RE: Would you be willing to pay higher taxes to make a Basic Income possible
I just replied to another post about basic income, no I wouldn't, not in the US. Why? Because the system we have is broken. I personally don't believe adding basic income to it would help, and if we did it would need to be much more than $1,000 a month for many since the benefits they currently receive cost more to obtain in the private sector. Especially medical.
In trying to compete in a "global market" where nothing is equal the US has destroyed its production/manufacturing base and is now a service based economy. We have a government passing more regulation and laws than ever in our history in an effort to micromanage or control every foreseeable disaster or circumstance . The cost of labor to track and file paperwork is expected to cost companies $108 billion this year. Of course that gets passed on to the consumer, and gives multinationals another reason to consider corporate inversion.
For years decreased competition has not benefited the US. As much as people blame the 1%, the whole reason we have a 1% is that the US is not a "user friendly" place to do business. Just like many corporations in the US today Walmart profits because it survived, there isn't any possible way a person could start a business today to compete toe to toe with them in the next 20 years. Businesses such as Target have been trying for years to gain market share. Many other businesses are failing.
In order for "basic income" to succeed you'd need an economy that has growth and for growth you need competition. Adding another tax burden isn't going to accomplish that here in the US when the number of tax sources dwindle and the alternative is to raise taxes on the available tax sources remaining.
It might work in another country, but not here.
Ok, so you wouldn't want to pay higher taxes for the basic income, and you think the basic income is useless at this moment in the U.S.
The way I see it the basic income could help in making our society less complex and less regulated. Altough I do have to admit that this problem you describe concerning regulation, laws and paperwork is probably not going to be solved by the basic income.
But maybe these are just two different things. The basic income doesn't have to solve every problem of our current economic system.
The problem is that in order to fund basic income you have to pay for it. With the increase of taxes, regulation compliance cost, etc. every year the US citizens are the ones that ultimately pay a large portion of those costs of lower wages, taxes on wages, and higher cost of good/services.
The US can't continue to increase taxes on a declining base. As France found drastically increasing taxes on businesses and those above a certain income level doesn't work when people and businesses can leave the country.
Every year our labor force participation rate falls for those 16 to 54. In 2024 that's projected to include those 55 to 64 in the decline. Each year fewer people pay taxes.
I don't believe that the idea of basic income is inherently a bad idea, but I do believe that if we were to implement it here in the US next month or next year that the program would fail and instead of improving the situation, make it worse.
What would be interesting to find out is if a countries with government owned businesses could successfully use the profits to distribute a basic income instead of it being funded by taxes.
I see your point.
Maybe a solution would be not to have an increase on income tax. We could have some kind of tax on capital, carbon tax, or any tax that isn't linked directly to a salary to finance the basic income.
The falling labor participation for me is one the reasons to implement a basic income. Because I think new technology will soon be burning more jobs than creating jobs. Which is not a bad thing for the economy in general, but is a bad thing for redistribution of wealth. So in that sense it would seem fair to find the money at companies (or people who own companies) that are creating a relatively small amount of jobs.
You could also kill the cap on income tax...or at least raise it substantially. That would only raise taxes for people making more than somewhere around $250K...
Patrice, these are all valid points you bring up. Thank you for expounding on the topic. One thing I would like to point out though, as it relates to the income tax cap, is that the super wealthy in the US, pay a lot less in taxes than their counterparts in Europe, for example. In addition, there is a cognitive cost associated with moving one's family to a completely different language, culture, geography, etc. Therefore, there is an amount that the cap on the income tax could be raised, without losing so much of the base that it becomes a deleterious action. Sort of like the elasticity of taxation, I suppose...lulz
You're welcome. I enjoy a good debate/conversation. I would be interested to see if a VAT tax would be feasible (if modeled after europe and in conjunction with lower corporate taxes along with basic needs exemptions). I also think that it could solve a number of environmental concerns connected to consumption and waste.
One of the things to note about taxes in most European countries is that while they have higher individual income tax rates they have a territorial taxation system and a lower corporate tax rate. How much lower depends on whether you are comparing multinationals or domestic companies in the US. They also have a rather high VAT tax compared to the US sales tax and higher capital gains tax.
In 2010 the UK was facing a high number of corporate inversions and companies leaving the UK. Since the UK changed to a territorial rate and started lowering corporate taxes the unemployment rate declined while the participation rate increased. Both of those things are important to note since the US has seen a decline in unemployment but we have not seen a significant increase in participation.
In 2014 someone in the top 1% in the UK took home 57.28% of their pay compared to someone in New York that took home 60.45%. On an average salary someone in the UK paid a tax rate of 24.9% compared to the US's 10.4%. So their tax rates are higher across the board and of course there are other apple to orange factors such as healthcare.
So while I wouldn't say all top earners in EU countries pay significantly more, I believe that the majority do. And more are likely to in the form of "voluntary" taxes such as the VAT.
How about tariffs on imports? Nothing as drastic as some idiots are calling for, but just enough to help level the playing field in some sectors the US can excel at and compete with when it comes to countries like China? While it might be a declining tax base in some instances as the US produces more goods, there will always be areas we do not excel at. Half a percent, one percent, would that generate tax revenue for a basic income along with some type of VAT? Maybe.
To put the problem in simpler terms, the people and companies with wealth have the means to leave the country when the cost of staying becomes more expensive than paying the "exit tax" and moving to another country reducing the our tax base.
The challenge to providing a "basic income" is doing it with a minimal amount of wealth redistribution as a percentage per person "tax" and increasing the tax base. For any continuing long term program backed by tax dollars to work you need several things, primarily a growing tax base willing to pay those taxes and an economy that grows steadily with the population rate to keep paying those taxes.
Especially when you live in a country like the that has spent years making it more profitable to not do business in.
Taxes on tobacco products are a prime example. It's a declining revenue base. Every year fewer people use tobacco products and every increase of taxes on tobacco products dives the use down even more. While this isn't a bad thing in terms of public health, it is a problem when these tax dollars are used to fund programs like children's health insurance. At some point these programs will need to find a new revenue source. It also impacts the labor force. As sales decline, so do jobs, and tax revenue from both the companies and the individuals.
If people really want a basic income in the US, for it succeed there would have to be major change if it were to succeed and not cause an economic disaster. As kooshikoo below pointed out, I think it actually could cause an increase in "startups". Just not when the red tape, permitting processes, taxes, and regulation make it too difficult and to costly.
Ideally I think a country that is rich in natural resources could make it work if the resources were nationalized. Provided the government wasn't greedy and invested the money from those resources wisely. Unfortunately most countries that have nationalized resources are poor. Mostly due to greed, corruption, and mismanagement.
Venezuela is an example. What could have been a boon for its citizens in the form of one or two well run nationalized businesses based on natural resources instead has brought the country close to economic collapse. I believe that the government's corruption, mismanagement, price setting, and short sightedness in "de-industrializing" in favor of a truer socialist model and relying heavily on imports of basic necessities has caused an economic crisis where as the country could have had a basic income and private sector growth to support more people and a better way of life.