My estimate is that a United States Basic Income will cost $1.8 trillion a year. I based the $1.8 trillion figure upon an individual Basic Income of $500 a month for 300 million people.
Calculating the cost of a National Basic Income is simple. I lay my calculations out below:
· A Basic Income for one person will cost $6,000 a year because 12 x $500 equals $6,000.
· Therefore, a Basic Income for 10 people will cost $60,000 a year.
· A Basic Income for 100 people will cost $600,000 a year.
· A Basic Income for 1,000 people will cost $6 million a year.
· A Basic Income for 10,000 people will cost $60 million people a year.
· A Basic Income for 100,000 people will cost $600 million a year.
· A Basic Income for one million people will cost $6 billion a year.
· A Basic Income for 10 million people will cost $60 billion a year.
· A Basic Income for 100 million people will cost $600 billion a year.
· A Basic Income for 200 million people will cost $1.2 trillion a year.
· A Basic Income for 300 million people a year will cost $1.8 trillion a year.
An American Basic Income would Cost $1.8 Trillion a Year
My guess is that around two-thirds of the US population would qualify for a Basic Income. The US Census Bureau estimates America’s population at 326.767 million people.
Therefore, a Basic Income will cost around $1.8 trillion a year if most Americans receive it. I use the $1.8 trillion figure because an effective Basic Income will need to be available to most Americans. My guess is most Americans, around 300 million, would receive the Basic Income.
Paying for the Basic Income is not as difficult as you might think. Statista estimated the 2018 US Gross Domestic Product (GDP) at $20.413 trillion. Therefore, America has the money to pay for a Basic Income for most citizens right now.
Economic growth can cover the cost of Basic Income if Statista’s forecasts are correct. Statista predicted that the US GDP will grow to $23.787 trillion in 2023. We can pay a Basic Income and still have plenty of money left over to fund the federal government with that money.
Bureaucrats are Basic Income’s Natural Enemies
The greatest obstacles to implementing an American Basic Income will be the politicians, bureaucrats, and government contractors that fear losing a large share of federal largess.
Bureaucrats are Basic Income’s natural enemies because we can distribute it without them. Politicians hate Basic Income because it will be an entitlement they cannot mess with.
Government contractors make money by diverting tax money to their businesses. They could not touch cash paid directly to citizens as Basic Income.
These groups; and their apologists in the media and academia, will fight the Basic Income with everything they have. Bureaucrats, politicians, and government contractors understand Basic Income reduces their power and income.
Basic Income is good for Business
Therefore, the natural allies for Basic Income advocates are those groups that want smaller government. Smaller government advocates include business, Wall Street, libertarians, cultural and fiscal conservatives, and local governments.
Basic Income is good for business and Wall Street for two reasons.
1) Basic Income will reduce the size, power, and scope of government because government will have less money to play with.
2) Basic Income will give average people more money to spend on consumer goods. Business will make more money by selling more stuff to more people.
Basic Income will help libertarians and fiscal conservatives achieve their goal of reducing the size and power of government. Basic Income will reduce the power and influence of the social services bureaucracy which is a major goal of cultural conservatives.
Basic Income will decentralize government power by redistributing tax money directly to citizens. Local government will benefit because it will reduce the size, scope and power of the state and federal bureaucracies.
Basic Income will increase consumer spending generating more sales tax revenue for local governments. Federal and state bureaucrats will have less money and power to interfere with local government. Communities will benefit because local leaders will have more money and power.
Basic Income gives children a Leg Up
America’s high-income families spent an average of $7,500 per year on each child in 2005–2007, The Washington Center for Equitable Growth calculated.
That gives rich kids a huge advantage, only very smart or talented poor children can overcome. Most families cannot compete because they cannot spend a fraction of what the affluent spend on their kids. For example an affluent family can afford to move to a suburb with better schools, or drive a child across town to attend a better public school.
Therefore, a Basic Income will level the economic playing field by giving poor families similar advantages to the rich. A poor family with two kids would receive an extra $12,000 a year from the Basic Income. Obviously, not every poor family will spend that money on their kids but most will.
More importantly, the middle and working-class families would have more money to spend on their kids without working themselves to death. Many parents will spend more time with their kids. Nobody will work overtime or multiple jobs to pay for a middle-class lifestyle.
Children will be far better off with increased income and more parental attention. Cultural conservatives will love that because it would strengthen families. More parents might stay home with kids or take time off for things like the church, soccer, and Scouts.
Capital Gains and Basic Income
The capital gains tax is a great way to finance an American Basic Income. The government levies capital taxes on the proceeds of stocks and other investments so only the affluent pay them.
The current capital gains tax rates are 15% and 20%. Obviously, that people who make their money from investments a huge advantage in economic warfare.
We can eliminate that advantage by raising the capital gains tax and redistributing half the money raised as Basic Income. I list my suggestions for capital gains tax rates below.
· Under $500,000 in capital gains — 0%. This would exempt most investors from capital gains and eliminate the political pressure to cut the rates.
· $500,000 to $1 million capital gains–25%.
· $1 million to $10 million capital gains — 50%.
· $10 million to $100 million in capital gains–60%.
· $100 million to $1 billion in capital gains–70%.
· $1 billion to $10 billion in capital gains–80%.
· Over $10 billion capital gains — 90%.
The greatest advantage to this system would be the reduction or elimination of the vast fortunes that give wealthy investors incredible amounts of power and influence. Instead, we will redistribute the wealth to ordinary people to increase spending and generate more economic activity.
Wall Street would benefit all Americans rather than a handful of hedge fund gurus with a combination of Basic Income and a just Capital Gains Tax.
America can afford a Basic Income for its citizens. The question we need to ask is will America survive without a Basic Income.
This op-ed first appeared at the Market Mad House where I tirelessly promote the Basic Income.