Taxless government spending for basic income

Taxless government spending for basic income

The crux of opposition to taxless spending (that is, money spent by a government that has not been raised through taxation) is inflation caused by creating additional money.

In The Affordability of Basic Income, a paper written by Geoff Crocker, it states that a government can create additional money without increasing inflation as long as the money supply does not exceed the productive capacity of the economy: and recent quantitative easing in both the US and Europe has given empirical backing to that claim. However, increasing the money supply beyond that point will inevitably create additional inflation.

It would be unfortunate if we never tested the boundaries of our productive capacity. Capacity utilization in the United States averaged 80.32 percent from 1967 until 2017, according to Trading Economics magazine. So far in 2017 the utilization is less than 78%. That means approximately 20% of the productive capacity in the US is an unused resource. Most nations in the world are in a similar utilization bracket, according to Trading Economics magazine.

The GDP of the US in 2016 was $18.5 trillion dollars according to Trading Economics. 20% of that is $3.7 trillion dollars. This is the amount of taxless money that could be added to the economy in the US each year, without causing inflation, in theory. Adding too much too quickly could cause inflation though, because the logistics of using 100 percent capacity takes time to implement.

The key would be to start with a small annual amount, then increase it slowly, if inflation did not occur. If the economy received a slow steady influx of taxless money from the government, the slow steady increase in demand should lead first to a slow steady use of full production, and then to a slow steady increase of production capability, as industry invests in increased production to match increased demand. This would be a platform for continued growth and utilization of taxless government spending, without causing inflation.

The government could introduce taxless spending through any number of programs, and Basic Income could be one of them. It could also lead to lower spending on federal interest payments if it were used to balance the budget, instead of increasing the national debt to do so. Many other programs could benefit as well, such as healthcare, infrastructure repair, education, etc.

Government would still collect taxes, and would still be able to use them to encourage or discourage activities as deemed necessary.

It is also a technology that would require no expensive change to the infrastructure. All major technological advancements in the past that could affect the economy by 20 percent required major investments in time, resources, and investments. The steam engine, railroads, cars, cell phones, and the Internet all took 20 to 30 years, billions of dollars, and countless man-hours to implement. Taxless government spending requires only the change of policy. No new airports, factories or cell towers, just a change in policy.

Taxless spending could provide a form of basic income funding that could be utilized in many nations around the world, without creating a burden on taxpayers, if implemented properly. It would filter into the economy and every person on the planet could benefit from it, not just the well to do. We all deserve to benefit from such a simple solution to an age-old problem, poverty.

 

Michael Keith has been in the construction industry for 30 years, spent 15 in the Carpenters Union building offices, skyscrapers, and condominiums. Keith had a California Contractors license, and built many custom homes there. He presently remodels Braum’s Ice Cream Store and Restaurants in 5 different states in the US.

 

Reviewed by Malcolm Torry and Tyler Prochazka

Book Review: Basic Income as a ‘realistic revolution of the welfare state’

Book Review: Basic Income as a ‘realistic revolution of the welfare state’

Why do so many leading economists pronounce themselves in favor of a Basic Income? Because of its positive economic effects on the distribution side, for example. Basic Income stabilizes the overall domestic consumption and provides a kind of regulation for the ratio between expenditures and savings. Furthermore, the Basic Income helps up to a certain degree to equalize the “unnecessary” distortions arising from the free play of market forces within the context of automation, digitalization, delocalization and further developments in society. And finally, Basic Income constitutes a lean and just system to provide every single individual with the minimal share of the wealth of nations that he/she is entitled to.

The economist and former head of the Hamburg World Economic Institute Thomas Straubhaar does not put the emphasis on the macroeconomic aspects. In 2006, he was one of the originators of the liberal Basic Income proposal “Solidary Citizens’ income” promoted by Dieter Althaus, member of the center-right party CDU and Thuringia’s prime minister at the time. Straubhaar’s new publication “Radikal gerecht” (radically just) shows some interesting development, while maintaining the core of the arguments in favor of a Basic Income from a liberal perspective.

The principles remain the same: Basic Income is paid unconditionally, to each individual, in addition to existing income and an amount that allows for a dignified living of each person. According to Straubhaar, Basic Income is a liberal concept because it promotes free choice of the individual (including the poor) and abolishes social bureaucracy. And it is a just cause because people with a high income pay more net taxes than those with a low income. While the citizen’s income of 2006 was calculated at €600 per adult per month (Bürgergeld), Straubhaar now speaks of €1,000 per person. He does not insist on this sum, saying that a) the basic needs of the individuals have to be re-evaluated periodically by the responsible office, for instance the federal statistical office, and b) in addition the amount is and will be a function of the political debate. A higher Basic Income requires higher taxes, which is the expression of the political will respectively of the political majorities. “It is obvious that the amount of the Basic Income and the tax rate are the levers of the policy makers and of the population to steer this new social system”, he writes on page 17.

Straubhaar presents the Basic Income as a kind of radical reform of the tax system. He calls it a negative income tax, however. A core element of this tax reform would be a flat rate tax on all kinds of income, not only wages, but also capital revenues and revenues from automats and robots. Here, Straubhaar reacts in a raw form to the fact that in the future, products from fully automated factories are going to have a price as well. Hence these have to be taxed like any other income. This is a major difference to most other models (and specifically the solidary citizen’s income of 2006) which deal mostly or exclusively with revenue taxes, and it is very welcome to see such an adaptation from the liberal side and in a systemic (even if at this moment still rather crude) form.

Concerning the financing, Straubhaar argues that the €960 billion cost of a Basic Income of €1,000 per person per month (80 million x €12’000) is somewhat higher than the actual expenses for the social state in Germany of €880 billion. The actual gross value-added amounts to €2.73 trillion (2015), which means that a flat rate of tax of 40% on this (at the moment it is transformed into income) would provide €1.1 trillion. The rest of the state’s expense would be covered by indirect taxes. At the same time, the contributions for the classical social insurance that actually are deducted from the gross salaries would largely be abolished.

Straubhaar admits this calculation to be very rough and not able to reflect all the possible and dynamic effects of the introduction of a Basic Income scheme, and insists on the flexible elements such an introduction will imply (estimation of cost of living, political process etc.). As with other authors, financing is not the core of this motivation. He sees the Basic Income as the best and most viable solution to adapt the classical system of social insurance of the 19th century to the 21th century. It creates a sort of a “blind” social policy, contrary to the targeted schemes whose advantage all too often is only to maintain a class of social bureaucrats who decide on sums and subjects. Furthermore, it is a core contribution to big issues of our times, namely an ageing population, digitalization/automation, individualization, and so on. Economically, it is not only viable, but it makes sense within the context of globalization and full automation. And he insists on paid labor continuing to be the main source of income but in new, more flexible and open forms, as activities and careers keep changing, as we witness already today. In this context, the existing organizations like trade unions or entrepreneurs’ federations will maintain their significance. The work motivation, which some economists see threatened by a Basic Income, will not decrease, but on the contrary increase thanks to the increased degree of freedom.

Straubhaar’s book is an important step for the liberal promotors of the Basic Income scheme in Germany. He aligns in practice with the other wings (Netzwerk Grundeinkommen, Goetz Werner) by speaking now of a sum of €1,000 per person per month (without being categoric about it). He urges it as a core element for the rebuilding of the social state, an adaptation to the 21th century and a blind social policy with arguments that are widely acknowledged by intelligent people. However, it is not certain that his fellow liberal economist colleagues in Germany are willing to follow his arguments. Many of them are still anchored in the concept of a 19th century social state. On the promotor’s side, some might be tempted to criticize Straubhaar’s concept of a negative income tax. Furthermore, several questions about the additional tasks of the social state remain.

There is one point that cannot be conceived in the way Straubhaar does. On page 98, he writes that every German citizen is part of the Basic Income scheme from birth until death, and those living abroad would have a right to their full claim, independent of their new country of residence. This is a flashback to the 19th century concepts of citizenship and nationality. Today, we speak of resident population and debate the introduction of a Basic Income in the whole world. Thus, if a German citizen would live in France, he would get the French Basic Income without the German Basic Income. But this is a tiny remark and does not impair the substantial progress of “Radikal gerecht”.

Finally, although Straubhaar labels Basic Income as radically just, he does not close the loop from a moral perspective to a legal standpoint, by omitting the step from basic income to basic right. As Thomas Paine wrote in 1796, the whole earth was originally in the possession of the whole human race. Now, on the base of an immensely increased wealth of nations and individuals, Basic Income represents the entitlement of every individual to a minimal (or basic) share of this wealth.

 

More information at:

(in German)

Thomas Straubhaar, Radikal gerecht [Radically just], Edition Körber-Stiftung, 2017

Written by: Albert Jörimann

Albert Jörimann, was president of BIEN-Switzerland from 2008 until 2013. His main research subject is financing questions of basic income.

 

Works cited:

Das Solidarische Bürgergeld. Analyse einer Reformidee.» Konrad Adenauer Stiftung, Edited by Michael Burchard, Lucius & Lucius, Stuttgart 2007.

Net incomes under a Basic Income system

Net incomes under a Basic Income system

In the May 23, 2017 edition of Basic Income News, Karl Widerquist laments the tendency of some basic income commentators to overstate the cost of a basic income. The typical methodology used to generate these overestimates is as follows:

  1. Obtain the population of the jurisdiction which will implement a basic income
  2. Obtain the amount of the basic income provided to each person in that jurisdiction
  3. Multiply the number in “a” by the number in “b”
  4. The product referred to in “c” is the cost of a basic income

As Widerquist points out, the reason this is an overestimate is that it fails to consider the fact that even though everyone would receive the amount referred to in “b” above, not everyone would be net beneficiaries of this amount.

Suppose the amount referred to in “b” were $10,000, meaning that under a basic income scheme, everyone would receive $10,000 per year. But in every basic income proposal I’ve seen, although the basic income wouldn’t officially be taxed, all other income would be. This means that at some income level, there would be those who’d owe at least $10,000 in their annual tax bill. Since the amount they’d owe in taxes would be at least as large as the $10,000 basic income, they would no longer be net beneficiaries. Their basic income would, in effect, have been taxed back from them. Under a basic income scheme, there would also be those who’d be net beneficiaries of a basic income but not of the full $10,000 amount. All of this might be easier to see if we did a bit of math.

Again, assume that our basic income comes out to $10,000 per year per person. Suppose all other income is taxed at a marginal rate of 25%. The use of one rate is to keep things relatively simple. Here is the key equation for the basic income system being described in this paragraph:

Net Income = $10,000 + (1 – .25) * Other Income

Now let’s play with this equation a bit. Suppose someone had no other income. We’d then end up multiplying $0 by (1 – .25) which would give us $0. And $0 + $10,000 would mean this person would end up with a net income of $10,000. That is, they’d be a net recipient of the full basic income benefit level.

Now consider someone with other income of $30,000. Multiplying $30,000 by (1 – .25), we end up with $22,500. Once we add this to the $10,000 basic income, they’d end up with a net income of $32,500. Let’s look more closely at what’s happened here. The person made $30,000 in other income. If they didn’t have to pay taxes, we’d have (1 – 0), which is just 1, instead of (1 – .25). So they’d keep all $30,000 plus the $10,000 basic income for a net income of $40,000.

Looked at this way, we see that the tax on other income is effectively a tax on the basic income as well. That is, the fact that the person with $30,000 in other income only ends up with a net income $32,500 instead of $40,000 means that $7,500 of their basic income has been taxed back to the government.

Next, let’s take a look at what happens to someone with other income of $40,000.

We’d have to multiply (1 – .25) times $40,000, ending up with $30,000. And $30,000 + $10,000 is a net income of $40,000. If this person paid no taxes on other income, we’d add their $40,000 in other income to the $10,000 basic income for a net income of $50,000. With taxation, their actual net income is $10,000 less than $50,000. That is, we’ve taxed back all $10,000 of their basic income. So this person would no longer be a net recipient of the basic income.

Finally, suppose someone had other income of $100,000. We’d end up multiplying (1 – .25) by $100,000, which comes out to $75,000. Since $75,000 plus $10,000 is $85,000, this person’s net income would be $85,000. Now if they didn’t have to pay taxes, they end up with a net income of $100,000 plus $10,000 or $110,000. But with taxes, their income is only $85,000. We see that not only has their $10,000 basic income been taxed away, so they’re no longer a net recipient of a basic income, but they’re paying enough in taxes to help finance someone else’s basic income, someone with much lower other income than they have.

If we think carefully about these examples, we see what’s wrong with some cost estimates of a basic income: they assume the tax rate in the equation above is 0%. But as I said above, every basic income proposal I’ve seen, assumes that all other income would be taxed at some positive marginal tax rate. This means, of course, that our net income equation will include a term where some positive marginal tax rate will be subtracted from 1. We used a 25% rate for illustration, but really any positive rate will do. This is because any positive marginal tax rate on other income, although not officially a tax on the basic income, is effectively a tax on basic income. And this means some people won’t be net recipients of the benefit. Understanding this point is key to arriving at better estimates of the cost of a basic income guarantee.

 

US: Step by step implementation of basic income

US: Step by step implementation of basic income

The following is a step by step instruction for implementing a basic income in the United States.

Step 1: The government introduces a basic income of $40 per month for all citizens. 300 million of the 325 million inhabitants are US citizens.

The required funds are $40 x 12 x 300 million citizens = $144,000 million, $144 billion.

This is financed by a levy of 10 cents per kwh of electricity consumed by households, which is 1,440 billion kwh per year. So the levy amounts to 1,440 billion kwh x $ 0.1 = $144 billion.

Since all people who get the basic income consume electricity, in a way, they pay this basic income to themselves. However, big users of electricity will contribute more than those who consume less. Think about it. Electricity allows you to have a smartphone, a PC, a fridge, and even drive long distances with an electric car at a ridiculous cost. The current price of electricity is much lower than its value.

Step 2: We increase the basic income with another $60 per month for everybody to reach $100 in total. The required funds are $60 x 12 x 300 million citizens = $216,000 million or $ 216 billion.

Financing

Most “productive” jobs are now done by machines which have replaced many of the workers in our factories. Stop dreaming of deriving social security contributions and income taxes from new jobs: 80 % of the GDP of the US are services, many of which have added value too low to contribute taxes. We should get taxes from the machines/robots which replaced the workers. However taxing robots would make them move to other countries where there are no taxes on robots. Therefore, we should not tax the robots themselves, but the products made by machines/robots, like cars, bikes, shoes, phones, PC’s, games, toys, furniture, carpets, fridges, and so on. That way, it doesn’t matter if the robots are in the US or China. Consumers will pay more for those products, but on the other hand they also will get an additional (basic) income to pay for such products. Those who spend more than others will contribute relatively more taxes. That is the beauty of taxes on consumption: you decide yourself how much taxes you pay, depending on how much you purchase. In the US, current sales of products which are typically and mainly produced by machines/robots are approximately $1440 billion. We introduce a “social” sales tax of 15% (on top of exiting sales taxes) on those products which will generate the required $216 billion.

You could argue, what is the point to give a total of $100 per month basic income to all citizens, if, on average, they spend it in increased prices of electricity and some goods? The point is that people who buy a lot contribute much more than the ones with a low income. Thus, it comes down to a (more or less voluntary) redistribution of purchasing power.

Step 3: The government will pay an extra basic income of $100 per month for all citizens of working age, 18 to 70, paid by employers. This will cost $100 x 12 months x 185 million citizens in this age group = $222 billion.

We finance it by a levy of 10 cents ($ 0.1) per kwh on non-household electricity consumption. So essentially, the electricity consumed by enterprises or other entities which typically employ workers.  This comes down to $ .1 x 2,380 billion kwh = $238 billion paid by the employers since they pay the levy of 10 cents per kwh of electricity consumed by them (including residential, industry and transportation).

At the same time, the employers compensate this extra tax by reducing the wages of their employees with the same amount. For a worker who previously was paid $1700 net per month, his new wage bill will read: basic income grant $100 paid via the government (thanks to an extra tax paid by enterprises) + $1,600 net salary = total income $1,700.  So, the total net income of the workers remains the same, the total cost for employers remains the same too. Electricity gets more expensive, wage cost less expensive.

Step 4: We increase the basic income with $200 per month for all citizens of working age, 18 to 70, paid for by employers, while at the same time the employers can reduce the wage bill with the same amount (as in step 3).

The cost is $200 x 12 months x 185 million citizens in this age group = $444 billion.

This is financed by a levy of 3 cents per kwh on gas and coal sold to industry, transportation, commercial and residential.  This does not apply to such fuels sold to generate electricity, otherwise electricity would be taxed twice. Given the energy consumption of fuel, gas and coal for these sectors, this generates $ .03 x 16,617 billion kwh = $498 billion. The margin between $498 billion and $444 billion will be necessary because consumption will decrease given the increase in cost. CO2 emissions will improve, by the way. For fuel, the additional tax amounts to +/-  $1.05 per gallon. Think about it.  With one gallon of gasoline you can drive 40 miles. Imagine you need to walk or ride a horse or use a bike in bad weather. The cost of fuel, including for air travel, is indeed ridiculously low.

Step 5: We increase the basic income with $1,000 per month for all citizens over age 70.

The required funds are $1000 x 12 months x 28 million people = $336,000 million, $ 336 billion.

This is financed by a decrease of military spending of the same amount over a period of 10 years, 30 billion per year, such that, in the end, for each military dollar spent we also give one dollar to the elderly.

Indeed, is it ethically acceptable to spend money on defence and not spend the same amount to support our elderly people? A fair deal is that for each dollar spent on military matters, another dollar should be distributed to them. Of course we cannot decrease military spending in one go. Therefore, this step counts as 10 sub-steps in which we decrease military spending by $36 billion per year over 10 years, moving the yearly military spending from $672 billion to $336 billion, which is still five times more than the current Russian military spending. Because military veterans will get basic income like other citizens, it will become a part of their compensation. The expense to the military budget would be reduced with the same amount.

Step 6: We increase the basic income with $200 per month for the age groups 0 until 17 and $400 for over 64. This relates to 70 million citizens of under 18 and 46 million over 64.

The required funds are $200 x 12 months x 70 million + 400 x 12 months x 46 million = $389,000 million, $389 billion.

The basic income per age category per month in total then becomes:

0 to 17: $300 (steps 1, 2 and 6)

18 to 64: $ 400 (steps 1, 2, 3 and 4)

65 to 70: $ 800 (steps 1, 2, 3, 4 and 6)

70 and older: $ 1500 (steps 1, 2, 5 and 6)

This step is financed by using most of the budgets for welfare since the basic income system gives a higher purchasing power to them. In 2016, welfare spending was $430 billion. Only an average of 25% of the funds went to cash assistance. The problem with the means tested welfare system is that the administration necessary to do the testing takes up a huge part of the budget. Wyoming currently gives the highest benefit to TANF families (a single parent with two children): $657 per month. Worst case, it compares with $300 x 2 +$ 400 = $1000 from the proposed basic income scheme above. The basic income system advantageously replaces the welfare system in any of the 79 existing systems. The food stamp system for example emerged in 1939, when the cost of food was still very high in household budgets, especially for poor households with many children. Food is now very cheap compared to then.

Step 7   When looking at further opportunities to fund basic income, we should look at inefficient parts of the US economy.

By far, the most inefficient part is health care. Not only because medical doctors have a nice income, generally speaking, but because the US health consumer not only pays for the health care itself,he pays also for the insurance people as well as lawyers and other legal people involved in disputes. No wonder the cost of health care per inhabitant in the US is twice as high in comparison to European countries. In France for example, there are no legal and insurance parasites draining the standard health care system, which is directly organised by the state. And even that system is not efficient, because there is a lot of overconsumption in France. The current cost of health care in the US is $3,300 billion including the $ 1,520 billion paid for by government.

Education is an outdated economic sector. The recent IT and internet revolution did not induce many institutions to review their business model. The “productivity” of the learning process would be less than 10% if measured by standards used in industry. Currently, until age 16, schools serve two purposes: education and babysitting. Lots of things in education should be re-engineered. If education were to be invented today, would we build schools? Would we have classes of pupils all the same age yet with different knowledge and skills? What about virtual classes, at least part-time?  The cost of education funded by the US tax payer is $960 billion.

The US has the highest cost per student world-wide, after Luxembourg. Just recently, in an address in May 2017 at Harvard, Mark Zuckerberg, the founder of Facebook, said we should introduce basic income. He also said that the time has come to introduce lifelong personal education, which we can refer to as “coaching”. Now think about it. Health depends a lot on education, not the least our mental health.   While health care should evolve from curative to preventive care, there is a huge synergy between education and the future of health care, to the extent that they should be regarded as one and the same venture. Therefore, the government should move the budgets for health care and education to private “care organisations” or “coaching organisations”, which should offer lifelong health care and education to their “members” while government pays the member fees.  We can do that by using the current government budgets for health care ($1,520 billion), education ($960 billion) and pensions ($1,380 billion). Mind that the basic income for > 70 will be $1,500 which is higher than the current OASDI benefits) and therefore replaces OASDI to a very large extent.   Possible residual differences in income need to be covered by the coaching organisation. The budget of $3,860 billion dollar amounts to $1,070 per citizen per month. When comparing with costs of education and health care in well managed countries, this looks like a good business opportunity for enterprises which want to become active in the social economy.  Obviously, the cash obtained by these coaching companies from the government may differ depending on some characteristics of the members, like age.  Citizens who want to change from a coaching service provider should face some penalty since continuity is important to provide a good service.

A possibility to launch such a system would be for the government to organise a tender offer followed by the granting of licences to big system companies willing to apply. There are several such companies well positioned to tap this new market. Think of IBM, Microsoft, Oracle, GE, Intel, Google or Facebook. They could design new health care/education products and bring those services to the market while using subcontractors, which they would manage. A special US problem has to be dealt with to make that possible. Legal proceedings and the “insurance” logic are not part of such a model. Those who want to keep the ability to sue teachers and nurses in court should continue to use the current private health care/education system.

Conclusion: Basic income can become the core of the social security system in the US. This is just an example of how it could be done. The guiding principles in this proposal are:

-Basic income is linked to citizenship combined with residency in these calculations. Other options imply other numbers.

– Money is not falling out of the sky. The sources of funds to finance each step are identified and realistic.

–  Information sources for energy: https://www.eia.gov/energyexplained and https://en.wikipedia.org/wiki/Energy_in_the_United_States

– A step by step approach may lead to the recognition of the viability of a significant number of steps.

– A basic income is a “social dividend”.  Just as the shareholders of enterprises get a dividend because they own shares, all citizens derive a right to get a social dividend because their parents and grandparents have put a society in place which is able to produce a large surplus of food and goods, such that we can pay a dividend from this surplus to all citizens.

– The basic income replaces, to a very large extent, the current social security and other benefits. For those who have a job, and the companies employing significant numbers of workers, the net effect of the introduction of a basic income system should be, more or less, neutral. When employees get a basic income from the state which replaces a part of their salary, the cost to the employer will be lower with the same amount (at the moment of the transition). However, the employers will be faced with an increase in other costs due to new taxes which will be levied to pay for the basic income.

– The basic income is distributed electronically, for example via an automatically charged debit card. It could actually be a smart phone if properly protected. Government can organize a bid process for organisations willing to distribute the money one way or another. It is highly likely technology businesses or communication operators would apply to distribute the basic income. However, it could be banks as well, or big retailers. It is likely that the cost of the distribution of the basic income to the government would be around zero. It could even turn out to be a small revenue for the government, when interest rates move up again.

– After a while the basic income should be disconnected from a precise mechanism of funding.

– The basic income should evolve with the cost of living. It would make sense however, to use it as a tool to influence the economic cycle – increase the basic income to increase demand; wait to increase it if the economy gets overheated.

 

Bill Gates is wrong: Don’t tax robots

Bill Gates is wrong: Don’t tax robots

Bill Gates made headlines when he suggested robots that take human jobs should be taxed at a similar rate as humans. The money, he said, could slow the rate of automation, and be used to fund government jobs.

Gates could not be more wrongheaded on this proposal.

The problem with Gates’ idea is that it assumes robots taking human jobs is something to be discouraged. The opposite is true. We should welcome robots doing more tasks for humans, thus freeing up humans to engage in other fulfilling endeavors.

Imagine the government took Gates’ approach with Microsoft computers to prevent their machines from taking jobs. Humanity would be worse off because of the unrealized productivity, connectivity, and convenience that would be impossible without computers.

The crucial component in response to automation that Gates does not mention is the Universal Basic Income (UBI). UBI will ensure that those who lose their jobs to robots will have a flexible cash grant that could be used for training, education, or to pursue whatever the individual’s passion may be.

There is a legitimate worry that the companies that own the robots will accumulate most of the wealth, and the rest will be left behind. A basic income addresses this automation cliff more effectively than attempting to delay inevitable automation with taxation.

It is possible in the future, humans will be able to scale back their work hours, while still receiving a comparable overall income through UBI because robots would be doing the bulk of humanity’s work. An individual could spend more time on volunteering, entrepreneurship, their family, civic engagement, and creative endeavors.

The greater the dividend humanity receives from robots because of their higher productivity, the larger the basic income can be without disrupting the economy.

Gates and others are stuck in the mindset that humans are meant to spend eight hours a day, five days a week in a traditional work environment. Robots are threatening to upend the system, which should be welcomed as it opens new possibilities for what people can do with their time.

Just because someone receives a wage from a company does not mean they are maximizing their potential for themselves and what they can provide to society. For example, is a single mother doing more for society by working twelve hour shifts, or spending more time raising her child?

As automation intensifies and countries inevitably start to implement basic income, many will continue to work full-time in the traditional system. Others will work part-time. And still more will find different ways to contribute to society. There is a basic human drive to develop one’s self and bring positive change to the world.

Traditional work will not necessarily cultivate each person’s true comparative advantage. The irony is that robots taking more jobs will give us more freedom to choose our best path, if coupled with an unconditional basic income.

Instead of taxing robots, we should tax activities that we want to discourage. For example, activities that harm the environment, such as fossil fuel use, animal agriculture, and resource extraction. Land ownership could also be taxed at a higher level. This could raise the same amount of revenue from wealthy individuals as Gates’ suggested robot tax in order to fund UBI and other government services, without discouraging the positive good of robotic development.

The dramatic expansion of automated jobs is going to remake the economic order and will require governments around the world to respond. The biggest mistake will be fighting this change and attempting to preserve the same system we have now, instead of using the opportunity to drastically improve it.

Image: Red Maxwell, Flickr, Ted Talk: 2009.