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I once calculated the tax implications of a basic income where everyone received a lump sum paid for by a flat income tax. A basic income at the current welfare

I once calculated the tax implications of a basic income where everyone received a lump sum paid for by a flat income tax. A basic income at the current welfare rate seemed to be easily achievable. I seem to recall that a 20k basic income was at the upper limit of what would be achievable without an exorbitant income tax rate. Many comments on the web are dismissive of a basic income because they simply multiply the per-person dollar figure by the total population and say that it is way too expensive. One needs to look at the current distribution of income, the existing level of welfare and subsidies, and the progressive income tax schedule to compute how much the basic income is likely to cost. The final pre-tax distribution of income will also change, but that is much more difficult to estimate. This idea dates back to at least Thomas Paine's Agrarian Justice and is supported by many (at least 1/2 a dozen) nobel prize winning economists. A basic income is interesting to study and has many compelling features, but it is complicated enough that it is not possible to easily debate its overall merit via comments on hacker news.

forrestthewoods 12y ago
I'd genuinely like to see your numbers because I've not seen a single napkin math calculation that makes is even remotely feasible. (for the United States)
- eru 12y ago
  In Europe it's entirely feasible, if your whole goal is to more or less keep the same post-tax, post-welfare distribution of income. You just do away with the traditional combination of means tested welfare and means tested taxes, and replace it with means testing for the taxes only. In the US that would also be possible, but the level of basic income you arrive at might be bloody low. I don't know the data. At least, you'd save on bureaucracy.
  - learc83 12y ago
    >In the US that would also be possible, but the level of basic income you arrive at might be bloody low. Why would that be? The US has a significantly higher GDP per capita than every European country except Norway, Luxemburg, and maybe Switzerland (depending on who you ask). If you're talking about limiting it to current social welfare expenditures, the US spends about 20% of GDP on social welfare [1], and many European countries spend close to 30%. But since our GDP per capita is so much higher it should come out fairly close per person. [1] http://www.oecd-ilibrary.org/social-issues-migration-health/government-social-spending_20743904-table1 http://www.oecd-ilibrary.org/social-issues-migration-health/...
    - eru 12y ago
      Thanks for the numbers.
  - forrestthewoods 12y ago
    This may sound rude, but I literally do not care about any response that does include napkin math. The concept of basic income has been quite popular on HN and elsewhere for the past 6-12 months. I have asked for napkin math probably two dozen times. No one has ever been able to provide it. I love the concept of basic income. I've played with the numbers quite a bit myself. I've tried to make it work. I can't do it. Not even close for the US. I'm desperate for someone to post some basic of basic back of the napkin level math. So far no one has done it. I do not consider that a good sign.
    - learc83 12y ago
      US GDP ~16 trillion. Government social spending 20% of GDP[1] or about 3.2 trillion dollars. US population about 320 million. That's right at about $10k per year to every American if we capped it at current government social spending. So a family of 4 would get $40k a year. You could make that 3.2 trillion go a lot further by raising taxes gradually so that when you reach say $75k you're paying as much extra taxes are you receive in Basic Income. I'm pretty sure [1] includes state and local spending as well so this would be tricky. [1] http://www.oecd-ilibrary.org/social-issues-migration-health/government-social-spending_20743904-table1 http://www.oecd-ilibrary.org/social-issues-migration-health/...
      - TTPrograms 12y ago
        That's a good point that if you're giving everyone say $20,000 a year you could still set taxes such that for a majority of employed adults you're net zero. So for simplicity you could assume just paying welfare recipients. The point of doing it this way vs current welfare would be increased transparency / reduced bureaucracy and providing more of a sliding scale of income classes rather than welfare / non-welfare buckets. In principle the costs could be made to be nearly equivalent.
      - forrestthewoods 12y ago
        Here's a good resource with more data. Including federal vs state. http://www.usgovernmentspending.com/current_spending http://www.usgovernmentspending.com/current_spending I'm curious what that 20% of social spending covers. It certainly includes health so we can't say "eliminate medicare/medicaid, but you get a yearly check for $10,000!". That's not gonna cut it. Federal+State+Local welfare spending is only 8% of total gov. spend and only ~3.1% of GDP. A long, long, long ways from being able to cut a $10k check per person. Edit: Why on earth would anyone downvote that? It boggles the mind.
- ppereira 12y ago
  I don't see your email address in your profile. I did the calculation about 3 years ago for Canada, so it may or may not be useful. It is not so far fetched when you consider that we already provide some welfare support and a progressive income tax schedule with a complete exemption for low incomes. Most basic incomes proposals would do away with regular social assistance (while retaining special programs for the disabled, etc.) and would do away with the exemption for low incomes, since that is compensated for by the basic income. Some have calculated that the progressive income tax could be entirely replaced with a flat tax with basic income and be close to optimal. I am not so optimistic, but the great thing about a basic income is that it can be tested at a low level and then slowly increased to determine its actual cost.
  - forrestthewoods 12y ago
    username + gmail
- pjc50 12y ago
  You don't actually have to run the numbers, because you can look through the dollar values to the underlying consumption distribution. And running the numbers is complicated by the likely discontinuity in wage and price inflation. Is there enough food in the US to feed everyone? Undoubtably yes. Is there enough space for housing? Yes, although the spatial distribution is a problem. But if it's no longer so essential to live where the jobs are .. So, if the scheme is targeted to that everyone can afford a minimum standard of living, and taxes are increased so that income above that sees less of an increase in standard of living, the feasibility is obvious. The real problems are the desire to exclude "undesirables" and "non-contributors", which results in an expensive, bureaucratic, and vindictive system. (The UK is heading in the other direction with the "bedroom tax" and other changes leading to a big rise in demand from foodbanks)
- adventured 12y ago
  It's very feasible for the US. Not everyone would get a basic income however, it would have to erode as you earn more income. And note, this is just the Federal Government's portion. http://www.budget.senate.gov/republican/public/index.cfm/2012/12/total-welfare-spending-equates-to-168-per-day-for-every-household-in-poverty http://www.budget.senate.gov/republican/public/index.cfm/201... "Based on data from the Congressional Research Service, cumulative spending on means-tested federal welfare programs, if converted into cash, would equal $167.65 per day per household living below the poverty level. By comparison, the median household income in 2011 of $50,054 equals $137.13 per day. Additionally, spending on federal welfare benefits, if converted into cash payments, equals enough to provide $30.60 per hour, 40 hours per week, to each household living below poverty."
  - dragonwriter 12y ago
    > Not everyone would get a basic income however, it would have to erode as you earn more income. Then its not a basic income. If it is a basic income, everyone would get it. You could, of course, have a similar net effect to tapering off with income simply by adjusting the progressivity of the income tax system, which is what UBI proponents usually propose. Since you changing the rates of the tax system, but not the behavior of the system, doesn't add complexity or administrative overhead, but eliminating the means-testing on the benefit side does reduce complexity and administrative overhead, this is seen as a net win even though (overhead aside) the net effect to recipients is the same.
tomp 12y ago
One should also keep in mind that there are many other things that can be taxed besides income (which, IMO, should be taxed less). Things like rental real estate, inheritance, foreign real estate investments, ... all these would encourage people, especially young people, to work more and more efficiently, and as a consequence spend more, and discourage concentration of capital and growing inequality.

forrestthewoods 12y ago

I'd genuinely like to see your numbers because I've not seen a single napkin math calculation that makes is even remotely feasible. (for the United States)

eru 12y ago
In Europe it's entirely feasible, if your whole goal is to more or less keep the same post-tax, post-welfare distribution of income. You just do away with the traditional combination of means tested welfare and means tested taxes, and replace it with means testing for the taxes only. In the US that would also be possible, but the level of basic income you arrive at might be bloody low. I don't know the data. At least, you'd save on bureaucracy.
- learc83 12y ago
  >In the US that would also be possible, but the level of basic income you arrive at might be bloody low. Why would that be? The US has a significantly higher GDP per capita than every European country except Norway, Luxemburg, and maybe Switzerland (depending on who you ask). If you're talking about limiting it to current social welfare expenditures, the US spends about 20% of GDP on social welfare [1], and many European countries spend close to 30%. But since our GDP per capita is so much higher it should come out fairly close per person. [1] http://www.oecd-ilibrary.org/social-issues-migration-health/government-social-spending_20743904-table1 http://www.oecd-ilibrary.org/social-issues-migration-health/...
  - eru 12y ago
    Thanks for the numbers.
- forrestthewoods 12y ago
  This may sound rude, but I literally do not care about any response that does include napkin math. The concept of basic income has been quite popular on HN and elsewhere for the past 6-12 months. I have asked for napkin math probably two dozen times. No one has ever been able to provide it. I love the concept of basic income. I've played with the numbers quite a bit myself. I've tried to make it work. I can't do it. Not even close for the US. I'm desperate for someone to post some basic of basic back of the napkin level math. So far no one has done it. I do not consider that a good sign.
  - learc83 12y ago
    US GDP ~16 trillion. Government social spending 20% of GDP[1] or about 3.2 trillion dollars. US population about 320 million. That's right at about $10k per year to every American if we capped it at current government social spending. So a family of 4 would get $40k a year. You could make that 3.2 trillion go a lot further by raising taxes gradually so that when you reach say $75k you're paying as much extra taxes are you receive in Basic Income. I'm pretty sure [1] includes state and local spending as well so this would be tricky. [1] http://www.oecd-ilibrary.org/social-issues-migration-health/government-social-spending_20743904-table1 http://www.oecd-ilibrary.org/social-issues-migration-health/...
    - TTPrograms 12y ago
      That's a good point that if you're giving everyone say $20,000 a year you could still set taxes such that for a majority of employed adults you're net zero. So for simplicity you could assume just paying welfare recipients. The point of doing it this way vs current welfare would be increased transparency / reduced bureaucracy and providing more of a sliding scale of income classes rather than welfare / non-welfare buckets. In principle the costs could be made to be nearly equivalent.
    - forrestthewoods 12y ago
      Here's a good resource with more data. Including federal vs state. http://www.usgovernmentspending.com/current_spending http://www.usgovernmentspending.com/current_spending I'm curious what that 20% of social spending covers. It certainly includes health so we can't say "eliminate medicare/medicaid, but you get a yearly check for $10,000!". That's not gonna cut it. Federal+State+Local welfare spending is only 8% of total gov. spend and only ~3.1% of GDP. A long, long, long ways from being able to cut a $10k check per person. Edit: Why on earth would anyone downvote that? It boggles the mind.
ppereira 12y ago
I don't see your email address in your profile. I did the calculation about 3 years ago for Canada, so it may or may not be useful. It is not so far fetched when you consider that we already provide some welfare support and a progressive income tax schedule with a complete exemption for low incomes. Most basic incomes proposals would do away with regular social assistance (while retaining special programs for the disabled, etc.) and would do away with the exemption for low incomes, since that is compensated for by the basic income. Some have calculated that the progressive income tax could be entirely replaced with a flat tax with basic income and be close to optimal. I am not so optimistic, but the great thing about a basic income is that it can be tested at a low level and then slowly increased to determine its actual cost.
- forrestthewoods 12y ago
  username + gmail
pjc50 12y ago
You don't actually have to run the numbers, because you can look through the dollar values to the underlying consumption distribution. And running the numbers is complicated by the likely discontinuity in wage and price inflation. Is there enough food in the US to feed everyone? Undoubtably yes. Is there enough space for housing? Yes, although the spatial distribution is a problem. But if it's no longer so essential to live where the jobs are .. So, if the scheme is targeted to that everyone can afford a minimum standard of living, and taxes are increased so that income above that sees less of an increase in standard of living, the feasibility is obvious. The real problems are the desire to exclude "undesirables" and "non-contributors", which results in an expensive, bureaucratic, and vindictive system. (The UK is heading in the other direction with the "bedroom tax" and other changes leading to a big rise in demand from foodbanks)
adventured 12y ago
It's very feasible for the US. Not everyone would get a basic income however, it would have to erode as you earn more income. And note, this is just the Federal Government's portion. http://www.budget.senate.gov/republican/public/index.cfm/2012/12/total-welfare-spending-equates-to-168-per-day-for-every-household-in-poverty http://www.budget.senate.gov/republican/public/index.cfm/201... "Based on data from the Congressional Research Service, cumulative spending on means-tested federal welfare programs, if converted into cash, would equal $167.65 per day per household living below the poverty level. By comparison, the median household income in 2011 of $50,054 equals $137.13 per day. Additionally, spending on federal welfare benefits, if converted into cash payments, equals enough to provide $30.60 per hour, 40 hours per week, to each household living below poverty."
- dragonwriter 12y ago
  > Not everyone would get a basic income however, it would have to erode as you earn more income. Then its not a basic income. If it is a basic income, everyone would get it. You could, of course, have a similar net effect to tapering off with income simply by adjusting the progressivity of the income tax system, which is what UBI proponents usually propose. Since you changing the rates of the tax system, but not the behavior of the system, doesn't add complexity or administrative overhead, but eliminating the means-testing on the benefit side does reduce complexity and administrative overhead, this is seen as a net win even though (overhead aside) the net effect to recipients is the same.

tomp 12y ago

One should also keep in mind that there are many other things that can be taxed besides income (which, IMO, should be taxed less). Things like rental real estate, inheritance, foreign real estate investments, ... all these would encourage people, especially young people, to work more and more efficiently, and as a consequence spend more, and discourage concentration of capital and growing inequality.