Tech Companies Can Actually Begin A Step Towards Basic Income This Summer
Since the election, I’ve had a lot of off-the-record conversations with leaders in the tech industry who are terrified of a populist revolt. They fear that if the industry doesn’t do something bold soon to make the economy more inclusive, it will be the target of debilitating political backlash.
But, there is something the tech industry can do, Today.
Silicon Valley can afford, this Summer, to support a policy that would erase the rise in inequality over the last 20 years and pre-empt the threat of automated job loss. Donald Trump’s extraordinary multi-trillion dollar tax cut proposal will largely be gobbled up by large tech companies.
For roughly 1/5th of the cost of corporate tax cuts, the US government can afford to give working families up to $12,000 a year through the government’s existing work-conditional income matching program, the Earned Income Tax Credit, which would dole out roughly $0.60 in credits for every $1 earned on the job.
Right now, the largest tech companies are busy lobbying Congress for the biggest tax cut the country can afford. Apple, alone, could become the first trillion dollar company, if Trump succeeds in passing a temporary 10% tax holiday on the company’s ~$230 billion in overseas cash holdings.
If tech companies instead banded together to simply shrink the existing tax cut proposal by 20%, the extra money could be used to set a new course for making economic growth more inclusive.
To be sure, this isn’t some pie-in-the-sky idea. Conceptually, it has support from respected technologists and economists.
In a recent public Q&A on Reddit.com, Bill Gates noted that tax credits are a smart step towards basic income.
“Even the US isn’t rich enough to allow people not to work,” he wrote. “Some day we will be, but until then things like the Earned Income Tax Credit will help increase the demand for labor.”
Silicon Valley’s brand new Congressman, Ro Khanna, is working on a bill to expand the Earned Income Tax Credit and will be introducing it into the powerful House Budget Committee, probably this Summer, when Congress begins serious debate over tax reform.
Even though many of Khanna’s business constituents stand to make money from tax cuts in the short term, it’s questionable whether it outweighs the long term threat of inequality and automation.
“US corporate profits have been robust, companies’ domestic cash reserves are high, and interest rates have been quite low,” says MIT economist Andrew McAfee, author of a new book on automation, Machine, Platform, Crowd.
When I asked McAfee about the possibility of a massive tax credit, he was bullish on the idea. “The EITC is a direct incentive to enter the labor force, and to work more hours (up to a limit). The research is pretty clear that it works as designed. So I support expanding it: making it both bigger and available to more people.”
Additionally, the tax credit would be a huge boost for startups, most of which don’t make enough money to qualify for a tax cut, but would greatly benefit from a tax credit that allowed them to quit their job and work full-time on building the next great tech company.
Tech titans, Today, could radically alter the national debate on tax reform by suggesting that some part of it be used to boost incomes from the average American. Something as simple as a company blog post would immediately make a big difference.
And, I think it’s time everyone start pressuring them to, at the very least, start engaging publicly in the possibility of using tax reform as a step towards basic income.
For details on the bill and estimates, click here for a long-form analysis. If you want to contact me, email is best: greg [at] gregferenstein [dot] com.
