The American Citizen’s Dividend provides a social insurance against structural change. Whether by trade, the movement of a factory to a town merely fifty miles away, or plain old technological progress, an increase in the overall standard-of-living—in the amount our Nation’s whole income can purchase on a per-person basis—has a disparate impact. Nearly all Americans benefit from each such change; yet some will become greatly more-wealthy, and a very few will become greatly impoverished by the loss of employment.
The American Citizen’s Dividend takes a small tax from all income and divides it evenly among all adults—a benefit called a Dividend, representing a share in all productivity and paid twice-monthly. As consequence, when Americans can in total purchase more per adult, the Dividend itself can also purchase more in the exact same proportion. Productivity gains, rather than inflation, control the benefit, allowing it to grow while the tax rate remains the same.
While the taxes do not increase over time, the Dividend behaves as a continuous tax refund. Lower- and middle-class Americans receive a significant tax cut, and one which continues to grow year after year. The overall income tax rate on many middle-class families immediately becomes negative, with nearly half of American households taking home more than their own wages. Middle-class wages are protected from wage cuts by unscrupulous employers—whose taxes the Dividend does not increase—by the upwards pressure of the structural minimum wage.
Paying For the Dividend
Despite these cuts, the American Citizen’s Dividend does not fund itself by major tax increases against the wealthy, American enterprise, or the American worker through sales tax and VAT. Instead, it repays the very Americans it taxes—in part—discounting the tax cost.
The program, in the 2016 model with a 12.5% funding tax rate, restructures roughly $1,100 billion of Federal social insurance spending into $2,000 billion of benefits—$1,500 billion paid through the Dividend plus an extra $500 billion to support Social Security Retirement and Disability Benefits, which are built on top of the Dividend itself. This leaves $900 billion to cover.
The top quarter of households in America pay more overall to the program itself than two adults would receive together. This represents roughly 68 million Americans, each receiving from the program at least slightly less than they pay in. Together, these households receive $415 billion in benefits which directly offset the taxes they paid to the program only. The lowest three quintiles would contribute an additional $650 billion of the $900 billion they receive.
In other words: of the $1,500 billion in taxes paid to fund the American Citizen’s Dividend, nearly $1,200 pay directly back to the same people to cover those taxes. With an overall tax increase of merely $900 billion, this represents a quarter-trillion-dollar tax cut distributed by adjusting the taxes taken for general government by our progressive income tax system.
Interestingly, the total tax rate—between the Dividend’s 12.5% premium and the general income taxes—must be increased to offset the Dividend’s benefit, itself representing the actual tax cut. The most crude model produce a 1.5% reduction in the Corporate Income Tax and a 3.5% reduction in the top personal tax rate, with increases along the middle-class to effectively transfer much of the income distributed by the Dividend back into the general fund. An adjustment must raise that top personal tax rate back up, as well as somewhat flattening the rate around the upper-middle income brackets where the Dividend provides a strong offset and creates the progressive curve on its own.