This post is not about tax rates. Higher tax rates don’t necessarily translate into additional tax revenue, because tax rates interact with economic behavior in complicated ways. That discussion is for another post. This post is about how to use the gift of extra tax revenue.

Some numbers:

_2019 Extra Tax Revenue if 30% of GDP.png

What I’d do with that extra $600 billion in tax revenue:

_2019 Extra Tax Revenue-How To Spend.png

How I arrived at these figures:

Universal Healthcare: Roughly 28 million Americans lack health insurance, most of whom are under 44. In 2017, employers contributed an average of $5,477 for single coverage, with employees contributing $1,213. That adds up to $6690 per person. Note that other posts (see below) documented how US healthcare spending could be reduced by around one trillion dollars with some reasonable reforms.

Parental Leave: this would be paid for by an employer tax, similar to an unemployment tax. However, the overall tax burden for employers would not go up, because their spending on healthcare benefits would be going way down due to other reforms. My budget is based on an average parental leave benefit of $2600 a month.

Adult Student Basic Income: :  The ASBI would provide $1000/month up to six years total (minimum one month at a time) for adults enrolled at least part-time in postsecondary training and education programs, from ESL classes to apprenticeships to graduate school. The benefit would not be means-tested, so recipients could work without jeopardizing their ASBI payments.

The new tax revenue would come from higher income households and pay for about 30% of the ASBI. About 18% of the ASBI would be funded by a tax on the benefit itself, paid only by higher income households that had received ASBI income during the tax year. A little over half the ASBI budget would come from funds made available by eliminating or downsizing other government programs, e.g., Pell Grants, federal student loans, and Supplemental Social Security. Note that the reduced budgets for safety net programs would be mostly due to a decline in applications, as more disabled, unemployed, and low-income folk would go back to school to take advantage of the relatively generous ASBI. Also, many ASBI recipients would be disqualified from other benefit programs due to income thresholds for eligibility.

Environment: That’s just what was available after figuring out how the rest of the $600 trillion would be spent.

Rental Subsidies: The typical subsidy is about a third of overall rent. Currently about 5 million low-income households received federal housing assistance. I doubled the number of households and made the average subsidy $500 a month. Part of this money would go to subsidizing tiny rooms in residential hotels for the chronically homeless.

Research and Development: over the past few years, R&D budgets have been slashed across a bunch of agencies, as has the budgets for congressional staff. You can’t craft sound governmental policy without high quality information and analysis. $13 billion is the least I could do.


Tax Systems Made Interesting, Part I: Comparing US Tax Revenue and Rates with Other Countries

What To Do About Chronic Homelessness in California: A Suggestion, Part II 

Behind The Headlines: Are Millennials Being Crushed by Student Debt?

How to Trim US Healthcare Spending by 25 Percent

Social Mobility and Income Inequality: How Are They Related?

How to Pay for a Targeted Basic Income - Responsibly! 

The Beauty of a Targeted Basic Income: Manageable Cost + Myriad Benefits

Bureau of Economic Analysis