By responsible, I mean the UBI:
Would not add to the national debt
Would not rely on unstable revenue sources, such as income or wealth taxes
Would not reduce labor market participation overall (work incentives and disincentives would balance out across the population and over time)
Would not be based on unrealistic scenarios of societal change (e.g, robots or AI replacing most human workers, the rich footing the bill, capitalism gone or much minimized)
Would be funded through a dedicated Value-Added-Tax (VAT), which is more stable and less distortive than other taxes
Would vary in size based on revenue availability
Would be politically feasible, because taxpayers would mostly get back what they put in.
Would not be included in means-tests for other government benefits, so the tax would not be onerous for low-income recipients.
The Congressional Budget Office also explored a broad-based 5% VAT as part of a 2018 “compendium of policy options”. Per CBO, this VAT would apply to most goods and services, with some exceptions:
“Certain goods and services would be excluded from the base because their value is difficult to measure. Those include financial services without explicit fees, existing housing services, primary and secondary education, and other services provided by government agencies and nonprofit organizations for a small fee or at no cost. (Existing housing services encompass the monetary rents paid by tenants and rents imputed to owners who reside in their own homes. Although existing housing services would be excluded under this alternative, a tax on the purchase of new residential housing would cover all future consumption of housing services.) Government-reimbursed expenditures for health care—primarily costs paid by Medicare and Medicaid—would also be excluded from the tax base. Accounting for those exclusions, the tax base would encompass approximately 66 percent of household consumption in 2020.”
As of August 2024, total personal consumption expenditures in the United States was $19.9 trillion. That would give us a VAT tax base of $13 trillion (66% of 19.9), after accounting for CBO’s exclusions. A 5% VAT translates to $650 billion in potential tax revenues. However, some VAT won’t be collected due to fraud, evasion, insolvency, or administrative error. It’s impossible to say how big this “compliance gap” would be in the US (it ranges from 1%-34% in Europe), so I’m going to assume a 10% shortfall. That gives me $585 billion to play with. This is what I came up with.
Not a lot, but it would definitely help finally-strapped households, not to mention adult students and retirees. A VAT tax would also motivate consumers, especially low-income households, to shop for even better bargains and save a bit more. A modest VAT coupled with a modest UBI would thus stimulate the economy by creating demand for goods and services across the price spectrum. At least in theory.
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Links:
https://www.cbo.gov/budget-options/54820
https://www.economist.com/leaders/2024/09/26/if-you-must-raise-taxes-raise-vat