I'd like to introduce my ideas for the Guaranteed Universal Basic Income (GUBI) in the United States, starting with the fundamental terms then digging into the details.
Let's start with the headline: every U.S. citizen adult would receive $11,500 per year (2013 dollars), and every U.S. citizen child would receive $4,500, paid monthly. At age 65 the benefit would increase to $20,000 per year. Rich or poor, it doesn't matter: everybody receives the benefit. (The under 65 figures are very slightly over the U.S. poverty line, for reference.)
Simple, yes! Expensive? Not really, because here's a partial list of government programs that would be terminated: Social Security retirement benefits, Social Security disability benefits, Social Security survivors' benefits (mostly, except that orphaned children would receive the adult amount, and widows/widowers would receive an additional amount for up to 5 years equal to the child benefit), unemployment benefits, workers' compensation benefits, food and nutritional assistance programs (such as SNAP), "Section 8" housing benefits, home heating support programs, foster care and adoption assistance (mostly), Native American benefit programs, some veterans' benefits, and numerous tax expenditures (such as the Earned Income Tax Credit and Child Tax Credits), among others.
The minimum wage would be abolished. However, labor unions would be free to organize through "card check" (e.g. independently administered Internet voting) and to negotiate "closed shop" contracts with management in every state if both agree.
Benefits would be administered and paid through the Social Security Administration. GUBI would be 100% free of federal, state, and local taxes.
Benefits would be indexed to inflation. Since "chained" inflation indices seem fashionable, OK: Chained CPI-U will be used in general to adjust benefits. However, if using the Chained CPI-E results in a higher benefit amount than the Chained CPI-U (both calculated from the 2013 base year), then Americans age 62 and older will receive a benefit based on the higher CPI-E amount. The CPI-E better reflects inflation experienced by older Americans, but they will never be penalized even if their inflation experience is less than general inflation.
Individuals age 57 and older when GUBI begins would be able to join GUBI (immediately if they wish) or receive Social Security retirement benefits under the existing program and formula, including COLAs and taxability. Once they start receiving benefits under either formula the decision is irrevocable. Note that Social Security payroll taxes would be abolished for GUBI recipients, so nobody would "lose" anything. The maximum retirement benefit is currently just over $30,000 at age 66 (increasing to 67) compared to GUBI at $11,500 until age 65 and $20,000 (average) thereafter (with different inflation, taxability, and survivor terms). Some older Americans (with relatively high incomes and long working careers resulting in maximum Social Security contributions) might want to stay in the existing program (and in existing Medicare), even if it means waiting for benefits. Other Americans would and should want the immediate tax free GUBI benefit.
Taxes would change a lot and for the better. As mentioned, Social Security payroll taxes would be abolished for all but "classic" Social Security participants. Only older Americans already receiving classic Social Security or those who opt out of GUBI (among those 57 and older when GUBI starts) would continue paying payroll taxes. General revenues would fund GUBI and its transition, and the tax system would be radically simplified. GUBI would be tax free, but there would be no personal deductions or exemptions, no child tax credits, and no earned income tax credits. Tax rates would be progressive and start at 15% (from dollar one excluding GUBI) and increase smoothly up to 50%. (Remember, there are no payroll taxes under GUBI.) That is, there would be no brackets per se but rather a smooth formula of gradually increasing marginal rates up to the income threshold for the top 50% marginal rate. There would be no weird "bubble brackets" in the effective tax rates because there would be no deductions or credits to phase out. Interest, dividends, and capital gains would be treated as ordinary income but all gains would be subject to inflation adjustment like GUBI. That is, you'd only pay tax on the after-inflation gains. Tax preferences for retirement savings would be abolished since everybody is getting a guaranteed GUBI annuity already, since GUBI helps working people save more, and since taxing only after-inflation gains encourages saving. The threshold for the top rate would also be adjusted for inflation. The mortgage interest deduction and primary residence capital gains exemption would be eliminated, although almost no one would owe capital gains on long held property due to inflation indexing and maintenance expenses. Deductibility of state and local taxes would be limited to income taxes based on a simple percentage of federal income tax. Charitable, medical, and educational deductions would be mostly or completely eliminated, as examples.
Estate taxes would start at a 15% rate for estates above $1 million in value and rise smoothly to a 50% rate on estate amounts above $20 million. Annual gift limits would be set equal to the GUBI. Loopholes would be firmly closed, as always.
GUBI benefits would be very well protected. "Reverse annuity" contracts for GUBI benefits would be illegal and unenforceable. GUBI benefits would be protected against child support/divorce judgments and creditor claims. GUBI could be suspended to those who are not tax compliant, but the beneficiary would have the opportunity to dispute the suspension if true poverty would result. Partial GUBI benefits could be awarded under court order as restitution to a victim of a crime (and/or survivors) but only for the duration of a beneficiary's incarceration. Parole boards may not consider GUBI impacts in their decisions. Back GUBI would be paid to anyone wrongly imprisoned but would not be counted against any other awards for wrongful imprisonment.
GUBI benefits would be payable to Americans living overseas at 75% of full GUBI, reflecting the fact that many possible overseas locations have lower costs of living. Overseas Americans would be responsible for paying any gap between U.S. and overseas taxation (and only the gap), and any foreign taxes paid on their 75% GUBI would be refundable from the U.S. (with caveats). Expatriating Americans would have to pay back the net present value of GUBI payments they've personally received (i.e. the current GUBI amount multiplied by the number of months they received GUBI), and they would have to "mark their financial assets to market," i.e. pay the capital gains taxes owed if they sold all assets, as with today's "exit tax."
GUBI data access would be fairly heavily restricted to protect privacy.
Since GUBI benefits would be contingent on citizenship (and quite attractive) there would need to be a change to automatic birthright citizenship. But it should be a very narrow limitation. For example, it might be that a child born in the U.S. to foreign parents is not a U.S. citizen unless the mother has a legal, long-term (non-tourist) right to stay or unless the child has continuously resided in the U.S., even illegally, for his/her first 18 years of life (with the presumption that he/she has). To facilitate GUBI eligibility determinations and administration all beneficiaries would be able to obtain and renew U.S. passport cards free of charge, although there would be a modest fee ($20) for replacing a lost card.
Paired with GUBI, the federal government would also be responsible for two important public goods: healthcare and education. The government would operate (partly directly, partly on a contract basis not to exceed 50% of the system) a national network of medical centers and elder care facilities offering $10/visit and $10/drug care to every GUBI recipient and covering all "essential" medical care. Much of this system would be a relatively simple expansion of the VA, the best part of U.S. healthcare. And government would be responsible for delivering free K-12 education and $5000/year public university and technical colleges, primarily building on the existing state institutions. The Pentagon could continue to offer recruitment bonuses such as paying the $5000/year for higher education, cutting the medical co-pays in half, and pushing veterans to the front of the line for elective procedures (maximum 15 days wait instead of 45). Public medical and higher education expenses could be deducted from the beneficiary's next monthly GUBI payment if the beneficiary chooses to pay that way. The aforementioned passport card would facilitate access to these services.
The Federal Reserve would be granted the authority, as part of its stabilization mandates, to inject cash into the economy through GUBI rather than through the banking system to prevent or to reduce the impacts of financial crises. The Fed must exhaust GUBI policy responses before resorting to banking system injections in crises.
That's GUBI, at least in introductory form. It's simple, effective, and fair. It reduces the economic distortions of government and gives the American private sector tremendous competitive advantages. Practically everybody wins, even wealthy Americans who would benefit tremendously from the wealth generation GUBI would unleash.
Let's start with the headline: every U.S. citizen adult would receive $11,500 per year (2013 dollars), and every U.S. citizen child would receive $4,500, paid monthly. At age 65 the benefit would increase to $20,000 per year. Rich or poor, it doesn't matter: everybody receives the benefit. (The under 65 figures are very slightly over the U.S. poverty line, for reference.)
Simple, yes! Expensive? Not really, because here's a partial list of government programs that would be terminated: Social Security retirement benefits, Social Security disability benefits, Social Security survivors' benefits (mostly, except that orphaned children would receive the adult amount, and widows/widowers would receive an additional amount for up to 5 years equal to the child benefit), unemployment benefits, workers' compensation benefits, food and nutritional assistance programs (such as SNAP), "Section 8" housing benefits, home heating support programs, foster care and adoption assistance (mostly), Native American benefit programs, some veterans' benefits, and numerous tax expenditures (such as the Earned Income Tax Credit and Child Tax Credits), among others.
The minimum wage would be abolished. However, labor unions would be free to organize through "card check" (e.g. independently administered Internet voting) and to negotiate "closed shop" contracts with management in every state if both agree.
Benefits would be administered and paid through the Social Security Administration. GUBI would be 100% free of federal, state, and local taxes.
Benefits would be indexed to inflation. Since "chained" inflation indices seem fashionable, OK: Chained CPI-U will be used in general to adjust benefits. However, if using the Chained CPI-E results in a higher benefit amount than the Chained CPI-U (both calculated from the 2013 base year), then Americans age 62 and older will receive a benefit based on the higher CPI-E amount. The CPI-E better reflects inflation experienced by older Americans, but they will never be penalized even if their inflation experience is less than general inflation.
Individuals age 57 and older when GUBI begins would be able to join GUBI (immediately if they wish) or receive Social Security retirement benefits under the existing program and formula, including COLAs and taxability. Once they start receiving benefits under either formula the decision is irrevocable. Note that Social Security payroll taxes would be abolished for GUBI recipients, so nobody would "lose" anything. The maximum retirement benefit is currently just over $30,000 at age 66 (increasing to 67) compared to GUBI at $11,500 until age 65 and $20,000 (average) thereafter (with different inflation, taxability, and survivor terms). Some older Americans (with relatively high incomes and long working careers resulting in maximum Social Security contributions) might want to stay in the existing program (and in existing Medicare), even if it means waiting for benefits. Other Americans would and should want the immediate tax free GUBI benefit.
Taxes would change a lot and for the better. As mentioned, Social Security payroll taxes would be abolished for all but "classic" Social Security participants. Only older Americans already receiving classic Social Security or those who opt out of GUBI (among those 57 and older when GUBI starts) would continue paying payroll taxes. General revenues would fund GUBI and its transition, and the tax system would be radically simplified. GUBI would be tax free, but there would be no personal deductions or exemptions, no child tax credits, and no earned income tax credits. Tax rates would be progressive and start at 15% (from dollar one excluding GUBI) and increase smoothly up to 50%. (Remember, there are no payroll taxes under GUBI.) That is, there would be no brackets per se but rather a smooth formula of gradually increasing marginal rates up to the income threshold for the top 50% marginal rate. There would be no weird "bubble brackets" in the effective tax rates because there would be no deductions or credits to phase out. Interest, dividends, and capital gains would be treated as ordinary income but all gains would be subject to inflation adjustment like GUBI. That is, you'd only pay tax on the after-inflation gains. Tax preferences for retirement savings would be abolished since everybody is getting a guaranteed GUBI annuity already, since GUBI helps working people save more, and since taxing only after-inflation gains encourages saving. The threshold for the top rate would also be adjusted for inflation. The mortgage interest deduction and primary residence capital gains exemption would be eliminated, although almost no one would owe capital gains on long held property due to inflation indexing and maintenance expenses. Deductibility of state and local taxes would be limited to income taxes based on a simple percentage of federal income tax. Charitable, medical, and educational deductions would be mostly or completely eliminated, as examples.
Estate taxes would start at a 15% rate for estates above $1 million in value and rise smoothly to a 50% rate on estate amounts above $20 million. Annual gift limits would be set equal to the GUBI. Loopholes would be firmly closed, as always.
GUBI benefits would be very well protected. "Reverse annuity" contracts for GUBI benefits would be illegal and unenforceable. GUBI benefits would be protected against child support/divorce judgments and creditor claims. GUBI could be suspended to those who are not tax compliant, but the beneficiary would have the opportunity to dispute the suspension if true poverty would result. Partial GUBI benefits could be awarded under court order as restitution to a victim of a crime (and/or survivors) but only for the duration of a beneficiary's incarceration. Parole boards may not consider GUBI impacts in their decisions. Back GUBI would be paid to anyone wrongly imprisoned but would not be counted against any other awards for wrongful imprisonment.
GUBI benefits would be payable to Americans living overseas at 75% of full GUBI, reflecting the fact that many possible overseas locations have lower costs of living. Overseas Americans would be responsible for paying any gap between U.S. and overseas taxation (and only the gap), and any foreign taxes paid on their 75% GUBI would be refundable from the U.S. (with caveats). Expatriating Americans would have to pay back the net present value of GUBI payments they've personally received (i.e. the current GUBI amount multiplied by the number of months they received GUBI), and they would have to "mark their financial assets to market," i.e. pay the capital gains taxes owed if they sold all assets, as with today's "exit tax."
GUBI data access would be fairly heavily restricted to protect privacy.
Since GUBI benefits would be contingent on citizenship (and quite attractive) there would need to be a change to automatic birthright citizenship. But it should be a very narrow limitation. For example, it might be that a child born in the U.S. to foreign parents is not a U.S. citizen unless the mother has a legal, long-term (non-tourist) right to stay or unless the child has continuously resided in the U.S., even illegally, for his/her first 18 years of life (with the presumption that he/she has). To facilitate GUBI eligibility determinations and administration all beneficiaries would be able to obtain and renew U.S. passport cards free of charge, although there would be a modest fee ($20) for replacing a lost card.
Paired with GUBI, the federal government would also be responsible for two important public goods: healthcare and education. The government would operate (partly directly, partly on a contract basis not to exceed 50% of the system) a national network of medical centers and elder care facilities offering $10/visit and $10/drug care to every GUBI recipient and covering all "essential" medical care. Much of this system would be a relatively simple expansion of the VA, the best part of U.S. healthcare. And government would be responsible for delivering free K-12 education and $5000/year public university and technical colleges, primarily building on the existing state institutions. The Pentagon could continue to offer recruitment bonuses such as paying the $5000/year for higher education, cutting the medical co-pays in half, and pushing veterans to the front of the line for elective procedures (maximum 15 days wait instead of 45). Public medical and higher education expenses could be deducted from the beneficiary's next monthly GUBI payment if the beneficiary chooses to pay that way. The aforementioned passport card would facilitate access to these services.
The Federal Reserve would be granted the authority, as part of its stabilization mandates, to inject cash into the economy through GUBI rather than through the banking system to prevent or to reduce the impacts of financial crises. The Fed must exhaust GUBI policy responses before resorting to banking system injections in crises.
That's GUBI, at least in introductory form. It's simple, effective, and fair. It reduces the economic distortions of government and gives the American private sector tremendous competitive advantages. Practically everybody wins, even wealthy Americans who would benefit tremendously from the wealth generation GUBI would unleash.
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