Citizen’s Dividend: The Impact on the Poor

by John Moser

Earlier, I covered the impacts of a Citizen’s Dividend on take-home pay.  The Dividend provides an increase in take-home pay for all incomes below $625,000, as well as a reduction in business income taxes; and, unfortunately, adds an additional $100,000 of tax burden on a $10,000,000 yearly salary.

on High-Income Earners

Take-Home Pay Impact on High-Income Earners

Unlike vague plans suggesting tax rates of 55% or 85% on all income over $1 million, this amounts to a rough 1% increase on marginal tax rate.  That still demands answers:  what are we buying with other people’s money?

Rather than focusing on the economic impacts of job and wealth creation, I’ll focus on the social impacts of income stability for individual families.  Stability in the consumer base leads to greater business prosperity, which I believe makes up for a small increase in taxes on those individuals whose income largely comes from that prosperity.

Meagan Limes:  A Real-World Example

recent NPR article covers the financial plight of Meagan Limes, a woman whose situation collapsed after losing her full-time job.  Meagan now works only 20 hours per week, making $10.50 an hour or just below $785/month.

Meagan is a single mother of two children, and also supports her 18-year-old niece.  She receives no child support, and only survives on her own income.  That places four people under her household, with a monthly rent of $1,275 and a prior income of around $1,600 after taxes.  Clearly, Meagan has struggled to get by on hard work and a minimal income.

The loss of her job and her new position at only half as many working hours per week leaves Meagan without enough money to move out of her three-bedroom apartment and into a small, $800 studio.  At her income level, she qualifies for housing assistance; and she has been on the DC HUD waiting list for over 7 years, a waiting list which stopped accepting new applicants after it grew to over 70,000 people.

Meagan’s life has not excluded long-term burdens from personal decisions:  she is a single mother from two fathers, one of whom is in prison; and she took her unemployed niece into her own home despite hardly having the means to support herself and her family.  At the same time, she has been approved for and yet not provided with state assistance, and has supported herself entirely on her own hard-earned income; and neither father provides any child support.

In the end, Meagan is only human:  a hard-working, compassionate individual who has taken responsibility for her life and, like all of us, has found she must still rely on others from time to time.  She currently works at a grocery store, where she provides an important service to those of us who do have the financial stability to feed and shelter our families.

A Dividend In Practice

I have argued that public aid and minimum wage are outdated concepts.  For all their expense, food stamps and housing assistance leave 50 million Americans without enough food and 600,000 Americans without homes.  Only one quarter of Americans the housing assistance program qualifies for support actually receive that support.  This is not a healthy, modern system.

Just to make housing assistance work, we’d need a tax increase of 2.4% on all Americans, which would restrict consumer buying power, destroying jobs and creating a greater need for housing assistance, food stamps, and other welfare programs.  Factor the tax in for only incomes above $140,000 and you have to double it:  the upper 10% American income earners take 48% of the income.  Factor in food stamps, income assistance, and other programs and you’re looking at a major tax hike on the upper income earners to prop up a failing and unsustainable welfare system.

Clearly, this system has not worked for Meagan; and it won’t work for America.

How would a Dividend impact Meagan?

Meagan Limes: Monthly Income

Meagan Limes with and without the Citizen’s Dividend

Today, Meagan’s household would have an additional $1,200 of income.  Without an increase in wage burden on her employer, her household would have a full $2,000 monthly income, more than enough to pay for her three-bedroom apartment and feed her family.  Even after her niece moves out, she still carries $550 more, a total of $1,420 household income.

The Dividend would give Meagan the ability to thrive; if nothing else, it would give her the ability to afford the smaller, $800 studio apartment and still carry her family on the remaining $600.  Even unemployed and living with her niece, she would carry $1,160 of monthly income, enough to barely get by with government assistance feeding her children.

Clearly, Meagan would have no need for public aid in her current situation if we provided a Citizen’s Dividend.  Living with only her children and working part-time, she would have $180 less than her prior full-time employment provided.  Further, Meagan’s household would still qualify for WIC through EBT to provide food and other basic needs for her children.

We, as a society, can do better.