Can We Afford UBI
How would Shares in America affect income distribution?
As noted in Shares in America, in 2024 total personal income in the US came to over $190,000 per household. That is after necessary investment. UBI doesn't decrease national income, just redistributes it somewhat. So the question is would that redistribution be "too large" and what do we mean by "too large"?
If all national income were distributed evenly every household would get over $190,000 in a combination of wages, benefits, and a share of net national income[1]. But few would think of that as fair, and it really would pose a disincentive to work. On the other hand, leaving things as they are will result in further income and wealth inequality, an increase in the part of the population struggling to get by, and a further shrinking of the middle class.
In Shares in America, I illustrate the income redistribution effects of a very modest $1,000 per month per adult citizen UBI proposed by Andrew Yang back in 2016. Two charts from my Shares book tell the story. The first is the distribution of personal income by household in 2019 before and after taxes. In this chart, households are ranked by income, the lowest ten percent in the first bar, the second lowest in the second bar, etc.
The second graph shows how this income would be distributed if a Share of $1,000 per adult citizen was financed by a simple change in income tax rates.
As you can see, everyone gets the same Share which amounts to around $19,000 per household (there are about 1.6 adults per household on average). For households in the lowest 10%, this makes an enormous difference, from roughly $26,000 per year to $45,000 per year. There is still plenty of incentive to work: Unlike much traditional welfare, you keep 100% of the money you make from working - your Share stays the same regardless. If you’re high income or rich, you’ll still be high income or rich. If you’re middle class, you’ll mostly see an increase in income from Shares. A Share of this size reduces income inequality, but there will be plenty of inequality left[2].
The above chart just shows a simple income tax to finance Shares, but our tax code is loaded with ways for rich people to avoid paying taxes. Any increase in income taxes could be reduced by tightening the tax code.
By the way, the change in taxes shown above would also reduce the national debt by $4.5 trillion over the next 10 years compared to business as usual!
So, yes we can easily afford Shares in America (UBI). The US is a very rich country.
Footnotes
[1] Net National Income (NNI) is the total value of finished goods and services produced by a country's residents and businesses, plus net foreign factor income, minus depreciation (consumption of fixed capital). Key components include employee compensation, corporate profits, proprietor income, rental income, net interest, and taxes on production/imports.
[2] Notice that the above assumes everyone gets their current benefits as before: Social Security, SNAP, housing subsidies, etc. Means tested benefits could be reduced without adding to transfers by increasing the Share size.