A Newer Version of the Parker Tax Plan is embedded in An Antidote to Populism (2018)
Parker Tax Plan (PTP) (2017)
We are just beginning a new worldwide Industrial Revolution. In America alone, tens of millions of people will lose their jobs in the next twenty years. We made the mistake during World War II of tying health insurance to employment. We need now to separate a basic income from employment. The heart of the Parker Tax Plan is Number 3 below which guarantees every person in the United States a basic income of $800 a month after federal income tax. Rather than use a new label such as Universal Basic Income, the increased income is made part of the current Social Security system. The current Social Security system is a politically acceptable major transfer of wealth. Since a further major transfer of wealth is needed to deal with the new Industrial Revolution, it is politically wiser to keep the familiar label of Social Security. The four major features of the Parker Tax Plan as are follows:
1. Eliminate the federal corporate income tax which is mainly a tax on consumers and pension funds (which own the bulk of stocks on the New York Stock Exchange). If you want to increase taxes on the rich, tax their income directly.
Elimination of the corporate income tax would attract companies from all over the world to invest in factories and offices in the United States. The untaxed overseas profits of American cooperations currently stashed overseas, and estimated to be over two trillion dollars, would be repatriated.
The distortions in the economy, the deals and decisions made primarily for tax reasons, would vanish. The corporate lobbyists in Washington who are there mainly to lower corporate taxes and keep corporate tax loopholes open, and the tax accountants and tax lawyers employed to deal with corporate taxes would be forced to find more socially useful work.
The present corporate income tax raises about $350 billion, about 9% of the total federal tax revenue of roughly $3.6 trillion. Here the Republicans are right. Eliminating the corporate income tax would pay for itself in economic growth. In this area alone, “voodoo economics” works.
2. Raise the personal income tax. Every man, woman, and child would be taxed separately. There would be no joint or head of household categories, no personal exemption, and no deductions of any sort. Everyone would pay income tax, even the poorest, but the tax brackets would be much more progressive for the very wealthy. The tax would be a flat 20% of the first $200,000 of individual income, 30% of income from $200,000 to $300,000, 40% of income from $300,000 to $400,000, and 50% of all income over $400,000. A person with an income of $500,000 would pay $160,000. A person with an income of $1,000,000 would pay $410,000.
All earned income would be taxed. In exchange for the elimination of the federal corporate income tax, all corporate capital gains and dividends would be treated as earned income. All Social Security income and all welfare payments would also be taxed.
People in the 20% bracket would usually not have to file returns. Any time any employer paid money to any full time or part time employee, 20% would be withheld and sent to the federal government which would keep track of the amount received from each person. Only self-employed people or people in a higher tax bracket would need to file a return. This is the system currently in use in Japan where, in 18 years of being fully employed, I was only twice required to file a Japanese tax return.
3. Provide Minimum Social Security payments for every man woman, and child. Every citizen and legal resident of the US would receive a guaranteed Social Security payment of $1000 per month. (The actual amount received would be $800 per month because 20% would be withheld to pay the 20% income tax.) The current Social Security system and payroll tax would continue as it is. Everyone would get everything they are due now and in the future under the current Social Security System. The new amounts would provide only a floor for Social Security payments. Every person is guaranteed a Social Security payment of at least $1000 per month (actually $800 because of the 20% tax). Thus if someone were receiving current Social Security payments of more than $1000, they would receive nothing more.
Can we afford the suggested minimum Social Security payments? The current population of the United States is about 325,000,000 people. Multiply that by the $12,000 ($1000 per mouth) guaranteed to every person and the total cost is $3.9 trillion. The 20% tax on all income reduces that to about $3.1 trillion. People in higher tax brackets who would return more than 20% of the guaranteed payments are about 1.5% percent of the population. Their extra return of the guaranteed payments would reduce the cost another $.1 trillion ($100 billion) down to $3.0 trillion.
In order to be politically feasible, the PTP presents what is essentially a universal basic income as an addition to the current Social Security system which has strong majority support, especially among the Trump voter base. The PTP requires that the present Social Security system be kept in place, so that people continue to enjoy the benefits they have been promised. The payroll tax is also kept in place, or raised slightly to ensure the solvency of the current Social Security system. (The payroll tax might be collected on all earned income as further insurance of the solvency of the current Social Security system.) Almost everyone who is or will be on Social Security already receives at least $1000 per month from Social Security and can be subtracted from the number receiving the new guaranteed payments. Roughly 15% of the population currently receives Social Security. Thus the cost of the new guaranteed payment is reduced by 15%, taking the total cost of the new Social Security payments down to $2.55 trillion.
The current federal income tax collects about $1.6 trillion, about 46% of total federal tax revenue. The new PTP federal income tax would collect considerably more, much of it from wealthier Americans, but also a great deal from poorer Americans, many of whom now pay no income tax at all. The current total national income of all Americans is about $18.7 trillion. Twenty percent of that amount is $3.7 trillion. The new income tax would collect $2.1 trillion more than the current income tax, almost enough to cover the $2.55 trillion cost of the new Social Security payments. The extra $.45 trillion ($450 billion) might be collected from the richer people paying more than the 20% lowest bracket tax. Also see number 4 below. If all federal welfare programs are eliminated, that is a $360 billion dollar saving.
The PTP will not make a big difference in the amounts many people receive because the new guaranteed Social Security payments would be offset by the 20% tax on all of their other income. The major advantage would be that $12,000 of their income would be assured, no matter what their employment. And they would be seen by themselves and others as contributing citizens rather than as welfare parasites. Also the difficulties presented when poor people with various welfare benefits cannot take a low paying job without lowering their actual total income would be solved.
Imagine a person earning $10 an hour for 40 hours a week for 50 weeks a year for a total of $20,000. This person would receive new guaranteed Social Security payments of $12,000 for a total of $32,000. That total would be taxed at 20% or $6400 for a total of $25,600 with $12,000 ($9600 after tax) guaranteed. That person’s actual income would increase by twenty five percent.
If that person earning $20,000 a year were a single mother with two children, then the total would $20,000 plus new Social Security payments of $36,000 for a total of $52,000. This total would be taxed at 20% or $10,400 for a total of $41,600, double her previous income.
A person earning $50,000 would receive $12,000 in new Social Security payments for a total of $62,000, minus an income tax of 20% of $12,400 for a total of $49,600, a slight reduction from $50,000, but with her federal income tax paid.
If the person earning $50,000 were a single mother with two children, then the calculations would be $50,000 plus $36,000 for a total of $86,000. This amount would be taxed at 20% or $17,200 for a total of $68,000, a thirty percent increase in income, with her federal income tax paid.
One can also imagine four artists, each of whom wants to work full-time on their art, but none of whom are selling any art. They could live together in a small artist’s colony with a guaranteed household income of $3200 a month. Other new ways of life requiring little cash would flourish.
4. All federal welfare programs would be eliminated. The elimination of politically divisive federal welfare programs such as food stamps, housing subsidies, the earned income tax credit, etc., might not save much money, only about $360 billion, but they make the PTP more appealing to conservatives. People are given money rather than services. The increase in personal freedom is considerable. The bureaucracy required to determine who is eligible for various services is eliminated. Add the elimination of the corporate income tax, and the social stability the new Social Security payments would provide, and many conservatives would likely support the PTP. Liberals will ask why tax the poor at all and why give anything to the wealthy. The answer to the first question is that by giving a large subsidy to everyone and then taxing it back, one can give large percentage income increases to the very poor and significant percentage increases to the near poor. The reason to give the same payments to every person no matter how wealthy is that the current Social Security works politically because it is universal and not seen as welfare. These new payments would be seen in the same way. Also, some of the money given to the wealthy is taxed back from those in higher brackets, and the number of really wealthy people who would receive the new guaranteed payments is relatively small.