Administrative Cost

What are the Administrative costs of a dividend?

        Using the Economic Stimulus Act of 2008 (ESA) [1] as a proxy for how much it would cost to administer the dividend in CCL’s Carbon Fee and Dividend (CFD) proposal, we report simple estimates for a worst-case, intermediate-case, and best-case scenario.

        Worst-case: ESA cost $0.3 billion to reach ~304 million people in 2008 (116 million households assuming 2.6 persons per household), for a cost of $2.59 per check per household [1]. There will be roughly 123 million households in the US in 2014 (2.6 persons per household, estimated 319 million population) [2]. Returning 1 monthly check per household would therefore cost roughly $3.822 billion in 2014 and roughly the same in 2015. CFD would raise ~$79 billion in 2014 and ~$130 billion in 2015 [3]. So, in this worst-case scenario, administrative costs would be 4.8% of revenue in 2014 and 3.0% in 2015.

        Intermediate-case: Monthly disbursements are already made to over 46 million people through the Supplemental Nutrition Assistance Program (SNAP) [4] and to 62.8 million people through the Social Security Administration (SSA) [5]. There is no overlap between these programs, so they reach a total of ~107 million Americans, or roughly 41 million households. The dividend could be returned to these households at virtually zero additional cost by increasing the amount of the benefits they already receive monthly, resulting in substantial savings. Removing these 41 million households leaves 82 million still owed a dividend, reducing total administrative costs to $2.5 billion, or 3.2% of 2014 receipts and 1.9% of 2015 receipts.

        Best case: The 82 million households neither in SNAP nor SSA may elect to receive their dividend by direct deposit instead of by a check in the mail. In 2012, almost 79 million out of 103 million households (77%) owed a tax refund by the government elected to have the refund returned by direct deposit [6]. Assuming the same 77% direct deposit rate for the CFD dividend reduces the administrative costs by another 77% to $572 million, or 0.7% of receipts in 2014 and 0.4% of receipts in 2015.

Common Assumptions: ESA is a useful proxy for administrative costs of the dividend. There are 2.6 individuals per US household. Monthly disbursements are returned to households. CFD raises $79 billion in 2014 and $130 billion in 2015.

Scenario Worst-Case Intermediate-Case Best-Case
Assumptions determining scenario All households get monthly check CFD piggybacks on SNAP and SSA Direct deposit is used at historical rate by non-SNAP and non-SSA households.
2014 Total Costs $3.8 Billion $2.5 Billion $0.572 Billion
2014 Costs as % of Revenue 4.8% 3.2% 0.7%
2015 Costs as % of Revenue 3.0% 1.9% 0.4%
  1. Summary: H.R. 5140 “Economic Stimulus Act of 2008”. Congressional Budget Office. Feb. 11, 2008. URL for download: http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/89xx/doc8973/hr5140pgo.pdf
  2. “2012 National Population Projections: Summary Tables”. United States Census Bureau. URL: http://www.census.gov/population/projections/data/national/2012/summarytables.html
  3. Charles Komanoff. “6-sector National Carbon Tax Model.” The Carbon Tax Center. May 30, 2013. URL for download:http://www.komanoff.net/fossil/CTC_Carbon_Tax_Model.xls
  4. “Supplemental Nutrition Assistance Program (SNAP)”. United States Department of Agriculture. 2012. URL for download: http://www.fns.usda.gov/sites/default/files/SNAP_Quick_Facts_0.pdf
  5. “Monthly Statistical Snapshot, September 2013”. Social Security Administration. October, 2013. URL: http://www.ssa.gov/policy/docs/quickfacts/stat_snapshot/
  6. “Filing Season Statistics May 10, 2013”. Internal Revenue Service. May 10, 2013. URL: http://www.irs.gov/uac/Newsroom/Filing-Season-Statistics-May-10,-2013


 

 

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