of the main complaints about a BIG is that it would cost a lot of money and you would be giving money to people who really don’t need it (the wealthy). I think there is a way around this problem by using some tax incentives. After all, incentives rule the world. Here is a rough way that I think it could work. A quick note, the numbers I’m using are rough and rounded to make the math easy. This is just to make a point, not to present a specific policy prescription… I’ll leave that to the professional economists, I’m just a weird guy in the woods with just enough economics training to be dangerous.

So, some quick numbers…

  • Number of Americans over age 18 or over: $235,000,000 (rounded up from the 2010 Census)
  • Proposed BIG*: $1,000 per month
  • Total Money needed from the program monthly (without tax incentive): $235,000,000,000
  • Total Money needed annually: $2.82 trillion

Where are we going to get that money?

  • First, cutting Medicare and Medicad will save about $750,000,000
  • Social security could take some transitioning out, I wouldn’t want people’s benefits to decrease but the BIG is a much better deal in the long run for everyone. First, it is guaranteed throughout your life so it is a form of social security, second it is funds that you can invest throughout your life to provide an additional retirement account. Anyway, for simplicity sake I say leave social security alone for now.
  • Okay, so that really doesn’t take a big bite out of what we need. We are down to about $2.1 Trillion. So, the tax incentives…

I think what we need is a way to encourage people to not accept the money after a certain income level. Tax incentives seem to be a good way to do that. Every month individuals can decide whether they want to accept the whole BIG, part of the BIG, or no BIG at all (the default position is to accept the whole thing). If they choose not to accept the BIG they receive a 125% tax credit on their tax obligation that year. So, if I am having a productive month and I decide not to accept my $1,000 I will get a tax credit of $1,250 for that year.

How would this look in real life? To take a simple example of a single person household. This is clearly a super simple example and doesn’t take into account the crazy fucked up system we have, but I think it makes the point. As a single person I made $45,000 this year, that means my tax bracket is 25%. So, I owe $11,250. Knowing that my salary each month was going to be about the same I decided to only accept $250 per month of my BIG. The $750 per month that I returned ($9,000) for the year becomes a $11,250 tax credit. It turns out that making over $60,000 per year makes it worth it to just return the money. Also, I think the tax credit should be applicable to any taxes, not just income tax, this will incentivize the wealthy who don’t have a traditional “income” to return the money.

Clearly, the federal government will see some tax income loss by incentivizing this way. But I think that loss will be less than the money saved by eliminating bureaucracy on the federal level, and by eliminating the problems that come from poverty on the local level. This will also incentivize people to work more and train to get skills for higher paying jobs. There are certainly a lot of kinks to work out but I think tax incentive issue could solve some of the problems.

 

 

 

* I recognize that $1,000 isn’t enough to cover some medical conditions or to raise a family alone, but the question is whether this is going to be more of a help than the status quo. Also, because the BIG comes in the form of cash it will be easy for family and friends to provide support for those in need. If I don’t need my BIG (or part of it), I simply give it to my sister who is raising two kids and needs the assistance. Again, these numbers are for making the argument and could be shifted if necessary.

Advertisements

Wages, Workers, and Machines

Today the “Zero to Hero” assignment was to write a blog post that builds upon yesterday’s assignment, to comment on some blogs. I did’t do yesterday’s assignment because it was Sunday and that means a 40 mile bike ride along the beach, lunch at The Spot in Hermosa, on orgy in the living room, and curling up to cheesy horror movies. So, instead I will be elaborating on the comment section of a Facebook conversation that is currently going on.

I shared an article that discussed the further mechanization of low-paying jobs, in this case it is a machine that can make burgers without any human help. I’m sure your big-chain grocery store has “U-Scans” so that anyone who can scan their own purchases can do it themselves and get out of the store more quickly and there are some fast-food restaurants that allow you to order via touchscreen computer and pay without talking to a person… it was only a matter of time before other jobs are replaced by machines. Now, I don’t think this is a bad thing in the long run but I do recognize that it will hurt people in the short run.

One of the main forces encouraging businesses to turn to machines is labor cost, particularly pushes for minimum-wage increases. When the government enforces a minimum wage it forces businesses to either increase their prices or decrease labor (by firing or reducing hours). Large corporations can usually bear this a little bit but small, local chains rarely make large profits and suffer the most. A large chunk of the US economy is small businesses and when people lobby for an increase in minimum wage they are harming small businesses. In addition to that, increased labor costs means increased prices of goods… so everyone is now paying a higher price even if they didn’t get a raise. If the minimum wage goes from $7.50/hr to $8.00/hr the price of goods will go up, even for the person who made $8.00/hr the whole time. And of course, as the article points out, if labor costs go up then businesses will look for a way to replace labor with machines.

So, in the long run, is this a good thing? I think so, yes. Humans are not here on the planet to work at shitty low-wage jobs. I look forward to a Star Trek world where machines do everything while the rest of us spend our time pursuing our passions and just hanging out. Work is a means to an end, not an end itself. Work is a tool to earn money to exchange for goods. We are entering a new era where the economy is based on service, information, and entertainment. We must take steps though to not punish or discourage innovation and entrepreneurship. Raising the minimum wage is a band-aid that makes things worse in the long run. What we need to be doing is breaking down the barriers of entry into different fields. Why do most cities and states regulate hair stylists and other trades, and require accreditation through certain expensive schools? Why does it costs so much to get approved to start your own business? Why is the government wasting time and money shutting down lemonade stands and raiding barbers? If this world is going to advance we need to let people use their gifts, talents, and passions without a bureaucrat stepping in, demanding money, and threatening to send men with guns to their doors if they don’t comply.

Interesting Things – Wednesday (11/13/13)

Here is today’s collection of things I found interesting online.

Intimacy: Another city has a professional cuddler in it. Portland is the most recent in a string of “cuddle parlors” that have opened up to provide non-sexual intimacy with people. Personally, I love this. I think it is a shame that society so often discourages expression of intimacy, love, and affection outside of our romantic partners. I also think men often face pressure to not be emotional and a safe environment like this gives them a chance to be anonymously vulnerable. (http://www.oregonlive.com/portland/index.ssf/2013/11/professional_cuddler_samantha.html)

Religious Hypocrisy: A Kansas City Mission has decided to prevent atheists from serving food to the homeless on Thanksgiving. I am not sure how they are living according to Christ’s principles when they are explicitly preventing people from helping those in need. It seems that they are choosing hate over love. (http://www.rawstory.com/rs/2013/11/11/christian-rescue-mission-bans-kansas-atheists-from-volunteering-at-thanksgiving/)

Police: A former police officer outlines how to avoid getting arrested. Some of the tips are good but my biggest takeaway is how subservient we must be to men in badges in modern America. When it is recommended that you cry or wet yourself when you encounter these “public servants” there is a serious problem. (http://www.businessinsider.com/how-not-to-get-arrested-2013-11>

Sex: Today is national birth control day, be safe out there and use vegan condoms like Sir Richard’s.
1424425_10153487980775187_1823009403_n

Nature: Here is a video of a dolphin masturbating with a decapitated fish. Nature is a cruel funny beast and we are all really just here to get our rocks off. (http://io9.com/this-is-a-video-of-a-dolphin-masturbating-with-a-decapi-1463711897)

Economics: Using game theory one can increase their odds of winning on the price is right. Economic principles can have a huge impact on life in general. For me ideas like sunk cost have actually changed my behavior. Everyone should understand the basics. (http://www.slate.com/articles/arts/culturebox/2013/11/winning_the_price_is_right_strategies_for_contestants_row_plinko_and_the.html)

Russia: A new promotion for the winter Olympics allows people to do squats instead of pay money for their train ride. I find this incredibly interesting and could be a way to both encourage fitness and provide transportation opportunities for low-income people. (http://mashable.com/2013/11/12/russian-subway-squats/?utm_cid=mash-com-fb-main-link)

Police State: For some reason Americans continue to assume the best out of the bureaucracy that operates our National Security agencies. Despite generations of rights violations, domestic spying, and abuse at the hands of both political parties people still kind of trust the system that is rife with abuse. It baffles me. (http://www.theatlantic.com/politics/archive/2013/11/why-does-anyone-trust-the-national-security-state/281429/)