Why We Should be Talking About Universal Basic Income

Imagine if the government gave every American adult $2,500 a month in real dollars (30K annually) for the rest of their lives – no strings attached. Seems crazy right?

Not so fast – this idea is known as Universal Basic Income (UBI). I believe UBI will be the solution to a myriad of economic problems we currently face. I have listed some things to consider when talking about UBI.

Benefits:

Provides a social safety net for all Americans. This would eliminate homelessness and extreme poverty among the most vulnerable Americans.

Addresses concerns from automation and technology significantly increasing structural unemployment. It is estimated that up to 47% of US jobs could potentially be replaced by automation and robots in the next 10 to 20 years.

Eliminates the “retirement age” from social security. People can work as long as they want to supplement their income or save money on their own to retire early.

Solves the welfare cliff dilemma where welfare recipients can lose benefits as they earn more supplemental income. 100% of all income earned would be supplemental to UBI.

Empowers individuals to choose how they spend their money versus receiving specific items like food stamps etc.

Reduces government bureaucracy and cost of administering social security and welfare programs

Has garnered bipartisan support in the past from both liberals like Huey Long and conservatives like Milton Friedman

Concerns:

The total cost of a UBI program. It remains to be seen how much UBI would cost, but the total cost would be offset by things we already spend a ton of money on like social security and welfare.

Lack of incentive to work. Critics of UBI worry that people will have little incentive to find a job.  While job participation would likely decrease, most people would still want to supplement their income or find intrinsic meaning through being productive.

Crowding out of other social benefits. Some people are concerned that UBI will eliminate all other government assistance programs. While UBI would eliminate things like social security and welfare, I would argue we should still provide education, healthcare, and other important social benefits that are not income related.

Overall, I think UBI is an issue we need to be discussing. As the pace of innovation in automation and technology continues to accelerate, we will need to find a solution to help those that are left behind.

The Need for Corporate Tax Reform

The US corporate tax system is broken – period. This is one of the few issues that both the left and the right actually agree on. For those that are not familiar with our corporate tax system, this Bloomberg article is a good read. The key takeaways are summarized below:

  1. The top US corporate tax rate of 35% is the highest of any industrialized country in the world. This makes the US less competitive relative to other countries when multinational companies are making investment decisions on where to allocate their capital.
  2. Corporate profits are taxed twice – once at the company level and again at the dividend level. Double taxation punishes successful businesses when they turn a profit.
  3. Companies are incentivized to “invert” to pay a lower tax rate. This entails merging with another company in a lower tax rate country and moving the official headquarters there, thus paying less taxes. Pfizer and Burger King are examples of companies that inverted to save hundreds of millions of dollars in taxes – moves that resulted in less US jobs and tax revenue.
  4. Since repatriated cash is double taxed at the full rate, companies are storing over $2 trillion of cash overseas to avoid the tax impact. This $2 trillion could potentially be brought back and invested in the US economy.

Based on the points mentioned above, here are some suggested common sense proposals on how to reform the corporate tax system.

  1. Reduce the top corporate tax rate to 20% to be more competitive with other countries.  25% is the average corporate tax rate for developed countries.
  2. Allow companies to repatriate cash back to the US at a reasonable rate where they are not fully double taxed
  3. Provide tax incentives for companies to use repatriated cash for capital investments in lieu of share buybacks or dividends

These proposals would make the US economy more competitive and encourage companies to invest and hire in America.  In addition, the government might actually collect more tax revenue – as the saying goes, 20% of something is better than 35% of nothing.  Ultimately, corporate tax reform would be a win-win-win for the government, corporations, and American workers.

How Free Markets Help Poor People

Is it possible in today’s day and age to both care about poor people and believe in free markets? It seems a lot of the political discourse is around protectionist policies and government intervention from both the right and the left. This Economist article serves as a friendly reminder of how far we have come over the past 20 years on the poverty issue.