Guaranteed minimum income: how much would it cost?

[phantom power]

This is a fairly short writeup, but it's not possible to include all the assumptions and reasoning in the traditional 4 paragraph limit, so I recommend reading the original.

We were talking not long ago about universal basic income policy, and there were a variety of opinions about the desirability, political sustainability and implications of such a policy. But, before arguing about those issues, it’s useful to consider whether a basic income is feasible at all and, if so, what kinds of tax policies, and adjustments to other welfare policies, would be required to support it. I’ve considered the relatively easy case of a guaranteed minimum income, rather than a universal basic income paid to everyone, as advocated by Philippe von Parijs and others.

...

So, what matters is making the benefit unconditional for those with no other income of their own. As a first step, that would mean paying the basic income to the 10 per cent of the population I’ve classed as workers dependents, raising the total cost to 9 per cent of income. That requires an increase in the total tax share from 30 to 35 per cent, which is significant, but still well within the range of ordinary variations. Assuming the tax increase is borne equally by labor and capital, the result is to reduce average post-tax earnings to 65 per cent of total income. However, because most of the benefits flow to workers’ dependents, there’s actually a small increase in the average income of worker households, net of taxes and transfers.

The big question is whether current workers will respond by leaving the workforce and relying on the basic income. We’d expect and want this to happen to some extent – the whole idea is to free workers from absolute dependence on wage income. But if the shift is too large, the tax burden will become unsustainable.

...

Summing up the exercise, I’d say that a universal basic income of the type I’ve sketched out here is economically feasible, but not, in the current environment, politically sustainable. However, while economic feasibility is largely a matter of arithmetic, and therefore resistant to change, political sustainability is more mutable, and depends critically on the distributional questions I’ve elided so far. A shift of 10 per cent of national income away from working households might seem inconceivable, but of course that’s precisely what’s happened in the US over the last twenty or thirty years, except that the beneficiaries have not been the poor but the top 1 per cent. So, if that money were clawed back by the state, it could fund a UBI at no additional cost to the 99 per cent.

http://crookedtimber.org/2012/08/05/universal-basic-income-how-much-would-it-cost/#more-25394

[canoeist52]

1. Intriguing. Thinking outside the box and worth a discussion.

I'm in, Anyone else?

[DJ13]

2. This needs to be framed as a rational 'free market' capitalist idea

As automation continues the relentless march towards ever increasing unemployment, a minimum income is the only answer, IF we want to continue to be a capitalist society.

Anything less will sooner, rather than later, lead to revolution.

[malthaussen]

3. The idea that "all must work" is obsolete.

Because there just isn't enough work. Recreating the kind of frenzied consumer culture we had in the 50's and 60's will just plunder resources faster and pile up more junk.

It has long been time to begin riding the Purple Wage.

-- Mal

[salvorhardin]

6. Philip Jose Farmer. Nice! +1,000

[Scuba]

4. Moody's (you know, the bond-rating folks) understand where/how to stimulate the economy...

<a href="http://imgur.com/T7qoo"><img src="" title="Hosted by imgur.com" alt="" /></a>

[salvorhardin]

5. Milton Friedman championed a version of guaranteed basic income

He was an ardent proponent of the Negative Income Tax as an alternative to all welfare, although he wanted to couple it with a Flat Tax. The idea was simple -- if you earned less than x then the IRS would send you money.

Nixon and Moynihan teamed up to get it through Congress, but it just wasn't politically feasible. Conservatives saw it as a handout, and liberals saw it (rightly) as putting the poor at greater risk since the negative income tax was so small.

In the end we did get a version of the negative income tax though, and it's still with us to this day -- the Earned Income Credit.

On edit: Here's an older NY Times story about Friedman's Negative Income Tax plan -- http://www.nytimes.com/2006/11/23/business/23scene.html