[p2p-research] Basic income from a millionaire's perspective?

Paul D. Fernhout pdfernhout at kurtz-fernhout.com
Tue Aug 4 20:03:37 CEST 2009

One may ask, why should millionaires support a basic income as depicted in
Marshall Brain's Australia Project fictional example in "Manna", but, say,
right now in the USA, of US$2000 a month per person (with some deducted for
universal health insurance), or $24K per year? With about 300 million
residents in the USA, this would require about seven trillion US dollars a
year, or half the current US GDP. Surely such a proposal would be a disaster
for millionaires in terms of crushing taxes? Or would it?

The US government has a lot of assets. It controls the broadcast spectrum
and can rent it. It can rent fishery rights. It owns about a third of the
land in the country and can get royalties for mining and forestry rights.
The government controls water rights. The government can assess fines for
risky or anti-social behavior (as it could have done to Wall Street instead
of a bailout. :-) In Alaska, there is a Permanent Fund that gives one to two
thousand dollars a year to every Alaskan resident based on royalties from
oil development, as well as paying for the operation of the Alaskan
government (so, no income or sales taxes). There is also control of the
money supply, which needs to expand as commerce expands, and the extra money
needed can be printed by the government inflation free. So, there are
various ways the government can fund a basic income, even without a wealth tax.

But, what if it is not enough? Currently, the total wealth in the USA for
personal households in about $50 trillion dollars.
Though that figure is hard to be sure of; it might actually be a lot higher.
So, this would require a 12% wealth tax on households to make this work
without any other revenue (and without taxing companies). Since most wealth
is owned by the top 10% of the households in the country, most of this tax
would fall on the wealthy. But, we can presume (with some handwaving) that
the government could pay for half of this using royalties or other means
like extra cash needed to increase the money supply in a growing economy
(this might mean the end of fractional-reserve banking). So, let's assume
(handwaving) there would be a 6% annual tax on household wealth if the
government could raise half the amount from an inflation-free increased
money supply to keep up with a booming economy and from royalties on
government assets. Presumably, the wealth of companies would be taxed
indirectly by taxing the individuals who own the companies. So, in this
model, there might be no business taxes or corporate taxes of any form.(*)

Well, millionaires would then face a tax to support all this (as would
anyone with even more wealth). For example, imagine a basic income for
everyone was supported by a 6% tax on all wealth that is based on monopoly
scarcity. So, this would be an annual tax on real estate equity, bank
accounts, cash and gold hoards, copyrights and patents, and so on --
basically anything that requires the government to defend it as a monopoly
against someone else taking it in a way that leaves you with less. Anything
undeclared would not be subject to legal process for recovery if stolen. It
would seem only fair in a sense to support the government with a percentage
of what you have, in proportion to the amount you have. (One might also
propose a progressive tax on that, like higher rates on large total amounts,
but let's just assume it is a flat tax.) Essentially, this could be seen as
a protective tax on wealth. If millionaires don't declare wealth, the wealth
can be taken by anyone, even by the government. :-) If wealth is declared,
it is defensible in a criminal suit, and further, maybe the government might
even insure it against theft (maybe even other things like fire or accident
or war or natural disaster). Recovery of stolen property would then be a
function of the government as a revenue source, after it had reimbursed the
person who lost it.

Perhaps there might be a basic exemption for the first $100,000 of personal
or business property, just so most people don't have to file this paperwork
at all. Perhaps the filing requirement might be $100K and the tax might
start of $200K, just to edge into the paperwork without having any liability.

So, should millionaires oppose a basic income on these terms? (Note, this is
a different question of whether billionaires should oppose a basic income,
for reasons that will become obvious.)

To begin with, many millionaires, who often have significant wealth in real
estate, already pay a wealth tax called a property tax. They may not pay a
wealth tax on other wealth, but most are already paying that one. So, taxes
might go up on real estate, but not the number of bills. A millionaire might
not want to pay more taxes, but a wealth tax could in theory replace all
transaction taxes like sales taxes or inheritance taxes or income taxes or
VAT taxes. So, maybe there would be no other paperwork to do every year
except a year end balance sheet, whether personally or for a business. So,
the total amount of stress dealing with bills might go down. A lot of
millionaires and large business owners might like the simplified paperwork.
The true cost of compliance with current tax laws are much higher than the
money paid in taxes; they include all the time spend in record keeping and
compliance. Presumably tax accounting as a profession would morph into
certified good-faith wealth estimators (assets minus liabilities in business).

Let's say you had a million US dollars. Most such people would tend to be
older. You might be living off the principal and the interest of it. You
would not want to see the principal go down in our current economy, because
then you would have to work again. If, the tax rate was 6%, then you would
see your wealth dwindling every year. You would be looking to the day when
all your wealth was gone with trepidation, as you would then be *poor*. Or
would you? Remember, you would get the basic income of $2000 a month too. In
the worst case where you lost all your wealth to taxes, you would still be
able to live a good-enough life on the basic income. Also, this basic income
would make up for some of the taxes, thus reducing the effective tax rate
for a millionaire, who would be paying $60,000 a year in taxes, by $24K, or
so to about 4%.

On the plus side, if you got sick, the basic income insurance would cover
you, so your wealth would not be at risk of loss to medical costs in most
cases. If you were robbed, or maybe even illegally scammed by someone like
Madoff, the government would reimburse you for the theft (and then try to
recover the wealth for the people). If your house was wiped out in a forest
fire, the government would write you a check to rebuild. And this would all
happen without you worrying one minute about finding good insurance policies
or whether those companies would have sufficient assets to really pay a
claim (because that insurance was backed by the government as a big risk
pool). Still, providing this insurance might require the tax to be a little
higher, like 7%. This would have to be worked out in detail. The government
might also decline to insure some properties perhaps if they were in
extremely risky situations like poorly built things in hurricane zones not
up to government building codes for insurability, so this would be an issue
of social policy to explore. However, there would be nothing to stop there
being supplemental insurance millionaires could buy to cover certain extreme

Now, let's continue to look at this from a millionaire's point of view. The
streets might be a lot happier. The families would not be struggling as
much, and so the kids would be happier. Why should a millionaire care about
other people's happiness? Well, there are obviously moral reasons. But
ignoring them, in general, communities would be safer. There would be less
resentment towards the rich, who after all, were making this all possible.
Nobody would be so poor they had nothing to lose by committing an assault to
steal a walled or break into a home. (Assuming drugs were legal, and
regulated, there would be less addicts doing property crimes for habits.)

There might be a much larger variety of goods and services  for millionaires
to choose from. given every unique person had some money so the market heard
their needs and even whims. The money would keep flowing, especially because
there would be no transaction taxes to slow it down. Entrepreneurial
millionaires would be in a good position to benefit from all this demand,
creating companies to satisfy all these needs that the market was now
listening to.

With all artists, writers, inventors, programmers, and so on freed from the
need to worry about earning a daily living, the digital world would blossom
with an endless array of free music, free images, free idea, and the
physical world would be beautified with free artworks and the streets would
be livened with free street productions and plays. So, the millionaire's
remaining wealth would go farther, with less entertainment that needs to be
paid for. Basically, millionaires would be benefiting, like everyone else,
from a robust peer economy and gift economy.

On a personal level, there would be a lot less desire for people to marry
millionaires just for the money. For some ugly or nasty millionaires, this
might be a hardship. But for most, this would actually be a blessing. They
would be less likely to be taken advantage of by social climbers or fortune
hunters. Millionaires would have to worry less about their kids being taken
advantage of too. With a basic income, there would be a lot less desire by
people to marry for money. So, a certain social problem would be greatly
reduced in the lives of millionaires. There might still be some of this, but
the overall situation would improve greatly.

Similarly, there would likely be less kidnapping. For potential kidnappers
or other criminals, when you get $2000 a month in income already, why risk
being thrown in jail where your income goes to the upkeep of your prison and
you lose your chance of making your own decisions as to how to spend it?
While there would still be crimes of passion, total money-related crime
might drop way down.

Right now, a profit driven health care system has sized emergency rooms for
average needs, and those emergency rooms are often full. With a basic income
  and more money going on a systematic basis to the health care system, the
health care system emergency rooms will no longer be overrun with people
there for reasons they could see a doctor for. So, emergency care would be
better for millionaires. Millionaires with heart attacks won't be as likely
to end up being diverted to far away hospitals because the local hospital
emergency room is full. Likewise, emergency rooms might, with more money
going to medicine, become sized for national emergencies, not personal
emergencies, so they might become vast empty places, with physicians and
other health care staff keeping their skills sharp always running
simulations, learning more medical information, and/or doing basic medical
research, with these people always ready for a pandemic or natural disaster
or industrial accident which they had the resources in reserve to deal with.
So, millionaires who got sick or injured in a disaster could be sure there
was the facilities and expertise nearby to help them, even if most of the
rest of the population needed help too at the same time too. In that way,
some of this basic income could be funded by money that might otherwise go
to the Defense department, because what is better civil defense then
investing in a health care system able to to handle national disasters? So,
any millionaires who are doctors (many are) would benefit by this plan,
because their lives as doctors will become happier and less stressful, both
with less paperwork and with more resources.

With a basic income, from a millionaire business owner's point of view,
there would be no need for social security as a payroll tax. There would be
no need for affirmative action or reparations for slavery. There would be no
need for a family-leave policy. There would be no need for unions (though
there might still be some, but they would no longer resist technological
innovation that eliminated jobs, since that increased wealth for everyone).
There would be no need for unemployment insurance. There would be no need
for all sorts of employment laws we need now. There would be no need for a
minimum wage to protect anybody from destitution.

Essentially, with a break in the link between having a job and having a
right to consume at a moderate level, workplaces could be organized however
they wanted. And potential employees would just vote with their feet about
where they wanted to work to make the most money, have the most fun during
the day, or do the most good for society as they saw it. While it is true
that many unpleasant jobs would no longer find low wage workers to do them,
for those jobs, either wages would go up, or they would be automated or
redesigned out of existence, for example, like with some towns that have
garbage trucks with robot arms to pick up curbside standard garbage cans.
So, overall, most of the jobs that remained would be ones that people really
wanted to do. There would no longer be the threat of poverty and starvation
to motivate workers, but that make for happier companies, and thus happier
managers and CEOs, and so more happiness for most of the millionaires that
are the managers and CEOs. Everything would just be a little less stressful.

There still might be a need for pollution regulation (as a negative
externality of the marketplace), but everyone would have more money to pay a
premium for greener products. And there might be a lot more innovation going
on to make compliance with low or zero emissions manufacturing easy.

There would be no need for public schools or a public school tax, because
families would have enough wealth per child to hire tutors or pay for
private schools or to just stay home and teach their own through
homeschooling/unschooling. Likely, towns would be more interesting places to
be, with people of all ages having fun on the streets. Cities and town would
come alive again with the laughter of children. And these would not be the
mean dispirited hopeless children sometimes found on today's streets --
these would be compassionate, confident, hopeful children who were following
a social example of generosity by the wealthy. These would be the kind of
children who would say "Mr. you dropped your wallet!" instead of running off
with it. With so much hope, the parents of these children would be more
hopeful too, so they would vote for hopeful politicians and hopeful
policies, the kind to build up the world instead of hunker down and build
fortresses and prisons, the kind that might treat drug addiction as a
medical illness and societal illness, not a personal crime.

Much of these benefits would also apply to billionaires (as opposed to
millionaires). The big difference is that billionaires would have so much
money, they probably would never think about the value of the basic income
to support them in the future, since even at 6% per year, it would take more
than a lifetime of such a tax on the remaining amount to make a billionaire
unable to support themselves. Also, the basic income would do nothing to
significantly reduce the effective taxes on a billionaire's wealth. And a
billionaire would benefit less as a percentage by access to free
entertainment. So, this is a better deal for millionaires than billionaires.
On the other hand, billionaires have so much money, they really do benefit a
lot more from a society where vastly unequal wealth is accepted as a social
reality. So in that sense, they benefit a lot more by reducing the pressure
in a society for massive social upheaval.

So, for all these reasons, millionaires and billionaires could sleep more
soundly at night, especially those with social consciences. Those with
social consciences would have recognized that while the market is great at
creating wealth, it is also great at concentrating wealth which creates
problems, since the market does not hear the needs of those without money to
shout out for them. But, a basic income gives everyone in a society a voice
with which to talk to the market, whether the market needs their labor or
not. And with rising automation like AI and robotics, better design, and
limited demand because the best things in life are free or cheap, more and
more the market will not need humans to be involved in production, and so
there will be less and less jobs for humans to do. So, this approach deals
with a fundamental problem with divide-by-zero errors in mainstream
economics, the kind of errors that cause unrest of various types.

The fact is, the basic income is already about what most millionaires might
be earning off their investments after inflation (assuming they have
anything left after the recent market crash). So, in a way, this proposal
makes everyone in the USA into effective millionaires (or close to it). So,
that means that millionaires have a lot more potential friends in the local
neighborhood with a millionaire-level of spare time to do fun things with
during the day. So, being a millionaire will be a much less lonely thing in
our society. And should a millionaire have children, the millionaire knows,
no matter how irresponsible with money their kid might be, that child will
always be a millionaire, in terms of a basic income.

As a society, we would suffer less from "millionaire wannabes" supporting
regressive social policies.
   "The Wrath of the Millionaire Wannabe's"
Such people support these policies in hopes that, even if they and their
families and their communities, are hurt by regressive social policies now,
someday they too might win the business lottery or gambling lottery and be a
millionaire and escape from the society of poverty. So, there would be less
incentive for strong healthy young people to support regressive politics
that are against their own current and future interests (statistically). And
as one can see from the above example, from improved medical care, decreased
risk of theft, happier streets, and so on, it would be easier to see that
regressive social policies were actually against their interests even if
they were millionaires. There would be less incentive for millionaire
wannabes to make products they did not really care about or that were not
truly new and useful. There would be less incentive to create *artificial*
scarcities as opposed to solve problems related to real scarcities (like a
limited helium supply).  And with less millionaire wannabes around, existing
millionaires might even have less business competition if they were
"billionaire wannabes" because they wanted a new challenge. :-)

Note, there would be one new pressure on millionaires and billionaires. With
a 6% annual tax on wealth (and possibly also inflation, or possibly not if
this basic income smoothed out boom-bust cycles), there would be a lot more
pressure on the wealthy to engage in business transactions and make
investments that met or exceeded a 6% rate of return. So, this would
accelerate the pace of economic activity in the country, as well as the pace
of technological innovation, as millionaires tried to get a better return on
their investment than 6% to keep their wealth at current levels. Presumably,
as long as pollution and some other things like systemic banking risk were
regulated, that would benefit everyone, even if it made some millionaires
lives more stressful to be making real decisions about good investments for
a change, investments into ventures that would benefit the average person
with their basic income. But, for those who did not want such stress, they
could always give all their money away (no gift tax :-) and live off a basic
income. :-)

--Paul Fernhout

(*) (As regards not taxing corporations, one could argue for limiting
corporate personhood status entirely under any circumstances, but, one might
argue that if corporations decide they still want personhood status, then
they should be taxed as persons and so pay for that privilege; so this issue
could be explored, perhaps even giving corporations to elect being persons
and paying wealth taxes, or not being persons and not paying wealth taxes.)

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