November 12, 2013

A basic income of about $10,000 per US citizen would work mathematically

Switzerland will soon be voting on a proposal for a basic income for all of their citizens.

Certain wonks on the libertarian right and liberal left have come to a strange convergence around the idea — some prefer an unconditional “basic” income that would go out to everyone, no strings attached; others a means-tested “minimum” income to supplement the earnings of the poor up to a given level. The case from the right is one of expediency and efficacy.

Let’s say that Congress decided to provide a basic income through the tax code or by expanding the Social Security program. Such a system might work better and be fairer than the current patchwork of programs, including welfare, food stamps and housing vouchers. A single father with two jobs and two children would no longer have to worry about the hassle of visiting a bunch of offices to receive benefits. And giving him a single lump sum might help him use his federal dollars better. Conservatives think, such a program could significantly reduce the size of our federal bureaucracy. It could take the place of welfare, food stamps, housing vouchers and hundreds of other programs, all at once.

The left is more concerned with the power of a minimum or basic income as an anti-poverty and pro-mobility tool. There happens to be some hard evidence to bolster the policy’s case. In the mid-1970s, the tiny Canadian town of Dauphin ( the “garden capital of Manitoba” ) acted as guinea pig for a grand experiment in social policy called “Mincome.” For a short period of time, all the residents of the town received a guaranteed minimum income. About 1,000 poor families got monthly checks to supplement their earnings.

Evelyn Forget, a health economist at the University of Manitoba, has done some of the best research on the results. Some of her findings were obvious: Poverty disappeared. But others were more surprising: High-school completion rates went up; hospitalization rates went down. “If you have a social program like this, community values themselves start to change,” Forget said.

The US federal budget spending $3.7 trillion in 2014 and was $3.45 trillion in 2013. There was $700-1 trillion in deficit. The level that went to assistance programs was about $2-2.2 trillion.

State tax levels total about $750-800 billion.

There are about 230 million people over the age of 21 in the USA. About 30% would have a significant part of the minimum income taxed back at their marginal rate. This could be used to provide some level of basic income for those under the age of 21. If there was some level of increased tax claw back on the higher income (top 10%) people then there would be more for the families supporting kids. So the number would basically work for providing a basic income of about $10,000 per person for those 21 and over and about $5000 per child 20 and under.

It could be possible to save 2-4% with simplified administration of a cleaner and simpler assistance policy.

The average monthly Social Security benefit for a retired worker was about $1,230 at the beginning of 2012. So the 51 million people who currently get Social security would have to get grandfathered to that level or probably more. Those with social security vote so the merging of social security and the basic income would probably require some kind of phase in period, where they would still get social security and some part of basic income. Some form of taxation clawback would be needed to recover from those with more combined income.

This would be like providing the lower 70% with about $5 per hour (for 2000 hours, 50 weeks at 40 hours per week) for individuals, $10 per hour for a couple and $15 per hour for a couple with 2 kids.

Just having the basic income would be tough, but would combine with lower wage jobs by eliminating the need for one or two full time minimum wage jobs or replacing another lower wage job.

Here is a 4 page summary of the Charles Murray “In Our Hands: A Plan to Replace the Welfare State.” He suggested guaranteeing $10,000 a year to anyone meeting the following conditions: be American, be over 21, stay out of jail and — as he once quipped — “have a pulse.” It was written in 2006.

There are various reviews of the book. Here is a 6 page review of the book

By converting all welfare payments, Murray calculates that a payment of $10,000 p.a. could be made. But there is a twist—once earnings from other sources, mostly jobs,exceeds $25,000, the payment will be surtaxed at 20%. This means those individually earning more than $50,000 will receive no net Plan-money.

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