As I've previously established in my post Tax Policy and Chill, I want the top marginal tax rate to be 45%. After that was posted, I saw a tweet from The UBI Center and, for whatever reason, thought this would be some form of a good idea to run these numbers.
Flat Taxes, Even Payouts, Smooth Brain
For Liberals: This could be used to redistribute economic resources from the excessively wealthy to the underprivileged in an efficient way.
For Conservatives: This could be a significant tax cut for those who most need it and will allow for tax filing on a postcard like Paul Ryan always wanted.
The tweet from The UBI Center linked to a study wherein the researchers set a flat tax of 48.1% (France's top marginal tax rate [even lower than my proposed 45%, so we're still going to be internationally competitive, at least with France]). To offset this, the researchers modeled a $2400/year UBI for each citizen of France, lowering the total tax burden placed on lower income taxpayers.
According to the CRFB, a 1% across-the-board increase in income taxes would yield $950 Billion over the next decade. Multiplying this by 45 would get the initial revenues for a flat 45% income tax rate (950 x 45 =) 42,750 Billion. When we consider how taxes affect labor, this would come out to (950 x 45 x [1 - 0.45^2] =) 34,093.125 Billion over the next decade.
Current revenues for the income tax are $1932 Billion for Fiscal Year 2020. When adjusting these numbers for annual inflation averaging 2.1% per year, the current projected total (ignoring the pandemic depression we currently find ourselves in) of income tax receipts is $21,252 Billion over the next decade.
To find new revenues, all we have to do is subtract old from new. This leaves us with (34,093.125 - 21,252 =) $12,841.125 Billion over the next decade in new revenues to feed into our UBI. Reverse-inflation adjusting this amount would give us $1,167.375 Billion in the first year to be devoted entirely to a continuous stimulus. (This would be $21,498 over a decade and $1954.36 Billion in the first year if we ignored how taxes affect labor supplies.)
If we give this UBI to all adult Americans, we would be omitting the 22.3% of the US population younger than the age of 18. The US has a total population of 330 Million, which would make the total adult population (330,000,000 x [1 - .223] =) roughly 256.41 Million people.
Starting with the $1,167.375 Billion in the first year, the 256.41 Million UBI beneficiaries would each receive $4,552.77 per year. (This would be $7,622.03 per person per year if we ignored labor elasticity.)
For a person making $15/hour currently pays $2381.25 in income taxes (plus $2386.80 in payroll taxes, totaling $4768.05) for an effective tax rate of 7.63% (15.28% combined income + payroll).
Under the new plan, the person would pay $8550 and receive $4552.77, making their net income tax burden $3997.23 ($6384.03 with the payroll taxes included) for an effective rate of 12.81% (20.46% combined income + payroll).
If we ignored labor elasticity, we would see the same income tax burden of $8550 and a higher UBI payout of $7,622.03, making the net tax burden of $927.97 (3314.77 with payroll taxes) and an effective tax rate of 2.97% (10.62% combined income + payroll).
This is a weird thing to think about. Perhaps I'll do a follow-up with a part 2.