Opinion; The Independentarian

How much does UBI cost?

I just completed some simple, “back-of-the-envelope” estimates the net cost of a UBI set at about the official poverty line: $12,000 per adult and $6,000 per child with a 50% “marginal tax rate.” They are in a paper entitled, “the Cost of Basic Income: Back-of-the-Envelope Calculations.” It’s currently under peer-review at an academic journal and available in un-reviewed form on my website.

Here are some of its most important findings:

  • The net cost—the real cost—of a roughly poverty-level UBI is $539 billion per year, less than 16% of its often-mentioned but not-very-meaningful gross cost ($4.15 trillion), less than 25% of the cost of current U.S. entitlement spending, less than 15% of overall federal spending, and about 2.95% of Gross Domestic Product (GDP)
  • This $539 billion UBI would drop the official poverty rate from 13.5% to 0%, lifting 43.1 million people (including about 14.5 million children) out of poverty.
  • This UBI will be a net financial benefit to most families with incomes up to $55,000, making it an effective wage subsidy (or tax cut) for tens of millions of working families.
  • The average net beneficiary of this UBI is a family of about two people making about $27,000 per year. The family’s net benefit from the UBI would be nearly $9,000 raising their income to almost $36,000.
  • Lowering the marginal tax rate to 35% would spread the benefits of the UBI program to more of the middle class while increasing the cost to $901 billion.
  • The cost of a UBI of $20,000 per adult and $10,000 per child is $1.816 trillion per year, less than 85% of total entitlement spending, less than 45% of total federal spending, and less than 10% of GDP.

-Karl Widerquist, Begun in New Orleans, completed at Cru Coffee House, Beaufort, North Carolina, May 21, 2017

 

About Karl Widerquist

Karl Widerquist has written 944 articles.

Karl Widerquist is an Associate Professor of political philosophy at SFS-Qatar, Georgetown University, specializing in distributive justice—the ethics of who has what. Much of his work involves Universal Basic Income (UBI). He is a co-founder of the U.S. Basic Income Guarantee Network (USBIG). He served as co-chair of the Basic Income Earth Network (BIEN) for 7 years, and now serves as vice-chair. He was the Editor of the USBIG NewsFlash for 15 years and of the BIEN NewsFlash for 4 years. He is a cofounder of BIEN’s news website, Basic Income News, the main source of just-the-facts reporting on UBI worldwide. He is a cofounder and editor of the journal Basic Income Studies, the only academic journal devoted to research on UBI. Widerquist has published several books and many articles on UBI both in academic journals and in the popular media. He has appeared on or been quoted by many major media outlets, such as NPR’s On Point, NPR’s Marketplace, PRI’s the World, CNBC, Al-Jazeera, 538, Vice, Dissent, the New York Times, Forbes, the Financial Times, and the Atlantic Monthly, which called him “a leader of the worldwide basic income movement.” Widerquist holds two doctorates—one in Political Theory form Oxford University (2006) and one in Economics from the City University of New York (1996). He has published seven books, including Prehistoric Myths in Modern Political Philosophy (Edinburgh University Press 2017, coauthored by Grant S. McCall) and Independence, Propertylessness, and Basic Income: A Theory of Freedom as the Power to Say No (Palgrave Macmillan 2013). He has published more than a twenty scholarly articles and book chapters. Most Karl Widerquist’s writing is available on his “Selected Works” website (works.bepress.com/widerquist/). More information about him is available on his BIEN profile and on Wikipedia. He writes the blog "the Indepentarian" for Basic Income News.

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The views expressed in this Op-Ed piece are solely those of the author and do not necessarily represent the view of Basic Income News or BIEN. BIEN and Basic Income News do not endorse any particular policy, but Basic Income News welcomes discussion from all points of view in its Op-Ed section.

12 comments

  • Tom Clarkson

    415 trillion is a typo.
    Should be 4.15 trillion. Otherwise, nice summary.

  • Adam Ross

    It kind of makes everyone that receives it, a slave to government. Does it not? I can see it. Everyone gets chipped. All currency goes digital (no more cash). The holdouts either starve or are rounded up and done away with. The masses will swallow everything government feeds them, and label the resisters, terrorists. Can you think of a better scenario to have the entire world involved in civil war at the same time? Because that’s what will happen. There are people everywhere that just will not go along with this.

    • Joe Lee

      @Adam….how would it make people slaves giving them a floor level subsistence income? if anything those people are slaves now and poorly treated at that. If everyone below the $50k a year had $1k a month they get at least have food and a place to live, they would still need a job to get the rest of things people usually want to have like a car or the newest phone.

      But lets say the worst case scenario happens like you stated and people get cut off all of a sudden, then guess what, they are no worse off then than they are now. But while they were getting a UBI they had a better quality of life AND the opportunity to better themselves by starting a business or getting a higher education while not being at or below poverty level.

      Besides, all businesses want customers to spend money on them. It would be a boon to the economy and to businesses profits. The free (but regulated) markets will keep prices in check as well as improve the well being of society in general. UBI is not a silver bullet to solve all problems but it will help to move us in that direction.

    • Justin

      “Starve to death or become a wageslave” is fine for capitalism, but people giving you things is slavery! I don’t understand this capitalism double-think.

  • Kenneth Noteboom

    How is the net cost only 13% of the gross cost? Where do you account for landlords increasing rent? You can’t cap rent because that would then trigger a shortage of low income housing.

    • Karl Widerquist

      This is only a static analysis. It does not look at how anyone will change their behavior in response to UBI, not workers, employers, consumers, landlords, or anyone else. It is the jumping off point for analyses that look at those effects.

      Certainly UBI would cause an increase in rent in neighborhoods where net beneficiaries live and a decrease in rent where net contributors live. So it would reduce the value of the UBI to net recipients. That’s a bad thing. But it would also reduce housing segregation, and that’s a good thing.

      There’s any easy way to solve the bad thing: use rent taxes to finance the UBI. The increased rent would automatically generate increased revenue, which could be added to the UBI. Then you get the decrease in housing segregation without the decrease in net benefit to net beneficiaries

  • shawn

    Giving a ubi to children just exacerbates the problem of the least qualified people having children to receive benefits. Perhaps there are other things to spend the money on like public education, free college and training, to encourage people to have their lives sorted out before becoming parents. There has to be some opportunity cost or we will have an ever growing population of people who regard free handouts as the purpose of life.

  • Shawn foster

    What abouy all the people who will try to immigrate into the country? A more modest first step that we can also encourage other nations to adopt is a private supplememtal social security IRA that can be withdrawn from when needed, and passed on after death. It would end the worst most desperate poverty. Also giving UBI to children is worse at breeding bastardd than AFDC, that money should go to schools, teachers, and healthcare.

  • John

    Hello there! Isn’t a 50% marginal tax rate insanely high? That’s almost doubling the tax rate.

    • You’re confusing “marginal tax rates” with “tax rates.” No 50% is not a particularly large MTR. Some people on benefits right now face MTRs of 100% or more. So, depending on what programs UBI replaces, 50% could be a significant drop in MTR.

  • Love this. below is what i have worked through so far. Karl. Add it to your well thought out look-see.
    Optimal Universal Basic Income & Single Payor Insurance

    With just ONE easy way to oversee restriction, UBI and Medicare for ALL can work well and based on Karl Widerquist’s theory can largely self-fund itself.

    Both the health care exchanges created by the Affordable Care Act and Medicare for All provide health insurance for the uninsured. However, the exchanges leave power in the hands of private insurance companies. Medicare for All takes power away from those companies and puts it in the hands of a public agency that is accountable to the public. BUT that public agency needs to require personal responsibility for what we stick in our mouth while realizing that the dollar profit system creates and pays for the ads that sell the mostly lifeless foods on mass media. Special interests in DC tip the scales toward the profit motives of the those companies. To hell with health.

    The concept behind UBI is appealing in its simplicity — everyone should be entitled to a-no-strings attached minimum income. Those receiving this income are not required to report on their financial circumstances or on how they spend their money.

    Neither are they required to attend job-seeker workshops or any other government initiative designed to try and make people ‘work ready’ as is currently the norm within many welfare systems.

    Free Cash For Doing Nothing?
    While it might sound absurd, before you dismiss the scheme as a good recipe for disincentivising the need for work and encouraging laziness, consider the following.

    In the developing world providing people with a basic income has proven to be an effective method for poverty alleviation, (https://thewire.in/economy/universal-basic-income-developing-countries-poverty) leading institutions such as the World Bank and the United Nations Development Program (UNDP) to advocate for continued testing and implementation of basic income schemes.

    The Prettier The Package The More Suspect The Food.
    The one flaw I see for the USA is to include a limitation for using the money for unhealthy foods. The UBI can only be used for the foods we know are healthy such as organic fresh or frozen fruits and vegetables, and raw seeds and nuts. The plan could be phased in increasing the UBI amount over 20 years to allow for educating people around proper cooking and storage. TV is slowly using losing its media power to the internet. This will help offset ads that sell the mostly lifeless foods on mass media and greatly reduce the trillion dollars spent on the chronic illness aspect of healthcare.

    Many Corporations Who Self-Fund Insurance
    were a $million or more behind. They $bonused and incentivized sick & overweight to change diets & exercise & in 1 year their self-insurance funds had huge $surpluses. Message? Eat right & you heal faster & DON’T GET SICK. Eat wrong-GET AND STAY SICK

    Reducing Prescribed Drug Costs Is Absurd.
    They treat symptoms not causes. Reduce USAGE by 90%: take responsibility for what U eat; no fried or packaged foods, pizza, dairy, red meat, TV ads & eat a mostly plant-based diet. ONLY THEN yes on Single Pay and UBI.

    Add the savings from healthcare to a small changes here and there in taxation https://basicincome.org/news/2017/05/much-ubi-cost/ and you have the funding needed.

    All entitlements come with certain requirements of those entitled. The requirement for UBI and Single Payor is to eat properly and exercise. That’s it. To not do this will simply allow the drug, packaged food industry, politicians and TV stations to divert the money for themselves.

    Food waste needs to be addressed as well but that is a bonus that will improve the numbers
    https://www.ecowatch.com/food-waste-increase-2597861750.html?utm_source=EcoWatch+List&utm_campaign=044354271a-EMAIL_CAMPAIGN_COPY_01&utm_medium=email&utm_term=0_49c7d43dc9-044354271a-86122209
    Michael Grant White

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