U.S. Representative Chris Van Hollen (a Democrat from Maryland) has proposed introduce a small financial transactions tax (essentially a tax on Wall Street speculators) to finance a $1000 per year tax credit, which will be added to the paychecks of all workers earning under $100,000, or working couples earning under $200,000. This proposal would come in addition to the existing “Earned Income Tax Credit,” and it would be closer to universal, probably reaching a substantial majority of the population.
A proposal reaching so many people can be seen as a step in the direction of a basic income. However, the proposal has several differences with a basic income, most notably, it is conditional on labor. This cuts out some of the most needy people in society including the disable, children, people with fulltime care responsibilities, and people who can’t find an acceptable job. Being conditional on labor, some of the benefit of the tax credit is likely to be captured by employers who might have an incentive to reduce wages or foregone raises because the government is now paying the first $1000 of most of their employees wages. The overall effect is likely to be higher living standards for the average work, but by less than the full $1000 economists would expect from a lump sum payment such as a basic income.
The plan is not likely to gain much support in the Republican-controlled Congress. But if it gathers support among Washington policymakers, perhaps a debate will form on ideas related to basic income.
For more information on the proposal see:
Richard Kirsch, “Van Hollen Tax Proposal an Economic and Political Home Run.” The Huffington Post. 01/12/2015
Budget Committee Democrats, “An Action Plan to Grow the Paychecks of All, Not Just the Wealthy Few.” Budget Committee Democrats (website). Accessed January 14, 2015.
