How to estimate the national cost of a Basic Income

[Leisured]

Suppose that advanced automation sweeps through the US economy in the future, is this a threat or an opportunity? There have been numerous posts about a Basic Income on this forum, but how much would it cost? I propose a method for estimating the cost off a Basic Income below, and would like comments.

Suppose people have to rely on a Basic Income rather than being paid for work, how much would this cost? The link below tells us that total wages and salaries in the US is about $7.5 trillion dollars, 46% of the $16 trillion GDP. Wages and salaries do not include business and partnership profits, rents or dividends.

http://research.stlouisfed.org/fred2/series/WASCUR

25% of US GDP is paid as state, federal and municipal taxes, see link below, first para.

http://en.wikipedia.org/wiki/Taxation_in_the_United_States#State_administrations

If, in the future, technological unemployment reaches 50% and stays there, then nearly half of $7.5 trillion dollars of wages and salaries will be displaced by automation. Most of the unemployed will have been paid less when they were employed than those still in employment. I do not know the discrepancy, so I assume that the Basic Income will replace $3.5 trillion dollars, or 21% of GDP. This sum will have to be raised by a combination of Federal taxes, and when added to the existing 25% of GDP paid in taxes, will drive Federal taxes to 46% of GDP.

The Basic Income will replace existing welfare payments and age pension payments, about 8% of GDP according to the link below, third para, so the actual percentage of GDP paid in Federal taxes will be about 38%.

http://en.wikipedia.org/wiki/Social_Security_(United_States)

The last time the US saw taxes on this scale was during WW2. It is achievable, but will need a stiff dose of political will.

An alternative is that most jobs be on half time, with two workers sharing one job, each on half pay, the shortfall for each being largely made up by a Basic Income. In this case, the Basic Income will be less than if people relied entirely on the Basic Income.

[market timer]

I expect we'll see something like this in the next century. Right now, it's happening piecemeal, i.e., if you have low income, you get heavily subsidized health insurance, massive financial aid for college, food stamps, free housing, etc. The administrative costs would be much lower on a basic income system.

There is a problem with your calculation, though. It looks like you are assuming only the unemployed receive a basic income, no? A basic income is given to everyone, regardless of employment status. Otherwise, it severely reduces the incentive to work. So, I think the cost would be something like $15K/year per person * the number of citizens, so nearly $5 trillion per year.

[Leisured]

I should have said that a true Basic Income is paid to all adults, excluding children, and those in employment pay part or all of their Basic Income in a changed tax regime. Your figures seem to assume that every man, woman and child in the US would receive a Basic Income, so $5 trillion paid out in a Basic Income would mean a bit over $20K for each ADULT recipient. Still about a third of US GDP, and existing Social Service payments, if I have the right term, (I am Australian), will become unnecessary, and those in employment will pay back part or all their Basic Income through an altered tax regime.

The point is that a Basic Income is achievable financially, if not politically.

[MoneyCat]

The problem with instituting a Basic Income is that health costs would skyrocket from all the conservatives suddenly needing heart medication.  "Poor people... buying candy bars..."  *clutches pearls*

[Philociraptor]

I'm a fan of the Basic Income Idea. More direct money transfers are occuring in poor areas in Africa and results are very encouraging. A basic income that replaces food stamps, welfare, unemployment, SS, etc would be much cheaper management-wise as well.

Also a fan of creating another tax bracket or two, let's say at $10 million and $100 million, where additional earnings are taxed at 50% and 75% or more.

[Pooperman]

I am firmly in favor of Basic Income, Universal Healthcare, and a Superannuation (in the US). The basic income doesn't need to be nearly as high as we think here. Likely closer to $10k is sufficient. It requires lifestyle changes, sure, but it's livable. There's no disincentive to work.

$10k/adult = $2.8T. As in the first post, this replaces $3.5T in programs, saving $700B compared to current expenditures*.

*Not including the cost of Universal Healthcare/Superannuation to replace Social Security/Medicare/Medicaid/etc

I'm pretty sure this brands me as a radical in terms of social welfare, though in reality I am about equivalent to what the Europeans call a "social democrat". I prize the rights of the individual above those of both the corporation and the state. I hope to see these three reforms in my lifetime.

[Huffy2k]

Also a fan of creating another tax bracket or two, let's say at $10 million and $100 million, where additional earnings are taxed at 50% and 75% or more.

Ask France how that worked out for them.

http://www.huffingtonpost.com/2012/12/29/france-super-rich-tax_n_2380887.html

[Bob W]

1/2 the us population is not employed and 2/3 of the employed are either direct or indirect government employees.     I'm more in favor of anyone receiving any kind of benefits being required to work.  Thus zero unemployment and a much nicer world.

[Leisured]

Bob W, the point of a Basic Income is that there is inadequate work available! If there were plenty of well paid jobs, as there were in fifties and sixties, a Basic Income would not be needed!