Progressive taxes on all income, with a tax-free life under $150,000

The first version of this design taxed only income above $150,000. It raised about $1,500 per adult a year. The lesson, which every later round confirmed, is that a universal income cannot be funded by a tax that most people do not pay. The base has to be all income, and the way to keep the promise of a tax-free life for ordinary people is to set the rate at zero below a high floor, not to exempt the income from the base.

The schedule

The threshold is per person, $300,000 per household. The universal income counts toward it, which is one of the open questions in the last piece; we model it as counting, because excluding it is a second exemption and exemptions are what killed rounds one and three. Capital gains, dividends and interest are income. There is a wealth charge on very large fortunes, modeled inside the "other taxes" line rather than separately. Small businesses pay nothing until they cross their own threshold, which the design leaves open between revenue and profit.

The tax clock is what makes the floor work without an annual return. The bank tracks cumulative income for the year; the day it crosses $150,000, withholding begins at 40 percent on everything after, and the rate steps up at each bracket. Nobody below the floor ever interacts with the system except to receive the deposit.

The base shrinks as machines work; the corporate tax grows

This is the part of the tax design that most proposals miss. If 65 percent of hours are done by machines by 2045, wage income falls as a share of GDP and so does income tax. The model has the income tax base (27 percent of GDP at launch, after 15 percent avoidance) shrinking by half the machine share. The same shift lands as profit on corporate books, so corporate tax (4 percent of GDP at launch, at a 30 percent rate) rises with the machine share. Together they are flat-to-rising, but the mix changes completely, and a design that leans only on wage tax would collapse: about $8,000 per adult by 2050 in a scenario where machines replace work without raising growth.

Who is a net winner

With the full stack of mechanisms, every adult below the $150,000 floor is a net winner by the full payment, because they pay nothing. In the tax-only round (round four) the break-even was about $47,000 of income; the later mechanisms moved it to the floor. Above the floor the arithmetic depends on income: someone at $200,000 pays $20,000 and receives the payment, still a net winner at the target; at $1 million the tax is about $400,000 and the payment is a rounding error. The rich keep building wealth in this design, at a slower rate, and the wealth simulation in piece 11 shows the over-$10 million band ending up about the same size in both worlds.

What could go wrong

Avoidance is built in at 15 percent, in line with the tax-gap literature³, but 75 percent marginal rates invite more of it, and real-time bank withholding closes only the domestic channels. State sales and income taxes conflict with the promise of a tax-free life, and the design has no answer yet beyond the land value tax (piece 6) replacing some state and local revenue. And the schedule's fairness rests on the universal income counting toward the floor; if it does not, the floor is effectively $200,000 and the base shrinks again.