Written by: Thomas Clarkson
This opinion solely represents the view of the author and is not necessarily the view of Basic Income News or BIEN. BI News does not endorse any particular petition or policy.
One of the difficulties in talking about universal income is that the arguments lack punch because we discuss them in the abstract. The “People’s Dividend” (PD) petition on Change.org tries to correct that problem by asking people to sign a petition and call Congress to take action. The PD petition is different because it uses real numbers:
- $27 trillion, the personal net worth of the one percent wealthiest (PNW1)
- $1.5 trillion per year, the annual growth of the personal net worth of that same one percent
- $4,500 per person, if the $1.5 trillion was re-distributed to all 333 million people in the U.S.
The PD petition proposes that the IRS annually harvest the growth of the wealth of the one percent and distribute it every year to every adult and child in the U.S. without conditions. It also urges people to take two specific actions to make that happen: 1) sign the petition and 2) call Congress.
Please Sign the Petition
If you read the petition first, or watch the video that introduces it, you will have a sufficient background for this article. Here is a link for the People’s Dividend Petition. Feel free to sign the petition while you are there.
Fun with Numbers
Before we go into the details of the proposal, it may be enlightening to compare some of the numbers given above to other things.
$27 trillion (PNW1) is:
- about 686 percent of the Federal Budget ($3.9 trillion)
- about 136 percent of the federal debt ($19.8 trillion)
- about 143 percent of GDP ($18.9 trillion)
- $81,000 per person in the U.S.
$1.5 trillion (the annual growth of PNW1) is:
- 38 percent of the Federal Budget ($3.9 trillion)
- 256 percent of the U.S. Defense budget ($585 billion)
- 253 percent of the annual Federal deficit ($592 billion)
- $4,500 per person in the U.S.
$4,500 per person is:
- one-third of the poverty level for 1 person, which is $11,880
- $18,000 or three-fourths of the poverty level for a family of 4 persons, which is $24,300
- one-seventh of the median wage for workers in the U.S.
- $450 million of added income for the population of Flint, MI, a city of 100,000 people
- $3 billion of added income for the population of Washington, DC, a city of 675,000 people
- $36 million of added income to the 8,000 homeless people in Washington, D.C., which is equal to one-third of Washington, D.C.’s 2017 affordable housing budget of $100 million
Are These Numbers Reliable?
The Forbes list of U.S. billionaires, as of March 21, 2017, identified 565 U.S. billionaires with a combined net worth of $2.8 trillion. This contradicts the established fact that “the personal net worth of the one percent wealthiest (PNW1) is actually $27 trillion. A lot of what is written in the popular press about wealth and income grossly understates PNW1. Fortunately, the World Wealth and Income database (located here) is pulling back the covers on this issue. WID.world has authoritative statistics on wealth and income going back 100 years. That is where the data that supports the People’s Dividend came from. Online access to the WID.world database has been available since 2011. However, economists have been laboring on it for thirty years or more and they deserve great credit for their results. This resource makes it possible for a non-economist like me to grasp wealth inequality trends.
With WID.world data, we can avoid erroneously limiting the wealthiest one percent of U.S. citizens to those found on the Forbes billionaires list. For example, an extrapolation of WID.world data from 2013 to 2017, indicates that the one percent includes all households with over $5 million in net worth. There are about 1,670,000 such households. I estimate that their total wealth in 2017 is $27 trillion, with an annual increase of $1.5 trillion projected. The important result that follows from getting the numbers right is that the size of the People’s Dividend payment gets large enough for people to notice. $4,500 per person is significant. That is the result when you divide the growth of $1.5 trillion by the entire U.S. population. The proposal takes data seriously and the petition includes a link, also given here, to all of my calculations and sources here.
Making It Real
Because the People’s Dividend idea is formulated as an actionable petition with known dollar results for individuals, it makes the numbers behind the universal income/wealth inequality discussion more real. For example, a person knows that their payment would be $4,500, with 99 percent paying no wealth tax. They also know whether their household net worth is above $5 million and, therefore, they know if they are in the 99%.
It is also immediately apparent to many that $27 trillion is simply too much money for one percent of the population to have when 50 percent of the population has so little. For those less easily convinced that that is too much inequity, consider the fact that the one percent’s share of total U.S. wealth has grown from 25 percent in 1982 to 40 percent in 2017. If the one percent’s share keeps growing one point every 2.3 years, then in 23 years it will grow 10 more points to 50 percent of total U.S. wealth. By 2040, the one percent would have as much wealth, 50 percent, as everyone else in the U.S. put together. I think, at that amount, almost everyone would agree that would be much too much.
The purpose of asking people to sign the petition and contact their one Congressional Representative and their two Senators is to encourage them to think about this data, and, in the process, have it become more real for them.
High Points of the People’s Dividend
The $4,500 PD Payment
- The $4,500 per person goes to everyone in the U.S., but only households with PNW greater than $5 million pay the tax. A household of 2 people worth $5.1 million would pay $7,800 and receive $9,000. This means that slightly more than 99 percent of the people would be better off financially. This should make it easier to get a majority of voters in favor of PD.
- The PD goes on year after year.
- The $4,500 is tax-free, so a dollar of the People’s Dividend is worth more to people who pay income taxes than a dollar of ordinary income.
- $4,500 is equal to about one-third of the poverty level for 1 person, which is $11,880. However, for a family of 4, $18,000 in PD payments is about three-quarters of the poverty level for a family of 4 persons, which is $24,300. Therefore, it would be a significant poverty fighter.
- The PD potentially adds a big boost to local economies. In Washington, DC, for example, a city of 675,000, the total PD payments to the population would equal $3 billion per year. This is equal to about 24 percent of the city’s 2017 budget of $13.8 billion.
- The PD is paid to everyone, including the one percent. Therefore, no apparatus for measuring need is needed, and virtually all the $1.5 trillion collected can go to the people.
- The PD would be paid out monthly like a social security check to provide a steady flow of income year around.
- The PD amount would vary up or down, depending on how fast the PNW1 is growing or decreasing, as it might if stock markets decline. Therefore, the PD amount is not guaranteed to be the same from year to year. This feature helps avoid deficit spending because the PD is always equal to the amount of wealth tax collected. To smooth the change in the PD amounts from year to year a moving average of collections might be used.
Alaska’s permanent fund dividend in 2016 was $1,022 per person. The PD would be more than four times that. See here.
The Wealth Tax
- The wealth tax is calculated so that it is equal to the year to year growth in the PNW1, estimated to be $1.5 trillion. Therefore, it represents the increase in PNW1 after the one percent has spent all they want to and paid all their taxes.
- The intention is to keep the wealth tax equal to the growth so that the amount of wealth does not decrease and kill the goose (PNW1) that lays the golden egg (PD).
- A good part of PNW1 is composed of stocks and bonds whose value can decrease in a market slump. If that happens, then the wealth tax rate would be reduced for a few years, but not eliminated, in order to allow the wealth to recover. You can see from the green and orange chart in the video that the 2008 recession caused everyone’s PNW to decrease. However, by 2013, everyone except the 50 percent least wealthy had recovered.
- The wealth tax applies only to every dollar over the household wealth threshold necessary to be part of the one percent. This is $5 million in 2017. A household with PNW of $5,000,001 would pay 7.8 cents in wealth tax. A household with PNW of $6,000,000 would pay $78,000 tax on the $1,000,000 of wealth over and above $5,000,000.
- The $5 million threshold amounts to about $500 billion leaving only $1 trillion to tax. The $1 trillion is taxed at 7.8 percent but the overall tax is 5.5 percent of PNW1. PNW1 grows on average 5.5 percent a year so the tax is equal to the growth.
The Amount of PNW1
- It is better to tax wealth than income because only “realized” income counts for income taxes, but increase in asset values results in increased wealth tax revenues whether the gain is “realized” through a sale or not.
- Capital gains are taxed at a lower rate when it comes to income taxes. Consequently, a lot of big earners take their compensation in the form of shares of stock. In this way, they reduce their income taxes, but a wealth tax would neutralize this tax avoidance strategy.
- The PNW1 amount is a comprehensive measure of the wealth inequality and considers: the effects of all other tax laws; economic forces, such as automation and globalization that reduce the share of profits going to labor; changes in government expenditures for health care and other social programs; right to work laws that weaken labor’s position; and all of the other factors that increase or reduce the concentration of wealth in the one percent. As such, it is an easy litmus test for inequality and a measure we should all watch carefully.
- Because the WID.world data only went until 2013, I estimated the 2017 amounts using the historical compounded growth rate of 5.5 percent.
- But it should not be necessary to estimate wealth amounts. Therefore, an important feature of the PD petition is that it would direct the U.S. Treasury to collect wealth data promptly and directly from banks, brokerage services and other wealth depositories, so that the public could see the PNW1 amount and other wealth distribution amounts shortly after the end of the calendar year.
- The petition requests Congress to appropriate extra money to the Treasury to create a wealth reporting system and a reliable means to track down wealth hidden in various tax havens.
- Not mentioned in the petition, but a necessary addition, would be for Congress to provide funds to Treasury to negotiate tax treaties with other countries to prevent other countries from giving our one percent a better tax deal than the U.S. This is necessary to prevent all of our “one percenters” from fleeing to other countries to avoid the wealth tax.
- By taxing personal wealth, the PD proposal avoids interfering in the taxation of corporations. If they become more profitable, then the shares owned by the one percent increase in value and the wealth tax harvests more.
There are several possible obstacles that might undermine a campaign for getting this petition signed. First, the ideas of universal income and the magnitude of wealth inequality are not well-known by the general public. Second, it might seem too “pie in the sky”, at least initially. Third, many might buy into the common belief that any “giveaway” will ruin the moral fiber of the country and encourage laziness. I am convinced, however, that with enough support, especially from individuals widely admired and trusted such as the Pope, Oprah or Bono, momentum could be achieved. Anyone reading this article with good ideas for getting people on board, please contact me at email@example.com.
Please Sign the Petition
Meanwhile, be sure to sign the petition, if you agree with it, and get one or two others to do the same – People’s Dividend Petition. Once people realize that they have skin in this game and that change is possible we may see some of these proposals become a reality.