Take-Home Pay and Business Profit Impact of a Citizen’s Dividend

by John Moser

I wrote earlier about the labor cost and effective tax impacts of a Citizen’s Dividend; as a quick follow-up, I’ve computed the 2013 take-home pay and business retained profits under those models.

These numbers all use the $6,100 Standard Deduction for a single-filing individual as a baseline, and the single-filer tax brackets.  The business profits use the 39.1% business flat tax applied to all United States businesses, compared to the tax rate of 35.6% under the proposed Citizen’s Dividend.

Take-Home Pay Impact of Citizen's Dividend

Take-Home Pay Impact of Citizen’s Dividend

The above chart shows the impact of the Citizen’s Dividend on the take-home pay of a single-filing individual.  The incomes (across the bottom) reflect each tax bracket plus the standard deduction.  The red block represents the additional take-home income.

An individual with no income takes home the Dividend under this plan and, up to $6,100, takes home all of their income plus the Dividend.  The Dividend covers the absolute bare minimum cost of living, replacing services such as unemployment and food stamps; this is how it makes that guarantee.

The larger red blocks around the upper-middle-class represent the reduced taxes as well as the Dividend.  This impact tapers off as income increases.

on High-Income Earners

Take-Home Pay Impact on High-Income Earners

Up to around the $1,000,000 mark, the take-home income breaks even.  An individual with $10,000,000 (that’s ten million) of income pays approximately $125,000 (or $0.125 million) more in taxes, an unfortunate effect caused by the 1.4% tax increase above $400,000 of income.  Policy makers could adjust this out by modifying business income taxes; a 2% reduction in the top tax bracket represents under $100 billion dollars of Federal income, so manipulating the finances is feasible.

Impact on Business Income Taxes

Impact on Business Income Taxes

The above chart represents the tax impact on business profits.  The taxes taken fall from 39.1% to 34.6%, losing almost one ninth of the tax burden.  This can cover for the cost of transitioning away from current public aid and OASDI onto a universal Citizen’s Dividend with Public Aid for families and immigrants; or it can cover for the tax increase on high-income individuals.  It could even represent a policy decision to lower business income taxes.

The Citizen’s Dividend is not an attack on the rich or businesses; it provides opportunities to lower taxes on either, while reducing the cost of labor and increasing the amount of buying power each consumer earns.  These factors directly create higher employment, greater profits, and more income for the rich, while completely eliminating homelessness and hunger among the poor and unemployed.