TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Monday, March 5, 2018

Weekly SSRN Tax Article Review And Roundup: Eyal-Cohen Reviews Wallace & Glogower's Shades Of Income

This week, Mirit Eyal-Cohen (Alabama) reviews Shades of Basic Income by Clint Wallace (South Carolina) & Ari D. Glogower (Ohio State).

Mirit-Cohen (2018)Clint Wallace and Ari Glogower wrote this timely article as we witness expanding enthusiasm for the idea of Universal Basic Income among researchers, policymakers, and representatives across the political range. The Article begins by providing the definition and fundamental pillars of the basic income concept. The concept, which was proposed more than two hundred years ago by Thomas Paine, encompasses direct and unconditional cash transfers that are “not of the nature of a charity but of a right “from a government to its adult citizens. The Article goes on to outline the shared traits and contrasts between basic income and features of the current progressive tax system such as the personal exemption and standard deduction. It differentiates basic income from other government transfer programs by emphasizing that basic income transfers money to beneficiaries (even those without taxable income), it is generally awarded to all designated adult citizens with minimal conditions for eligibility, and usually places no restrictions on the use of the grant. The Article uses four hypothetical taxpayers to exemplify these effects of basic income: low-income (income up to $1,000), lower-middle-income (income up to $30,000), upper-middle-income (income up to $80,000), and high-income (income above $180,000). Meant to illustrate a point, these examples could work similarly when using present day amounts to reflect these classes. The authors conclude there are many familiar analogues between the way the progressive tax and basic income designs work, which makes the concept of basic income, in their opinion, not so much the exotic policy tool that is claimed to be by some of its critics.

The authors thereafter argue that many proposals for basic income differ greatly in their underlining philosophies, priorities, and their assessment of the future of the labor market. The Article proceeds to serve as an excellent primer for the various different proposals for basic income, their policy motivation, design features, and anticipated effects. The authors successfully isolate and analyze the significant distinct threads of those proposals and provide a much-needed prerequisite to any systematic policy analysis. They focus on four distinct basic income programs: 1) Milton Friedman’s proposal for a “negative income tax” focused on poverty reduction; 2) Demogrant transfer described in optimal income tax literature; 3) Robert Theobald’s proposal for a Basic Economic Security as a response to uncertainties resulting from job automation; and 4) Bruce Ackerman and Anne Alstott’s proposal for a “stakeholder grant” focused on promoting economic opportunity and combating inequality. 

The Article properly points out to the fact that these various proposals have very different views on the future of labor market. In the age of automated procedures and bots some scholars have provided dire predictions that labor demand will decline tremendously as more segments of the economy utilize robots and algorithms to take over the traditional place of workers resulting in rising inequality. Others have anticipated that these advances in technology will create new prospects for workers even as conventional jobs become obsolete. The Article claims that the various basic income proposals also differ in their view of distributive justice, property entitlement, and economic rights. 

The authors then focus on the motivations of the four main proposals. They coin the term “efficient redistribution motivation” to signify views of basic income as an effective apparatus to change our current progressive tax and transfer system to accomplish grater redistribution while preserving individual choice and minimizing economic costs. On the other hand, “economic opportunity motivation” according to the authors, views basic income as a safeguard to supplant wages lost from automation and other forces influencing labor markets and social mobility and to give recipients of basic income an opportunity to apprehend their economic potential in a changing economy.

After describing the four main basic income proposals and their motivations the authors conclude by make several suggestions. First, they recommend designing basic income to impose only modest redistribution in the name of efficiency for fear it will have an immense effect on the social compact. Second, the authors propose to draw a clear line by which individuals are eligible for basic income and consider potential migration that will require international coordination or adopt greater guardrails to demarcate both beneficiaries and taxpayers. Third, the authors contend that if job scarcity becomes a real concern, redistribution that extends beyond the most disadvantaged will be more feasible but will also place pressures on the revenue raising function of the income tax system. Accordingly, they propose that more work will be done to connect and evaluate the various elements of redistribution and how they will work in practice under these proposals. Lastly, the authors propose that attention be given to the question of the form of payments (lump sum versus periodic), taxability of the basic income grants, who will administer the grants, and the taxpaying unit eligible for the grant. This part of the Article could be developed some more to provide a deeper analysis of these possible points of tension with basic income proposals. Moreover, an analysis of how existing social programs and code sections will correspond or be affected by the various basic income proposals could be helpful.  

In sum, with the recent traction the universal basic income concept is getting this work is important in providing the underpinning elements of basic income proposals as well as some tools to evaluate their effectiveness from both conceptual and practical aspects. 

Here’s the rest of this week’s SSRN Tax Roundup:

Scholarship, Tax, Weekly SSRN Roundup | Permalink