UBSS, Unconditional Business Subsidy System

“Fanuc Robots at Work” (2010)

UBSS, the Unconditional Business Subsidy System, is a new concept (assembled from a few old ones), and now is an ideal time to establish it.

UBSS is an opportunity for Republicans and Democrats to forge an agreement for economic stabilization. It is simple in design, it subsidizes businesses, it maintains fiscal discipline, and it helps the people who need it the most. 

UBSS makes an opportunity to resolve the discussion of the $600 per week emergency unemployment benefits boost. We can remove the $600 boost and replace it with UBSS.

Consider for a moment the existing system. We may suppose the prevailing view of economic stimulus tax cuts, grants and loans to business is that these are methods of improving the prosperity of the people. That’s not entirely false, but studies (for example, Gale and Samwick) show that the owners of the businesses enjoy 75% or more of the stimulative benefit, with the rest distributed to employees. In the existing system, the owners of the businesses get most of the money, not the employees, and not the general public.

In the existing system, despite stimulus, prosperity doesn’t improve. Our existing economic system supplies goods and services passably well to around 80% of the people. That’s quite a good accomplishment, but nevertheless, 15% live at the edge of personal financial disaster, and perhaps 5% often go to bed hungry, if they can find a bed.

In the existing system, tens of millions of people don't prosper, which limits the prosperity of businesses and their owners. Prosperous customers make prosperous businesses.

We need an improved approach.

Here is the idea of UBSS:

UBSS systematically connects the subsidy for businesses with new government revenue, so that the money paid out in business subsidies is systematically recaptured in taxes, giving it budgetary neutrality without risk of inflation.

UBSS subsidizes businesses via their customers. Each woman, man and child who resided in the United States the entire previous calendar year receives a uniform and equal payment each month, deposited by the Federal Reserve System (on behalf of the Treasury) in each person’s checking account (established, if necessary, for the purpose of receiving UBSS deposits). Each person chooses without constraint how to spend the money, generating transactions for businesses. The many transactions will subsidize all businesses and genuinely create jobs to supply the goods and services to these customers. The owners of businesses will be entitled to a fair profit from these transactions with customers.

  

Prafcke, “Automatic warehouse for small parts” (2003)

The aggregate distribution of subsidies in the current year can be known with high accuracy as the number of people multiplied by the uniform equal amount of the individual payment. In the current calendar year (2020), we collect the revenue based on incomes in the previous calendar year (2019), and we know with high accuracy the revenue collected on income in the second calendar year previous (2018).

For the current tax year, we can calculate a surtax on the largest ten percent of taxable incomes. The total surtax is the total population, multiplied by the uniform equal individual payment per month, multiplied by 12 months, less a compensating adjustment for the difference in surtax collected and the subsidies paid in the second year previous. To the largest one percent of taxable incomes, UBSS assigns two-thirds of the surtax. To the next largest nine percent of taxable incomes, UBSS assigns one-third of the surtax. The IRS will express the surtax as a percentage of taxable income.

Let’s consider specific numbers for UBSS. I suggest the uniform equal amount of $250 per month for each woman, child and man in the United States, indexed to the larger of the change in CPI and the change in income of the largest one percent of incomes. Here are some estimates.

Assuming the uniform equal amount of $250/month per person...

$990b/year = 330m population * $250/month * 12 months

$660b = two thirds of $990b

$2,500b = aggregate of the largest one percent of taxable incomes

26% = UBBS surtax rate on the largest one percent of taxable incomes

$330b = one third of $990b

$2,500b = aggregate of the next nine percent of taxable incomes

13% = UBBS surtax rate on the next nine percent of taxable incomes

Alternate assumption of the uniform equal amount of $125/month per person... 

$495b/year = 330m population * $125/month * 12 months

$330b = two thirds of $495b

$2,500b = aggregate of the largest one percent of taxable incomes

13% = UBBS surtax rate on the largest one percent of taxable incomes

$165b = one third of $990b

$2,500b = aggregate of the next nine percent of taxable incomes

7% = UBBS surtax rate on the next nine percent of taxable incomes

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I'm grateful for the work of Scott Santens for inspiration and for ideas contained herein, and to Dr. Linda Cunningham for suggestions and editing.

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Images

Andreas Prafcke, “Automatic warehouse for small parts” (2003, Wikimedia,  CC-BY-3.0 license, https://commons.wikimedia.org/wiki/Automation#/media/File:Automatisches_Kleinteilelager.jpg)

“Fanuc Robots at Work” (2010, Mixabest, Andrew J. Kurbiko, Wikimedia  

https://commons.wikimedia.org/wiki/File:FANUC_R2000iB_AtWork.jpg#/media/File:FANUC_R2000iB_AtWork.jpg, Public Domain )

Steve Jurvetson, “Tesla Auto Bots” (2013, Chrishmt0423, Flikr, Wikimedia, https://commons.wikimedia.org/wiki/File:Tesla_auto_bots.jpg, CC-BY-2.0 license)

Sources

William Gale and Andrew Samwick, “Effects of Income Tax Changes on Economic Growth”, Nov 2015, http://eml.berkeley.edu/~burch/Gale%20Samwick%2020151105.pdf)

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