Blog Archive

Sunday, October 14, 2012

The Citizen's Dividend by the Numbers:

In order to give everyone in America $12,000 every year, we would need to tax and spend 25% of USA's GDP.  The best way to do this would be to cut all current taxes, and implement a 25% sales tax to the purchase of all goods and services, a simple tax code with no deductions or loopholes, a fair, flat tax of perfect equality towards all.  Sales taxes cost no money to collect, plus there is no chance of tax avoidance because no one can make their purchase without also paying the tax.  They are regressive, but this no longer matters because $12,000 in everyone's pockets can soothe all hurt feelings.

If the entire country forks over 25% of its income every year, but receives $12,000 a year in return, at what level of income would you start to lose money from this deal instead of gain by it?

Simple math says people making $48,000 or more would not receive any benefit from the citizen's dividend, but this isn't actually accurate.  We have to take into account the fact that this sales tax has replaced all other taxes, and therefore we must also take into account the average taxes someone making $48,000 or more used to pay to the federal government, but no longer does.  This includes the inflation tax everyone must pay due to the fact that the government is continuously spending more than it takes in in taxes, thus depressing the value of the dollar every year.

Currently people making $48,000 a year are paying 25% in taxes anyway, or lose $12,000 along the way to social security taxes, income taxes, medicare taxes, inflation, and so on.  But if they are taxed instead solely for the sake of the citizen's dividend, and then receive back $12,000 from said citizen's dividend, they have a net tax burden of 0 dollars, which is an improvement over their current financial situation.  So now we have to up the income levels yet again to find a group that doesn't benefit from the citizen's dividend in the form of less taxes and more benefits.

Now let's assume you're making $100,000 a year.  Under my sales tax, you would lose $25,000 a year to taxes, but receive $12,000 of that back in your allotted citizen's dividend.  Your total tax burden would be $13,000, or 13% of your income.  Currently people making $100,000 a year pay much more than that to income taxes, capital gains taxes, social security taxes, medicare taxes, lost profits/wages from the corporate income tax, dividend taxes, and so on.  So even if you're earning $100,000 a year, you would pay less in taxes than under the current system.

So let's assume you're making $500,000 a year.  Under my plan, you would lose $125,000 to taxes, but receive $12,000 back as a citizen's dividend.  Your net loss would be $113,000.  Under the current system, people making $500,000 a year pay the alternative minimum tax of 26%.  So just from their income taxes, they would be paying more in taxes than under my plan.  Add in inflation, social security taxes, etc, and the fact that they receive nothing from the taxes they pay into the current system, as opposed to $12,000 every year with my plan, and it's a lopsided victory for the 25% sales tax yet again.

That's right, at every single income level, people would be paying less in taxes and getting more benefits than they do in the current system.  Everyone benefits from this new, better tax plan.  But just to be safe, since we might want federal government spending for a few other things besides the citizen's dividend, let's increase the tax rate from 25% to 35%.  With an additional 10% of GDP, this tax could fund not only the citizen's dividend, but other goodies like a military, national parks, science foundations, whatever, and with plenty of money to spare.  Would the formula change if the tax rate were increased to 35%?

Not even remotely.  Payroll taxes already take 15% of every worker's salary, and income taxes add on from there for at least another 15%.  For normal people, the $12,000 citizen's dividend benefit more than covers the 'higher' tax rate of 35% as opposed to today's 30%.  But even this is not the whole of the picture.  A citizen's dividend is paid to every single citizen.  So if you are married and have two children, you'd be receiving $48,000 from the government every year, not $12,000. (the children would receive it into a lockbox that could not be opened or used by anyone but themselves until they reach the age of maturity at 18, and they would have the choice of how to spend said accumulated savings once they did become adults, not the parents.  However, parents already set aside money as savings so that their children can go to college, so if the government gives your kids savings instead, that's more money in your pocket that you don't have to spend.  As a result, you benefit from every dollar put into your kid's lockbox almost as much as you'd benefit from money put into your bank account.)  If a family is receiving $48,000 a year from the government, it's practically inconceivable that they'd be paying more in taxes than they are receiving in benefits unless they were extremely rich, at which point the tax code already slams them for much more than they receive in benefits, so they're no more 'victims' of the tax code than before.  Even at 35% taxes, if you take into account the citizen's dividend being paid to your whole family instead of just yourself, you end up ahead of the current tax code.

No one can possibly object to the citizen's dividend because it costs too much in taxes.  That's simply not true.  It costs less in taxes than the current plan.  So the next question is, is it a better benefit than current government benefits?

Supposedly, the taxes we pay today serve some purpose, which would all be scrapped in order to fund the citizen's dividend instead.  A 35% tax rate by the federal government, 25% of which went to the citizen's dividend, would give us a budget of 10% of GDP, or $1.6 trillion instead of the traditional $4 trillion we are spending today.  How do we cut the budget, painlessly, $2.4 trillion dollars?

No problem.  55% of the federal budget is currently spent on social security, medicare, medicaid, welfare, health and human services, unemployment benefits, food stamps, HUD housing, etc, etc.  All of these handouts can be nixed and replaced with the citizen's dividend.  Instead of these selective, special interest handouts to various groups, everyone in America would receive an equal amount of money to take care of themselves with.  $12,000 is sufficient money to buy private health insurance to protect against catastrophes, support yourself while unemployed, save up for retirement, or provide any other function the old system used to cover.  Not only this, but at age 18 every child in America will have a nest egg of $216,000 to pay for college, a house of their own, a car to get them places, money to start a new business, or whatever they see fit, something the government currently doesn't do for anyone.  The citizen's dividend creates an opportunity society for children reaching adulthood, and a secure society for adults worried about health care, layoffs or retirement.  It covers everyone, not group X or group Y, and it is impossible to fall through this safety net, so it is more morally sound than the previous benefits in the federal budget, and also more financially sound.

You see, currently, we must spend one trillion in deficits every year just to fund our budget.  Under my plan the budget would be balanced and we would collect enough in taxes to meet all outlays every year.  This is unsustainable, and therefore we couldn't keep the old budget plan even if we wanted to.  In addition, the costs connected to social security, medicare and medicaid are expected to rise every year, to the point that we have 100 trillion dollars in unfunded mandates when the baby boomers retire.  But under the citizen's dividend plan, there aren't any rising costs, the cost stays the same every year, and there isn't a 100 trillion dollar debt bomb that blows up America.  Getting rid of all the social spending in the US budget was already a necessity, replacing it with the sustainable, low-cost citizen's dividend is the only way to balance the budget and provide a fair, equal helping hand to all Americans so that no one gets left behind in these leaner times.

If we cut from the budget all the social spending programs, we end only needing $1.8 trillion dollars to fund all the rest of the federal government.  We have $1.6 trillion, so we will need to cut the military by 200 billion to make ends meet.  Don't worry about this cut.  We currently spend 711 billion dollars a year on the military, and our next closest rival in the world, China, spends only 228 billion.  So even if we cut our military budget by 200 billion, we would still be spending more than twice as much as the next strongest country on Earth. If that can't keep us safe, then nothing can.  There is no reason to be spending so much on our military in the first place.  After this final cut, we have a balanced budget and we still cover all the other functions of government, from railroads to the EPA to courts to farm bills to highways to NASA to whatever.  If you have some favorite government program that isn't a social handout, you can keep it.  All we are doing is changing how we give people redistributed money in this country, from special interest groups to the entirety of the populace.

To sum up, we could implement a tax code that costs less for all Americans, from the highest income level to the lowest, and give people a more meaningful social benefit than all previous spending benefits the government used to provide to all Americans, all while balancing the budget and preventing the 100 trillion debt bomb that is looming over the horizon.  We could do this without hurting any other government program or function, and while still maintaining a military that is twice as strong as anyone else's in the world.  There can't be any financial argument against the citizen's dividend, the numbers simply do not support such a stance.  Every single fact, from deficits to taxes to benefits from spending, all favor the citizen's dividend.

I can imagine a few fringe cases where people would get more government spending for themselves under the current system, like some welfare queen who gets hundreds of thousands of dollars in section 8 rent support, food stamps, medicaid, etc by somehow gaming the system.  However, I think it is a good thing if said people receive less money.  Likewise, I can imagine that some very old, very sick people are better off receiving millions of dollars from medicare than what the citizen's dividend could buy in health insurance, but again I do not think this is government money well spent in the first place.  People can't live forever, nor should they bankrupt the country in an attempt to do so.  That's just a little too selfish to be accommodated.  But for the vast majority of beneficiary recipients, the citizen's dividend represents a much more sizable government handout than any other program has helped them before.  If 5% of Americans are worse off under this plan, that still leaves 95% of Americans who are better off.  Social policies always have some winners and losers, but when the winners vastly outweigh the losers, it's a good plan and should be implemented.

This leaves the 'moral' argument against the citizen's dividend.  It goes somewhat like this -- "Why should I be working every day to support some lazy bum who isn't working even when he could be?  I don't want a single cent of my tax dollars going to him!"

This argument does not work for a number of reasons.  A)  The vast majority of Americans do not make enough that they would be paying more in taxes than they receive in citizen's dividend benefits.  Therefore, they have no standing to complain about their hard work being stolen by anyone else.  Only the very rich, in my plan, would be paying more in taxes than they receive in benefits, and therefore it is only their work that is supporting lazy bums who aren't working.  B)  There is no evidence that says people receiving $12,000 a year are content with their lot and will not try to work to increase their spending power beyond this subsistence level.  The number of people who will voluntarily stay out of the workforce because of such a paltry sum is very low, most would try and do better for themselves.  C)  At this point in modernity, the supply of labor has far surpassed the supply of useful work that needs to be done, especially the amount of work available to unskilled labor, the people who would most be incentivized to quit working for a paltry sum of $12,000 a year instead.  If you are making $60,000 a year as an engineer, it's doubtful whether you would quit that job to collect your lazy bum free money.  But if you are making $10,000 a year, it's quite reasonable to do so.  The question is, if you were only making $10,000 a year from working, what could the work have been worth in the first place?

Due to the prevalence of 14 hours a day shift workers in China and 24 hours a day manufacturing machines, the supply of labor is nearly infinite in today's market.  Industrialists are not crying out for more workers so that they can increase production -- they are firing workers left and right.  In fact, despite America's population rising some 30 million people since 2000, not a single new job has been created.  There are fewer working Americans now than there were 12 years ago.  Not only are there not enough low-paying, unskilled jobs to go around, but many of the jobs that do exist are pure government make-work.  How many people are getting paid large salaries as teachers or school administrators, while failing to even teach their students how to read?  How many are employed as lawyers?  How many are in the military, despite the lack of any conceivable threat to our country that would necessitate such a strong military?  There are so many more people seeking employment than there is useful employment to do, that an enormous number of Americans are simply pretending to work while collecting massive salaries from the taxpayer.  A citizen's dividend, which pays people just $12,000, and the person not working at all, would represent a massive savings to the American taxpayer, and be a refreshing breeze of honesty into the system.

For systemic, technological reasons, it is impossible to give everyone a useful, high paying job in America today.  These aren't the 1950's.  Your options are to give everyone useless makework, give everyone a citizen's dividend, or let massive numbers of Americans die for the sin of not being able to support themselves, despite being able-bodied and healthy.

Furthermore, the price of jailing our underclass far surpasses $12,000 a year.  America has one of the highest incarceration rates in the world, and much of that is due to poverty.  Let me explain.  I do not mean that poor people are stealing bread in order to eat, and then getting arrested.  What I mean is that they find themselves in intolerable living conditions, become embittered, and lash out as criminals in return.  If every family had enough money to get by with, and every child at age 18 was suddenly rich, with $216,000 in their pocket, they would have more reason to enjoy life and less reason to endanger it by falling into a life of crime.  Furthermore, many criminals are drug dealers who are just trying to make a living because there are no comparable free market opportunities, and there is no government spending that will take care of young healthy men.  It is only natural for people in these positions to enter the black market, where it's possible to make good money, unlike minimum wage fast food labor.  Because drugs are a black market, just like alcohol was in the past, it attracts thugs like Al Capone and becomes a nest of violence.  If drugs were legalized, none of these crimes would occur, and the drug trade wouldn't be very enriching at all.  Furthermore, people receiving the citizen's dividend would no longer have to choose between a life of crime and a life as a fast food server.  They would have a third option, which is far less harmful to the general public, but far more enticing than being a minimum wage drone.  If we could get rid of just half the criminals in our criminal justice system via this citizen's dividend bribe, we would be saving endless amounts of money and human lives.

Lastly, I do not believe the value of a human life is measured by their productivity.  This is the most important moral answer to the moral argument that people should not receive unearned wealth.  If people only earn wealth, and thus, the right to provide for themselves, and thus, the right to life, by being productive, then the Good is a pale shadow of what it should be and rightfully is.

The right to life can mean one of two things in this system.  The anti-citizen's-dividend-er will define it as 'the right to enter into the darwinian struggle, and may the best man win.'  They do not care if you fail to support yourself, and therefore die in a ditch.  This, to them, is human progress, and a good thing.

But the pro-citizen's-dividend-er has a very different definition.  It goes like this.  Everyone alive has the right to enjoy the fruits of life, because the enjoyment of life is a good thing.  These fruits include a good night's sleep, a warm bath, a full belly, and good health.  But even more importantly, they include the chance to participate in the transcendent -- Beauty, Truth, Love -- even God Himself.  This is something only living humans can do, and it is something they should be able to do.  It is a lost opportunity, a tragedy, whenever a single person doesn't get the chance to enjoy life as it was meant to be enjoyed.  Out of a respect for human dignity, and love for our fellow man, if it is at all possible to prevent such a tragedy, it is incumbent upon us to do so.  In that case, paying lower taxes than before to give everyone the right to life is an obvious no-brainer.

I cannot conceive of any financial, social, or moral argument against the citizen's dividend.  Anyone who continues to oppose it, after seeing all the arguments for it, is either an idiot or evil.  There simply isn't any other ground upon which to stand.

No comments: