
California Legislature Proposes a Universal Basic Income Program - ceohockey60
http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201920200AB2712
======
bsimpson
It's a $1000 payment funded by a 10% VAT (tax) on everything but food,
clothing, medicine, and education. So unless you spend more than $10k per
month on things that aren't food, clothing, education, or medicine; you come
out ahead.

My first thought: can this possibly be solvent? There are apx. 32 million
adults in California. Are there $32 billion spent per month in-state on things
that aren't those common categories?

Then I realized that this includes business purchases. Everything sold in
California would become 10% more expensive. There'd be a huge incentive to buy
from out-of-state, and a huge disincentive for out-of-state purchasers to buy
from California merchants.

I also wonder what it does to the population/demographics over time. If you're
poor in another state, there are 12,000 new reasons per adult per year to move
to California.

Including B2B purchases, could the current California economy absorb $32
billion per month in additional taxes? Even if it could, this would pervert
the economics of the state so badly it's hard to know what the effects would
be over time.

~~~
ocdtrekkie
A big thing not really detailed, but briefly mentioned here, is presumably a
lot of social services like CalFresh and CalWORKS would presumably be scrapped
in exchange. Instead of having a bunch of different support systems for poor
people with all of the administrative overhead that comes with it, you'd just
issue people money, and get a lot of it back in taxes.

Note that Amazon has to charge state sales tax these days too, as do many
other online retailers. So "buying out of state" is going to be pretty hard.
People's eBay or Craigslist game might get interesting though with the new
margins.

As much as California is one of the few states that might be progressive
enough to attempt this, it'd be far better if a less populated (and smaller)
state attempted UBI first. If Montana torches it's economy, it's probably a
lot easier to reassemble than California's.

~~~
bsimpson
I have a feeling Montana would be less keen to torch its economy than we are
to have them be our petri dish.

One nice thing about California's economy is that it's robust. There's
probably enough economic activity that this wouldn't totally fuck us, but the
ramifications are surely much stronger than the legislator who threw this
together has considered.

~~~
ocdtrekkie
I'm in neither state, so either petri dish is informative to me. :)

"The bill would authorize the department to adopt regulations to implement the
program" makes it kinda sound a bit like a Brexit vote, in that the bill is
really only meant to get everyone to vote to agree to do it, and then the
precise details of how you'd actually implement it would be attended to later.

------
mrkstu
I am sometimes glad that Californians are around as a polity. They try the
things the rest of us think are loony, but are motivated by strong ethical
underpinnings.

Sometimes they fail badly and serve as a warning to the rest of us that 'here
be dragons' and other times they unexpectedly succeed and the rest of us can
learn that, in certain circumstances, living up to your beliefs with the
collective wallet can work out positively, net-net.

~~~
JMTQp8lwXL
Just because a bill is submitted doesn't mean it's not immediately dead on
arrival. Some bills are submitted just so a politician can say "I submitted
the bill, but it was <other party> that killed it".

~~~
chrisdhoover
There is only one party in CA

~~~
JMTQp8lwXL
Not all Democrats within California Democratic party sit at the exact same
point on the political spectrum. Some are more neoliberal & centrist, and
others are more socialist Democrat. By submitting this bill, it could signal
the expectation that centrist democrats need to move further left.

Given CA is mostly a one-party state, it's more about intraparty influence
over the party's platform, than it is about blaming the "other" party.

------
rcpt
Won't the money from this ultimately go towards landowners in the form of
increased land rents?

We could get around that by pairing UBI with a land value tax but the
nightmare that is Prop 13 makes that impossible.

~~~
arebop
Only to the extent that money from anything goes towards landowners in the
form of increased land rents. There are other basic necessities and also some
luxuries that the beneficiaries of this progressive redistribution would
likely buy with the extra income.

~~~
rcpt
But those other things can increase supply if people start demanding more. The
amount of land is fixed.

------
danem
How about doing something to address the housing crisis first so all of this
money doesn't just end up in landlords pockets? Land value tax maybe?

~~~
fennecfoxen
Oh, yes. Housing is too expensive! Instead of building more housing to compete
with it, let's just raise taxes on it! That is unimpeachable and will
definitely not result in the housing being more expensive, not at all.

~~~
lukifer
Note that a land value tax implies a tax on ground rent, _not_ on
improvements: [http://www.landvaluetax.org/what-is-
lvt/](http://www.landvaluetax.org/what-is-lvt/)

That said, most areas have overly draconian zoning and regulatory costs
(driven in no small part by existing homeowners wanting to protect/inflate
their own investment); it's a complex issue, and Ricardian rent-seeking is
only one factor.

~~~
fennecfoxen
Housing development is famously undertaken when developers can sell to
landlords who wish to make a profit on the improvements only; all parties
involved would be quite willing to spend millions of dollars and to lose
money, _if_ it's a loss on the underlying land.

------
njarboe
This UBI excludes people who are: "California residents who are 18 years of
age or older and receiving benefits under the Medi-Cal program, the County
Medical Services Program, the CalFresh program, the CalWORKs program, or
Unemployment Insurance shall not be eligible to receive a universal basic
income under the CalUBI Program."

Medi-Cal is state medical for poor families in California, so a lot of people
who this would help would be excluded from getting the benefit. This bill
seems like just creating another bureaucracy that moves money around without
improving things much.

~~~
heavyset_go
This creates the perverse incentive to forgo health coverage, putting a burden
on the healthcare system when an uninsured person has an emergency.

Then, when providers can't collect on the medical debt, they'll sell it to
debt collectors and write off the difference at tax time, which the proposed
VAT will have to make up for.

------
jeffdavis
My gut tells me a 10% VAT won't be enough. It's excluding medicine and housing
and food. What else do people spend a lot of money on? Cars? Will that really
bring in enough for tens of billions per _month_?

~~~
nostrademons
VAT includes B2B purchases. Presumably that means that 10% of every
Facebook/Google/Netflix ad impression ends up going toward funding this
program, as well as 10% of the profit of every iPhone. That's a lot of
billions.

~~~
jeffdavis
Hmm. It's also pretty hard to imagine that. You're saying that we ask the big
tech companies to pay tens of billions per month in taxes?

------
randombit
18992.1(b) excludes UBI for anyone "receiving benefits under the Medi-Cal
program, the County Medical Services Program, the CalFresh program, the
CalWORKs program, or Unemployment Insurance" so if you are currently receiving
any form of welfare, f you, otherwise here's your free money? Seems like a
really strange approach for something that is trying to improve economic
security. Does anyone know what the reasoning here is?

~~~
the_watcher
The most resilient case for UBI (by that I mean that it blunts more criticism)
is that cash transfers are cheaper to administer and arguably more effective
than welfare programs. I thought it was odd that this wasn't proposed to
entirely replace those programs with a simple to administer system (no
verification of income, no verification that you're looking for work, etc)
that still "delivers" the benefits already received by people covered by
existing programs. This proposal definitely seems framed poorly...

~~~
heavyset_go
If you look at the individual market for health insurance, premiums,
deductibles and co-pays will exceed the total UBI benefit. Medicaid sets group
rates that it will pay, so it is more efficient at reducing costs. I can't
imagine that using UBI benefits to pay for health insurance on the individual
market would be more effective than such a program.

~~~
the_watcher
I think the proposal is by far weakest in tying it at all to healthcare. Maybe
UBI could be used to improve our health insurance headaches, but I was
speaking specifically about things like unemployment benefits, CalFresh, etc.
Things that are already just cash transfers but require an (arguably) bloated
and too expensive bureaucracy to administer.

------
jeffdavis
I can imagine this incentivizing semi-rural living. Cheap house, low COL,
steady income.

~~~
pengaru
Indeed. I regularly burn around $1k/mo when living simply in a cabin on my
rural California property, with property taxes under $500/yr.

There's a _lot_ of rural California. The combination of modern tech enabling
comfortable and connected off-grid living and UBI opens up pretty much all of
it for residence, as long as there's a grocery store accessible.

------
tryitnow
Low is positioning this as a response to "job losses" associated with
automation.

[https://a28.asmdc.org/press-releases/20200221-expand-
economi...](https://a28.asmdc.org/press-releases/20200221-expand-economic-
security-wake-automation-assemblymember-low-introduces)

This makes no sense to me. $12K/yr is a nice supplement to low incomes. But
let's say I'm a trucker making $60K/yr and I lose my job. Making 20% of my
previous income is definitely nice, but it's not exactly moving the needle
that dramatically.

If you're primarily concerned about job losses due to automation, why not
radically increase unemployment benefits and make vocational education for
adults tuition free (and maybe even offer a cost of living stipend for
unemployed adults who retrain)? This approach is a LOT less expensive and far
more targeted.

I fully support a UBI as a form of income security, but as a corrective for
technological unemployment it just seems like a really blunt, and ultimately
not terribly effective instrument.

------
heavyset_go
VAT is a regressive approach to implement something like this.

~~~
lukifer
Allegedly, "food, clothing, medicine, and education" costs are excluded. To
what extent those exemptions don't matter in practice (the grocery store pays
more for printer ink and passes the cost along to you) is debatable.

Personally, I'd rather start with a revenue-neutral Pigovian tax+dividend [0]
on environmental externalities like carbon and disposable plastic, which set a
price of unsustainable behaviors while also functioning as a progressive tax
for the vast majority of people.

[0]
[https://en.wikipedia.org/wiki/Pigovian_tax](https://en.wikipedia.org/wiki/Pigovian_tax)

~~~
heavyset_go
> _Allegedly, "food, clothing, medicine, and education" costs are excluded. To
> what extent those exemptions don't matter in practice (the grocery store
> pays more for printer ink and passes the cost along to you) is debatable._

It still places an excessive burden on those the UBI proposal is supposed to
benefit. Necessities like utilities, phones, fuel and transportation, etc will
become more costly for those who are already struggling to pay for them.

I could get behind a Pigovian tax, along with a land value tax or equity tax.

~~~
lukifer
> Pigovian tax, along with a land value tax or equity tax.

While I'm not opposed to VAT _a priori_ , 100% agreed that those options are
vastly superior.

------
A4ET8a8uTh0
I am first to admit that I don't follow CA legislature that closely. How
likely is it to pass? If I remember correctly Ds have control over both
chambers?

I take it is really fresh news since I can't find a reference to governor
addressing the bill yet.

------
megaman821
I feel this would be better if they didn't include the exact amount you would
get each month. There are energy policies that impose a tax on your energy
bill each month. At the end of the month the total pot collected is
distributed evenly to the consumers. Large energy consumers get back less than
they paid in tax and frugal energy users get extra money. There is no chance
of the bankrupting the government because the total amount paid out is equal
to whatever was collected.

------
crobertsbmw
My fear is that once this gets rolled into production, every other politicians
campaign is going to be “increase the basic income” until we are all basically
living off the top .01%

~~~
lukifer
In a highly networked world, Metcalfe's Law [0] trends most services towards
winner-take-all. Living off the 0.01% may be our least-worst alternative to
neo-feudalism.

One under-discussed aspect of UBI is that it might render minimum wage
unnecessary; people could end up working for luxuries rather than subsistence.
And of course, there are other non-monetary incentives to work (intrinsic
rewards, passion projects, prestige/reputation).

Still, the issue you raise is significant. The thing that bugs me about UBI as
proposed, is that there isn't a clear Schelling focus, or organic emergent
self-balancing process, for deciding how much it should be. I'm a fan of Yang,
but the "$1000/mo" target is ultimately arbitrary, because it's a nice round
number, and large enough to have a significant impact in people's lives.

But why not $750 or $1250? Why shouldn't it index to regional cost of living
and/or GDP? What metric do we use to decide when/if it should update? I don't
think that's a reason not to do it, and I suspect any amount of UBI will
result in better outcomes than spending the same money on bloated federal
bureaucracies; but it feels very zero-sum / tug-of-war to just pick a nice-
sounding number, and then have to fight over raising or lowering it every
election cycle.

[0]
[https://en.wikipedia.org/wiki/Metcalfe%27s_law](https://en.wikipedia.org/wiki/Metcalfe%27s_law)

------
tryitnow
Here's the catch:

"(b) California residents who are 18 years of age or older and receiving
benefits under the Medi-Cal program, the County Medical Services Program, the
CalFresh program, the CalWORKs program, or Unemployment Insurance shall not be
eligible to receive a universal basic income under the CalUBI Program."

So I don't really see what the point is. If you're targeting technological
unemployment why make it so that people who have unemployment insurance are
ineligible?

------
robomartin
A 10% VAT added on top of our ~%10% sales tax?

The $1,000 is going to be spent entirely on taxes!

The range and domain of taxes being piled on CA residents has reached an
unimaginable scales. I know many people and companies who have left the State
for precisely this reason. Atlas Shrugged.

~~~
rconti
I don't believe sales tax or income tax rates have changed substantially in
the 20 years I've lived in CA.

Perhaps 1 percentage point increase in sales tax in that time. The top income
tax rate for "normal" folks has been, I believe, 9.3%, although there was an
additional 1% tax on incomes over $1M added sometimes in the past few years.

A quick search didn't turn up much in the way of useful historical charts, but
it sounds like your post is more politics-based than economics-based. I'd
welcome better data, I might well be wrong here.

~~~
ericd
IIRC the top income tax rate is 13.3%. I think sales tax is 9% but not sure
how much that varies between locales.

~~~
rconti
Ah yes, this might be the change I was thinking of, in 2013:

pre-2013: 9.3% marginal rate from $49k to $500k, then to 10.3% over $500k.

post-2013: additional 1 percentage point at the $250-300k, another 1
percentage 300k-1m, and then a 3rd additional 1 percentage point over $1m.

So the top rate is 13.3% up from 10.3%; with a tiered increase in the 9.3%
rate to 10.3 and 11.3% depending on income.

[http://www.newhallstudios.com/images-lib/CA-
taxes/California...](http://www.newhallstudios.com/images-lib/CA-
taxes/California_Income_Tax_Rates_2013_01_621x438.gif)

~~~
ericd
Oh interesting, didn't realize it had been bumped like that in 2013.

------
kangnkodos
Give each resident $1,000 per per month. Paid for by a 10% value added tax.

I can image a possible situation where this ends up taking money from poor
people and giving it to rich people. Unlikely, but possible. That wouldn't be
good.

~~~
secabeen
Yes, but as a general rule, universal social welfare programs (medicare,
social security, etc.) are much more robust and not subject to cost-cutting
than means-tested ones (medicaid, welfare, food stamps, etc.)

------
nyxtom
Seems like a Digital Tax like they are proposing in the EU would be something
that could supplement this on top of general VAT. Would like to see more of
this flushed out in principle, similar to what Yang was proposing.

------
homonculus1
Kudos to California reps for attempting to make this happen, this is a good
example of using states' rights to address local desires.

Unfortunately coastal ideas are defined a priori to be everyone's best
interest, so experiments on them can only return one type of data. When this
creates massive unintended perverse incentives, proponents will blame its
failure on lack of scale and insist that it be federally imposed on the other
states that want nothing to do with it.

~~~
stazz1
Haha, it couldn't possibly be due to the fact that the microcosm is riddled
with snags. This is just moving the inequality gap vertically without
shrinking it at all.

------
andrekandre
i wonder how they came to a nice round number of 1000 a month... why not 1100
or 900

i’d love to see the rationale for that

------
allears
That would be fine with me. It would definitely be a net gain in my case.
However, how will they document/track monthly expenditures? Will I have to
submit a verified expense report? Will the state collect data on every
purchase by every citizen? What about cash?

------
foolzcrow
Native Americans have this exact thing and free medical and free housing. They
are now fully dependant on the governent.

------
stazz1
While I was a proponent of UBI several months ago, I have found some
irreconcilable flaws and would urge everyone to consider Progressive
Guaranteed Income, a basic income for people below a certain "climb-out
bound."

Reasons: +UBI Robs from the rich to give to the poor... and give back to the
rich a little bit. "Billionaires will die without UBI." It's simply not good
nor true to the intent of BI to give money to people who already have plenty.
"But means testing will cost so much!" Actually means testing if you earn less
than C.O.B is not very expensive, and giving UBI to everyone is very very
expensive. Something like 6-12x more expensive. (PGI with C.O.B. of 24k would
cost $800B annually, UBI would cost 3.6T)

+aside from giving to the rich for no good reason, UBI causes an increase in
commodity prices anytime the fund is issued. This is like having a highway
turn at 340* and being very incensed when people crash because they are going
too fast. There is no way to avoid a spike in commodity prices when giving UBI
out and especially when you give it out to everyone, why? because everyone
getting more money devalues money (for a brief while). See: Supply of Money
(M0, M1, M2...) and the Kuwait attempt at UBI from 2011. They blamed their
ministers of commerce for the crashes on the 340* turn, of course.

\+ Value Added Tax is not good to fund B.I. of any kind because it's likely
that this "luxury tax" will hit a lot of the recipients of the B.I. The
Roosevelt Institute did a study on a potential UBI to "grow the economy / gdp
by 12% annually" which is cool to consider, but one of the key assumptions is
that a funding method like a VAT would not hit the households getting UBI.
Plus, their study does not do UBI, just B.I. of different tiers. If the VAT
hits the consumers who get the B.I. then it's taking with the left hand what
was just given with the right.

\+ In short: Don't give back to the rich. Don't make a VAT that taxes the poor
inadvertently (B2B vat is the only vat we could support then it seems). UBI
would cause commodity spikes during currency issuance and that's unavoidable,
but the amount of issuance is proportional to spikes so: Only give B.I. to
people below a Climb-Out-Bound. Give them ( C-Earnings )/ 2 to incentivize
their working out of poverty.

Example: Climb-out Bound 24,000. You earn 12k, the government gives you 24-12
= 6k, and now you're at 18k. The closer you climb out of poverty, the less you
get, but you cannot get more than 12k, and if you work you'll make more than
someone not working. Make sense?

Because what people fail to remember is the Federal reserve act of 1913 and
its FEDERAL mandate that employment be kept at a running maximum (keep them
ponies movin' raw hide). +Progressive Guaranteed Income does not violate the
1913 Federal Reserve Act, but actually works with it.

~~~
rcpt
> Progressive Guaranteed Income

Doesn't progressive income tax make UBI progressive?

But yes we should fund this with a LVT not VAT.

~~~
marcosdumay
VAT is a highly efficient tax, very hard to game. But it's regressive. If you
couple it with an UBI, you can fix the regressivity, and keep all the good
parts.

It's a way to make VAT good, not a way to make UBI good.

~~~
stazz1
Right on. What does "regressive" mean in this context?

~~~
marcosdumay
Poor people pay a higher share of their income than rich people.

~~~
stazz1
Ah, yes that is 100% true and likely to be true of any VAT implementation that
hits consumer goods. If a VAT could hit B2B transactions only, it could be
possible to "tax the tech companies"

~~~
marcosdumay
The beauty of a VAT is that there is nobody determining the difference between
consumers and business, it's just transactions all the way down, with later
ones verifying the earlier ones.

If you start adding rules, it will stop working.

