Universal Basic income plus a flat tax equals a progressive tax

Peter Allen
Dec 14, 2016 · 2 min read

I know that advocating for Universal Basic Income (UBI) is hard enough without adding in changing the tax code. I just want to point out the appeal of the simplicity.

Why do we have a progressive tax? The idea is that the first few thousand dollars a person earns are critically necessary for living. A person needs food and shelter and those cost a certain amount, so we keep taxes at zero for the first bit of money. As a person earns more, money is less about survival and more about luxury, so the tax rate gets progressively higher. Taxes are highest on those who can most afford it.

Nonetheless, a flat tax is appealing to the libertarian minded. There was this animated video that explained the appeal (link). Everyone should pay their fair share, the logic goes. If some people are poor and paying taxes means they have to go hungry, then so be it. I do not agree.

A flat tax plus UBI is definitively progressive. The net tax rate paid to the government gets progressively higher as a person earns more income. I ran the numbers for a 31% flat tax plus $1k per month. Here’s what it looks like. It’s more progressive than the progressive (current) tax plan.

With those numbers, anyone making less than 40k per year gets a net rebate. No matter how much you make, you always give 31 cents on the dollar to the government. The percentage and UBI can be set however you want. If you want it to look more like the current system, set the flat tax to 25% and the UBI to $5k (pretty close to the standard deduction). You can check my spreadsheet.

I am simplifying the issue, I admit. And I am not saying that a flat tax is a critical feature. But if a flat tax (which seems more fair to some people) brings the Right on board, I don’t think we are sacrificing much. A UBI inherently satisfies the same needs as a progressive tax system.

Also tagged Basic Income

Also tagged Basic Income