An annual guaranteed income?

I’ve just come across an interesting idea that perhaps you’ve heard about, but I had not: a Basic Income Guarantee, or BIG.

So, what is this Basic Income Guarantee?
A Basic Income Guarantee is an unconditional, government-insured guarantee that all citizens will have enough income to meet their basic needs.

There is actually an organization known as the U.S. Basic Income Guarantee Network where there is a great deal of information.

The Basic Income Guarantee (BIG) is a government ensured guarantee that no one’s income will fall below the level necessary to meet their most basic needs for any reason. As Bertrand Russell put it in 1918, ‘A certain small income, sufficient for necessities, should be secured for all, whether they work or not, and that a larger income should be given to those who are willing to engage in some work which the community recognizes as useful. On this basis we may build further.’ Thus, with BIG no one is destitute but everyone has the positive incentive to work. BIG is an efficient, effective, and equitable solution to poverty that promotes individual freedom and leaves the beneficial aspects of a market economy in place.

Under this program, everyone would be guaranteed a basic income with no attached work requirement, so it would be easy to administer. It would help the working poor, single parents, and the homeless, without anyone having to be supervised by a caseworker or report to an administrator with paperwork and documents. A basic income guarantee system using the tax code or simply expanding the Social Security programs would be more efficient and fairer than the current patchwork of support services like welfare, food stamps and housing vouchers. And a lump sum might help struggling individuals use their federal dollars better, giving them discretion to use their money where their needs are greatest.

How would it work?
Two types of guaranteed income have been proposed: the Basic Income and the Negative Income Tax. The Basic Income gives every citizen a check for the full basic income amount every month, regardless of their employment status, and then taxes earned income from employment, so that nearly everyone both pays taxes and receives a basic income. Individuals with low incomes receive more in basic income than they pay in taxes, and those with relatively high income pay more than they receive.

A Negative Income Tax pays the full guaranteed basic benefit only to those with no private income, and reduces the basic benefit as people earn more in private income. Private income is not taxed until the negative income tax is fully phased out. In this way, the Negative Income Tax avoids giving people checks for basic income and then asking them to send income tax checks back. The Basic Income assures individuals that they will receive a basic check every month even if they have a sudden reduction or loss of earned income. Both of these plans provide a basic minimum level of income, and ensure that people who make more money privately will be financially better off than those who make less.

Could we afford to give everyone a guaranteed income?

This program would require about $907 billion (as of the latest census), just over 5.5% of GDP. In actually implementing a basic guaranteed income, we could potentially exclude the 46 million Americans receiving Social Security benefits from receiving a basic income, which would reduce the cost significantly. However, then the program would not be universal.

We could afford a basic guaranteed income for all by raising taxes on the wealthy, who would pay more in new taxes than they would receive in basic income, and on lower-middle class and poor families, who would come out ahead with a guaranteed income. We could reduce or eliminate tax exclusions for such things as personal retirement accounts, capital gains at death, annuity investment returns, or home ownership. This unacknowledged “welfare for the well off” costs hundreds of billions of dollars annually. And how about trimming the $700 billion military budget? Lots of room there. I’m sure many of us could think of other ways to make such a program affordable.

Will people decide not to work at all if they’re simply handed cash each month?
It is unlikely, based on some small trial programs and evaluations that suggest most people like to do something useful with their lives, and will continue to work even if they don’t necessarily need to. A basic income is exactly that: basic. Most adults would continue to work to earn extra money that would improve their lives from basic to comfortable. Similar programs in the U.S. in the 1960s and 1970s showed a drop of only 1 percent in hours worked in at least one sample population, despite workers having that baseline income guaranteed whether they worked or not.

Given our current gridlock in Washington, could elected officials agree to implement this idea?
There is evidence that it might appeal to both the left and the right, but for different reasons. Conservatives see such a program as a way to significantly reduce the size of our federal bureaucracy, replacing welfare, food stamps, housing vouchers and hundreds of other programs. Charles Murray of the conservative American Enterprise Institute has proposed a minimum income for exactly that reason: “feed the poor, and starve the beast.” Liberals presumably would be more concerned with the power of a guaranteed income to reduce or eliminate poverty and increase upward mobility and reduce inequality.

However, given that Congress can’t keep the government open or pass a budget, much less agree to rework our entire benefits program into a guaranteed basic income, unfortunately this idea is not likely to happen in the U.S. anytime soon. But the fact that there has been discussion of it is promising, and it is moving closer to reality in other countries. Last month the Swiss government received a petition signed by more than 100,000 of its citizens, calling for a nationwide referendum to establish a basic income guarantee. If it passes, we may see more movement toward such a plan here in the U.S.

Photo public domain via Wikimedia Commons