Basic income from a millionaire's perspective?

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?

For reference:

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 situations.

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.)

This essay was originally published here on August 4, 2009, although I've since added the links at the start for more context: