Beginning to Think About Universal Basic Income

(posted 1/8/2017) - I'm reading more about automation affecting the traditional capital to labor ratios. It seems reasonable to expect that over the next decade the number of 1st world jobs will decrease dramatically due to automatons (think self driving buses, trucks, and cars). What new jobs will the average 'blue-collar' or clerical 'white-collar' employee train for if the net number of such jobs are reduced by capital (read artificial intelligences that do better than humans at any wage level)?

If you browse the internet (stay away from the Heritage Institute links) you will find many cogent discussions and even some European trial balloons being floated for something called a Univesral Basic Income, or UBI. Each proposal will apply subtly different philosophies to the basic problem of providing a sufficient income to everyone to insure citizens are collectively able to consume the products of their society -- without this capability a nation's GDP invariably falls and its economy devolves towards feudalism and chaos.

So, after reading a few of these articles I sat down and tried to think about a UBI for the United States. View this as a work in progress, a first cut at thinking about a very complex social / economics problem. But then, that's what this Soapbox is for: Snapshots of my thoughts at various points in time on Social, Political, Environmental, and Economics issues.

Some thoughts on a US "Universal Basic Income" or UBI. Here are four relevant datapoints:

  • The US has about about a $19 trillion 2015 GDP,
  • Public held stock capitalization of about $17 trillion (about $10 trillion in the top 100 corps).
  • There are 320 million US citizens (Men, Women, and Children).
  • Classic Welfare Programs (means-tested benefit programs .eg food-stamps, ADC, public assistance) collectively draw about $1 trillion from our state and Federal budgets each year.

Assumption: about $6000/citizen/year as a UBI would provide a financial floor and increase citizen consumption levels in support of our economy going forward (Trusts/premiums/supports for existing ObamaCare, Soc. Sec, and Medicare will remain in place and are not counted in Classic Welfare Program funding above).

Question: How to fund this UBI?

If the revenues used to support means-tested benefit programs were directed toward the UBI that would account for $3125 of the $6000 target. Under the existing system a much smaller percentage of the population receive much larger average benefits - a source of much political dissent and requiring administrative oversite / screening activity. There are obvious downsides to impoverished individuals transitioning to UBI; but the overall benefits to the average american would be significant.

To reach the $6000 target consider tapping into shareholder wealth and corporate earnings as described below:

  • 1.25% annual tax on average market evaluation of shares of public corporations - paid by individual shareholders --> contributes $742 to UBI target.
  • 3.9% VAT from corporate earnings paid by the corporate entity (not from individual income) -- > contributes $2072 toward UBI target.

US individual income tax structure is assumed unchanged. This proposal adds a wealth tax on individuals owning public shares (around a penny on the dollar) and an off-the top corporate earnings from operations tax.

Supporting calculations: 1x10^12 / 3.2x10^8 = $3125 + ($1.9x10^13 * 1.25x10^-2 ) / 3.2x10^8 = $742 + ($1.7x10^13 * 3.9x10^-2) / 3.2x10^8 = $2072 Sum= $5938

Some thoughts: There are other sources of untaxed transactions and wealth in our economy. In particular the areas of capital gains and pass-through transactions. Also, non-public shares and private partnerships might be sources of tax revenue -- I didn't have ready information on their national valuations so I didn't consider them in the above back-of-envelope calculations.

I think that the point to be made is that it is possible to consider funding UBI levels in the US that have positive impacts on the average American -- reducing social tensions as everyone shares in the UBI equally; while drawing much of the extra funding from private wealth and corporate earnings. This is especially pertinent in the age of automation as more and more of our economy is capital based with labor receiving on average less and less of the pie.