HOW SHOULD A UBI BE IMPLEMENTED IN THE USA?
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Universal Basic Income, or UBI, is the economic idea or policy method that creates a tax pool of money, then redistributes this tax money evenly to citizens of the country. Plans differ on specifics, but the rich are taxed higher for the UBI fund, and those that are poorer are taxed lower or not at all. This redistribution of income sees a lot of economic and mental health benefits, allowing those who receive from it to be more flexible with their job searches or spending. UBI can be a supplement to existing welfare programs, or even a replacement depending on implementation and amounts to be given.
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UBI is not a new idea, it has been tested and brought up over many decades under many different names, including ‘reverse income tax’ or 'basic income'. Most recently, UBI was a part of Presidential candidate Andrew Yang’s platform and was presented as a main issue. The issues presented below assume a UBI is going to be implemented in the USA specifically.
WHAT IS UBI, AND WHY DOES IT MATTER?
How would the transition from the current welfare state to UBI occur?
While how UBI is implemented encompasses a large amount of issues, how we get from the current welfare state to a UBI is the most crucial issue that UBI rests on. The primary force between how this transfer can occur is clear when considering that UBI will cover a multitude of existing programs. Tax expenditures can be taken away, Social Security can be lowered in overall cost, and a majority of other low-income citizen support can be minimized or removed in the face of UBI.
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But how exactly this transfer occurs is still in question, because of one minor issue. UBI’s pool of money is reliant totally on collecting the money of the people, in significant amounts. This means a UBI payout can only occur after taxes are collected. While this might not be an issue by itself, having tax money collected on a monthly basis is near impossible, meaning tax money would have to be collected on a yearly basis. The three options presented that are all impossible without substantial drawbacks are as follows:
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Despite these glaring issues, there are two proposed solutions that could work without incurring significant long-term penalty.
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The first is a slow transfer over to UBI. This type of transition would include a small amount of welfare funding sent into funding a UBI every year. Ratios for percentages of tax would still be applicable, and this could also function as a testing ground for a large scale UBI before full implementation. If a UBI is successful, more of the federal budget could be spent on a UBI from the tax dollars that normally go to welfare each year, and then eventually standard welfare could be removed from the equation. UBI could go to specifically low-income populations before higher-income or middle-class Americans if funding were an issue, since those groups are most reliant on government welfare. After standard welfare is removed, normalized taxes for UBI could be implemented and money could be distributed at the end of the government’s fiscal year.
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The second solution is that UBI is implemented and the government temporarily foots the bill but implements extra taxing methods to gain back some of the debt from the American people. A revenue carbon tax can get money from all Americans while encouraging more people to be eco-friendly. A “Robin Hood Tax”, which targets the top 1%, since they are least affected by changes in welfare. A Value-Added Tax (VAT) also known as a Consumption Tax, works similarly to a Sales Tax but is applicable to every step of a production process, making it harder to avoid. The last tax could be a Land Value Tax, not to be confused with Property Tax, which includes what is built on the land, where a Land Value Tax is entirely based on the land itself. These taxes could be implemented until the debt for UBI is paid off, and since the taxes come in such a wide variety and are avoidable in some cases it would not destroy the economy. These taxes could eventually be removed or even replace some current taxing methods long term if they prove to be efficient.
Should there be a gradient for receiving UBI?
Having a UBI can help cushion many economic or unfortunate events that occur to an individual over the course of their lifetime, but how much should be paid per person is a very relevant topic. There are two sides to this topic, the moral side, and the practical side. The moral side says everyone gets a fair share of the UBI, no matter what they pay, because getting an equivalent share is in the name, ‘universal’. The practical side might argue for a gradient pay, one where those at the higher end of income receive less and less percentage of UBI payments.
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First the simple argument, the moral one. Universal Basic Income implies universality, a shared something between all people. In the case of UBI, every person should receive an equal share of the total UBI pool. No matter your income, no matter your tax bracket, every citizen receives an equal share of the pay pool, because otherwise there is no universality in the system. This share is non-negotiable, no one can be cheated of it, and it cannot be changed on the whims of the government. This form of payment is also much easier to calculate and distribute, as everyone receives an even amount and there are no tax rebates to calculate.
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Now the more complex argument, the practical one. Since a flat rate pulls and gives to everyone in the US, the taxation necessary to this would need to rise significantly. An easy way to counteract this is to create a pay gradient. For example, every citizen gets $10,000 in UBI yearly, but for however much money they make above $15,000 a year a percentage of the UBI is phased out. Where this percentage starts being subtracted and how much is taken out in total varies from proposal to proposal, some stating that 100% of the UBI should be subtracted at a set point, some giving rates at which UBI is subtracted. The obvious downside to this is that many people will be paying substantial amounts to UBI but seeing nothing come back for it, and that it is much harder to implement a system like this with all of the variables explicitly thought-out.
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An important sub-debate regarding these two categories that should be mentioned is whether a UBI can fluctuate based on national inflation or other economic factors. Poverty can easily exist, even with a job, and even with a UBI, provided economic conditions are right (Ravallion). Making UBI taxes fluctuate in size on a yearly basis can fix this, just as minimum wage can be adjusted based on economic inflation. The one problem with allowing UBI to be adjustable is that UBI might be adjusted based on the whims of the current government leaders and may not be centered around what the people need. Coming up with a foolproof solution to these adjustments would be a necessary step in making a fluctuating UBI a reality and may even be necessary to have a functioning UBI at all.
Should Children Receive UBI?
A major component of UBI revolves around whether children should be able to receive UBI. Children born in the US are citizens, and every citizen of the US should be eligible for a share of the UBI pool. The main reasoning against this is that while adolescents can be working citizens, they do not have to pay taxes, and are therefore are not contributing to the UBI pool. Most UBI proposals that grant children UBI also reduce the amount of money given to children from the standard number significantly.
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The major support arguments push for a child UBI, as it can help offset costs of dependents. While most believe that child UBI should be a supplement to existing dependent tax write-offs, it could also replace these tax write-offs, should the payoff be significant enough, making the overall tax system simpler. Including children in the UBI would decrease child poverty and improve children’s development. Indirectly, a child UBI would help decrease gender inequality, as anything that is good for children will help support mothers, since mothers are usually left in taking care of children. This conclusion can be seen explicitly in a study performed on a Native American population, where families all received a cut of the locally run casino’s profits. There was an average of a one-year increase in education, and a 22% reduction in chances of minor crime for 16 and 17 years old. Children also saw a better relationship with their mothers, since the mothers were less stressed about money and were not as affected by other mental health issues relative to poverty.
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There are significant worries on this topic, however. Since more UBI would be going to a population that does not contribute taxes the UBI pool, the overall tax burden would be significantly more expensive and harder for Americans to pay. This would either cripple the US government or negate many of the benefits of UBI for middle class Americans. The second major worry surrounding UBI for children is that it would be much easier for abusive or neglected parents to sidestep caring for their children. While the UBI payments are technically for the children, no child is going to receive $500 a month, much less spend it properly. So, the parents collect the money, but since money is simply a currency, then it can be applied and used in any means chosen by the holder. Some adults may be inclined to use their children’s UBI as a ‘double payout’, rather than using it for its intended purpose. With standard welfare programs goods are usually provided instead of directly giving applicants money, the primary example being food stamps. While small scale operations may yield that households improve, it is equally possible that in a large scale operation of UBI child neglect rises across the country.
Citations
Ro, Christine. “The Case For Extending Basic Income To Children.” Forbes, Forbes Magazine, 23 Mar. 2019, www.forbes.com/sites/christinero/2019/03/20/the-case-for-extending-basic-income-to-children/?sh=24c21317a3f0.
Gershon, Livia. “What Happens to Kids When You Give Families a Universal Basic Income?” JSTOR Daily, JSTOR, 27 Mar. 2015, daily.jstor.org/what-happens-to-kids-when-you-give-families-a-universal-basic-income/.
Nods, Atlas. “The Libertarian Case for a Basic Income.” Shibboleth Authentication Request, 2017, heinonline-org.proxy-um.researchport.umd.edu/HOL/Page?collection=journals.
Kearney, Melissa S, and Magne Mogstad. “Universal Basic Income (UBI) as a Policy Response to Current Challenges.” The Aspen Institute, Economic Strategy Group, The Aspen Institute, 23 Aug. 2019, www.brookings.edu/wp-content/uploads/2019/08/UBI-ESG-Memo-082319.pdf.
Henderson, David. “Henderson's Case Against a Universal Basic Income.” The Library of Economics and Liberty, The Library of Economics and Liberty, 14 June 2019, www.econlib.org/hendersons-case-against-a-universal-basic-income/.
Ravallion, Martin. “Guaranteed Employment or Guaranteed Income?” ScienceDirect, ScienceDirect, www-sciencedirect-com.proxy-um.researchport.umd.edu/science/article/pii/S0305750X18304194.
Santens, Scott. “How to Reform Welfare and Taxes to Provide Every American Citizen with a Basic Income.” Economic Security Project, Economic Security Project, 5 June 2017, medium.com/economicsecproj/how-to-reform-welfare-and-taxes-to-provide-every-american-citizen-with-a-basic-income-bc67d3f4c2b8.
Hunter, Brittany. “The Top Three Arguments against a Universal Basic Income: Brittany Hunter.” Foundation for Economic Education, Foundation for Economic Education, 8 Sept. 2017, fee.org/articles/the-top-three-arguments-against-a-universal-basic-income/.