Can We Afford UBI
How would Shares in America affect income distribution?
As noted in the Shares in America book, total personal income in the US came to over $190,000 per household in 2024[1].
Universal basic income doesn't decrease or increase total personal income, just redistributes some of it. Aggregate income stays the same when higher incomes are taxed and that money is redistributed to lower income households. In short there is no additional cost for a UBI, just income redistribution as currently happens with Social Security. The only cost question that remains is whether that redistribution would be "too large" and what do we mean by "too large"?
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If all personal income were distributed evenly every household would get over $190,000 in a combination of wages, benefits, and UBI. 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 further shrinking of the middle class.
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In Shares in America, I illustrate the income redistribution effects of a modest $1,000 per-month-per-adult-citizen UBI proposed by Andrew Yang back in 2016. Two charts from the 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].
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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.
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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 if UBI is adopted for all working age adults![3]
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So, yes we can easily afford Shares in America (UBI). The US is a very rich country.
Footnotes
[1] Annual personal income was $25.589.5 Trillion in December 2024 per BEA Table 2.1 as reported through FRED https://fred.stlouisfed.org/series/PI . The number of households was 132.2 million per https://fred.stlouisfed.org/series/TTLHH. Divide to get income per household. Disposable personal income after local state and federal taxes was $ 22,377.3 Trillion, or about $170,00 per household. Interesting to note that all these government taxes came to a little over $3 Trillion or about 13% of net national income.
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[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.
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[3] If the same UBI is adopted for all adults including retirees, then the illustrative tax falls short by about $1.2 trillion over 10 years. But removing the cap on Social Security taxes (currently a tax that falls almost entirely on the poor and middle class) would generate about $3.4 trillion additional over 10 years! Also we could consider a smaller UBI for retirees or an increase in Social Security.
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You can see the sample UBI tax and how these graphs were calculated here.