FacebookTwitterRedditEmail

Doing the Math: What it Takes to Fund a Universal Basic Income

As the economic insecurity of a large segment of the country continues without relief (debts, taxes, low wages, health costs, education costs, etc.), some big new ideas (like the Green New Deal) are getting attention.

In my last piece at Counterpunch, “Your Check is in the Mail” (18 April 19), I examined one of these big new ideas: the proposal for a universal basic income (UBI) put forth by presidential candidate Andrew Yang, who proposes to give every US citizen over eighteen years of age $1000 a month. He calls it the Freedom Dividend.

Yang argues that automation and robotics are relentlessly eliminating wage-labor jobs, hence the need for a UBI. He may be right. I speculated that a UBI might be paid out of corporate profits, but it turns out that that’s not where the money is.

To see how it can be funded, let’s do some math:

The current adult (18 plus) population of the US is about 250 million people. Giving $12,000/year to each person would cost about $3 trillion. To put that in context, the federal budget is about $4 trillion/year, including $700 billion for the military, while total annual US corporate profit is about $2 trillion/year in an economy of about $21 trillion.

The total net financial assets of American households, according to the Federal Reserve, are much greater than that. They add up to about $70 trillion. What are net financial assets? They include stocks, bonds, funds, and other financial instruments. That’s where the money is.

The major asset for most Americans is their home. Net financial assets don’t include your personal property (your home, vehicles, furnishings, art, etc.); nor the debts you owe. Exempting personal property from a net financial asset tax protects the major assets of most people, and shifts the tax burden to those holding mainly financial assets.

If that $70 trillion of net financial assets were to be spread equally among 250 million adult Americans, each of us would own a piece of the nation’s financial pie worth $280,000.

But the pie is in fact not equally divided. Presently, financial asset distribution across the population shows that 22% of the population has financial assets greater than $280,000, and 78% has fewer or no assets at all. That’s one way to distinguish the haves from the have-nots.

Net financial assets, in short, may be the only pool of wealth deep enough to fund something as big as a UBI. To produce the $3 trillion dollars needed to fund Yang’s UBI, you’d have to tax the $70 trillion of net financial assets at a rate of 4.3 %.

Everyone would pay the same rate on the value of their net financial assets. But since every adult would also be receiving $12,000 UBI/year, only those with financial assets over $280,000 would actually pay the tax.

Actual tax payers would be the 22% of the population with net financial assets over $280,000. The vast majority–78% of the population–would receive more in UBI payments than they would pay in a net financial assets tax.

Some examples: If I had, say, $100,000 in taxable net financial assets, I would have a $4300 tax bill (at a 4.3% rate), but I would also have a UBI of $12,000, a gain of $7700. If I have taxable net financial assets of $280,000, the UBI and the tax would both be the same at $12,000. And if I had, say, $500,000 in taxable net financial assets, I would have a tax bill of $21,000; but I would still have the offsetting UBI of $12,000, trimming my actual tax to $9000.

In short, if you tax financial assets, it looks like there’s plenty of money to fund the UBI. Let’s consider some of the pros and cons.

Funding a UBI with a net asset tax has the advantage of not being inflationary. By redistributing existing wealth, it avoids the need to print money. It also avoids cuts in social programs which fall disproportionately on lower income individuals. And, as a simple redistribution system, it requires little bureaucracy.

Although Yang’s UBI is designed to make up for the long term erosion of jobs, giving out $12,000/year–combined with continued low-income supplements like welfare, food stamps, etc.–might lead to labor shortages, especially for low-paying jobs. A lower UBI–say $6000/year–might be less disruptive of important service jobs.

Perhaps the most visceral criticism of UBI is the widely felt moral reaction that money should be earned by hard work, not just redistributed with no strings attached. But, if Yang is right, some form of UBI may be in our future as jobs disappear.

Are holders of large financial assets–the 22%–willing to share their assets to make it happen? No doubt most would resist. Yet, without such a controversial tax, the much needed redistribution of wealth, which the UBI would promote, looks unlikely.

More articles by:

Adrian Kuzminski is a scholar, writer and citizen activist who has written a wide variety of books on economics, politics, and democracy. 

bernie-the-sandernistas-cover-344x550
September 19, 2019
Stephen Martin
The Perspicacity of Mcluhan and Panopticonic Plans of the MIC
September 18, 2019
Kenneth Surin
An Excellent Study Of The Manufactured Labour “Antisemitism Crisis”
Patrick Cockburn
The Saudi Crown Prince Plans to Make Us Forget About the Murder of Jamal Khashoggi Before the US Election
W. T. Whitney
Political Struggle and Fixing Cuba’s Economy
Ron Jacobs
Support the Climate Strike, Not a Military Strike
John Kendall Hawkins
Slouching Toward “Bethlehem”
Ted Rall
Once Again in Afghanistan, the U.S. Proves It Can’t Be Trusted
William Astore
The Ultra-Costly, Underwhelming F-35 Fighter
Dave Lindorff
Why on Earth Would the US Go to War with Iran over an Attack on Saudi Oil Refineries?
Binoy Kampmark
Doctored Admissions: the University Admissions Scandal as a Global Problem
Jeremy Corbyn
Creating a Society of Hope and Inclusion: Speech to the TUC
Zhivko Illeieff
Why You Should Care About #ShutDownDC and the Global Climate Strike  
Catherine Tumber
Land Without Bread: the Green New Deal Forsakes America’s Countryside
Liam Kennedy
Boris Johnson: Elitist Defender of Britain’s Big Banks
September 17, 2019
Mario Barrera
The Southern Strategy and Donald Trump
Robert Jensen
The Danger of Inspiration in a Time of Ecological Crisis
Dean Baker
Health Care: Premiums and Taxes
Dave Lindorff
Recalling the Hundreds of Thousands of Civilian Victims of America’s Endless ‘War on Terror’
Binoy Kampmark
Oiling for War: The Houthi Attack on Abqaiq
Susie Day
You Say You Want a Revolution: a Prison Letter to Yoko Ono
Rich Gibson
Seize Solidarity House
Laura Flanders
From Voice of America to NPR: New CEO Lansing’s Glass House
Don Fitz
What is Energy Denial?
Dan Bacher
Governor Newsom Says He Will Veto Bill Blocking Trump Rollback of Endangered Fish Species Protections
Thomas Knapp
Election 2020: Time to Stop Pretending and Start Over
W. Alejandro Sanchez
Inside the Syrian Peace Talks
Elliot Sperber
Mickey Mouse Networks
September 16, 2019
Sam Husseini
Biden Taking Iraq Lies to the Max
Paul Street
Joe Biden’s Answer to Slavery’s Legacy: Phonographs for the Poor
Paul Atwood
Why Mattis is No Hero
Jonathan Cook
Brexit Reveals Jeremy Corbyn to be the True Moderate
Jeff Mackler
Trump, Trade and China
Robert Hunziker
Fukushima’s Radioactive Water Crisis
Evaggelos Vallianatos
The Democrats and the Climate Crisis
Michael Doliner
Hot Stuff on the Afghan Peace Deal Snafu
Nyla Ali Khan
Spectacles of the Demolition of the Babri Masjid in Uttar Pradesh and the Revocation of the Autonomous Status of Kashmir
Stansfield Smith
Celebrating 50 Years of Venceremos Brigade solidarity with the Cuban Revolution
Tim Butterworth
Socialism Made America Great
Nick Licata
Profiles in Courage: the Tories Have It, the Republicans Don’t
Abel Prieto
Cubanness and Cuban Identity: the Importance of Fernando Ortiz
Robert Koehler
Altruists of the World Unite!
Mel Gurtov
Farewell, John Bolton
Weekend Edition
September 13, 2019
Friday - Sunday
Paul Street
The Age of Constitutional Coups
Rob Urie
Bernie Sanders and the Realignment of the American Left
Anthony DiMaggio
Teaching the “War on Terror”: Lessons for Contemporary Politics
FacebookTwitterRedditEmail