As you go through the hassle of doing your taxes this year, perhaps paying someone else to do them for you (to avoid the headache), do you ever think that there must be a simpler, easier way to do taxes? If a group of hyper-intelligent aliens came to earth, they would, I think, know how to install a tax system that eliminates (or radically reduces) tax-code cheating, was fair to the poor, and was simple and easy.
I think I have such a system. It is going to sound insane and ludicrous at first, but if you’ll indulge me, I promise to support what I am saying with plenty of hard facts.
Here are the basic points of my proposal:
- We have a flat tax of 30% on all income. This new tax is very straightforward: No deductions, no tax breaks, no bullshit.
- We eliminate all welfare, unemployment insurance, food stamps, social security, and basically every other “safety net” program that we currently have in place.
- We pay every American adult 21 and older ten thousand dollars a year, tax-free. I mean everybody, from lazy bums making nothing to millionaires and everyone in between: all of them can receive ten thousand dollars per year tax free.
First, let’s look at some numbers: the amount of all personal incomes in the United States during the year 2012 was over 13.401 trillion dollars (I don’t think this includes corporate income, so this is probably a lowball estimate of taxable income). A thirty percent tax on that income would bring in over 4.02 trillion dollars.
In 2012, the United States budget was $3.729 trillion, which ran a deficit of over 1 trillion dollars. How much would my plan cost? To figure that out, we have to figure out how much our present welfare programs cost and how much a universal income program would cost. Here are the welfare programs and the percentage of the federal budget which they accounted for:
Unemployment insurance 0.99%
Food and nutrition assistance 3.89%
Housing assistance 1.74%
Earned income, Making Work Pay, and child tax credits 2.81%
Supplemental Security Income 1.74%
Child care, foster care, and adoption support 0.57%
Temporary Assistance for Needy Families 0.61%
All in all, these programs account for 12.35% of the federal budget. Again, this is probably a “lowball” estimation, since if we had universal basic income, many other programs (like medicare and veteran’s assistance) could probably be reduced. 12.35% of the budget ($3.729 billion) works out to over $460 billion dollars. Then we’ve got the social security administration, which costs a total of $805 billion as of 2012 (See here, under “Social Security Financing”). Then we’ve got welfare-type programs that exist within the states, which total up to $250 billion. Put all those together, and we’ve got a welfare state that runs over $1.515 trillion dollars a year (and more, if you count medicare, medicaid, veteran’s assistance and so on).
How much would universal basic income cost?About $2.71 trillion per year, which is almost $1.2 trillion more than we presently pay for welfare-type benefits. However, the flat-tax system would bring in $1.4 trillion more than the present system, which is a net gain of $200 billion. [If you’re curious about the number, see the addendum to this post].
In future posts, I will further explore the pro’s and con’s of universal basic income, including how it would affect working class, middle class, and wealthy individuals.
Addendum: How Much It Costs and Why
Since we had about 315 million people at the end of 2012, and about 86% of them were adults 21 and older (based on the percentages listed here under “Population by Age and Sex”), we would have roughly 271 million people on basic income (all of this, rest assured is an overestimate, the real percentage is lower than 86% and the actual number is lower than 271 million). At ten thousand dollars per person per year, that works out to about 2.71 trillion dollars. So, the country would pay out about 1.2 trillion dollars more in income benefits than it does presently. However, the flat tax system would bring about 1.4 trillion extra dollars in taxes, which means we could afford to fund this new program and we’d have borrowed 200 billion dollars less than what we did in 2012.
So, where did I get the figures for all this? As previously explained, a flat tax ought to bring in $4.02 trillion. In 2012, the government brought in $2.627 trillion dollars (not all of that came from income tax, but I will assume that it did just to make the calculations easier and to demonstrate just how much better a flat tax does than the present system). So, the flat tax brings in almost 1.4 trillion dollars more than our current tax code (just deduct what the flat tax brings in, 4.02 trillion, from what our present system brings in, which is 2.627 trillion). We currently pay out $1.515 trillion in welfare benefits, whereas universal basic income would pay out $2.71 trillion in welfare benefits. The difference between those two numbers is about $1.2 trillion. So overall, my system earns 1.4 trillion more, and pays out 1.2 trillion more, which results in 200 billion more for the federal government. On what the government brought in in 2012, see table S-1 on page 175 of the government’s official budget.
UPDATE: A similar plan was computed and similar numbers to my analysis were independently arrived at. That’s encouraging. The author wonders where we would get all the extra money involved; I think the flat tax would take care of that.