Understanding UBI

What Is Universal Basic Income?

Universal basic income, or UBI, is a regular cash payment made to every person, without a means test or work requirement.

A UBI has five essential features:

• Cash: People decide for themselves how to use it.

• Regular: It is paid on a schedule, such as monthly.

• Individual: It is paid to each person, rather than to a household.

• Universal: Everyone who meets basic residency or citizenship requirements receives it, regardless of income.

• Unconditional: Recipients do not have to work, look for work, prove financial need, or use the money for an approved purpose.

  
  

A frequently discussed example is $1,000 per month for every adult. That amount is not part of the definition: proposals can provide more or less, may include children, and can be financed in different ways.

Why pay it to everyone?

Universality makes UBI simple and dependable. People do not lose the payment when they take a job, receive a raise, marry, or build some savings. It also avoids complicated eligibility rules and the stigma sometimes associated with means-tested assistance.

Paying everyone does not mean that everyone benefits equally after taxes. Under many UBI proposals, higher-income households receive the payment but pay more toward its cost through the tax system. What ultimately matters is the combination of the payment and the taxes used to finance it.

UBI and related ideas

Several policies provide cash income, but they work differently.

Universal basic income

Everyone receives the payment. It does not decrease as other income rises, and employment is not required.

Guaranteed or means-tested income

Payments go only to people below a specified income level. The benefit usually becomes smaller as a recipient’s other income increases. These programs cost less than a comparably sized UBI because fewer people receive them, but they require eligibility rules and income reporting.

Negative income tax

A negative income tax uses the tax system to guarantee a minimum income. People with little or no income receive a payment; as their earnings rise, the payment gradually declines. Economist Milton Friedman promoted this approach in the 1960s. It resembles UBI in providing unrestricted cash, but it is means-tested rather than universal. A negative income tax and UBI can achieve exactly the same income distribution.

Refundable tax credits

Credits such as the Earned Income Tax Credit can produce a payment when the credit is greater than the taxes owed. Unlike UBI, these credits may depend on earnings, family circumstances, or filing a tax return, and they are often paid annually rather than monthly.

Social dividends

A social dividend distributes income generated by publicly owned resources or shared public wealth. Alaska’s Permanent Fund Dividend is a well-known example, although it is paid annually and is much smaller than most full UBI proposals.

UBI does not necessarily replace every public program

Some proposals would replace portions of the existing safety net; others would add a basic income while preserving Social Security, Medicare, disability benefits, housing assistance, and other programs. That is a policy choice, not part of the definition of UBI.

The same is true of taxes, payment amounts, eligibility for children, and treatment of noncitizens. Two plans can both qualify as UBI while differing substantially in their details.

The idea has a long history

The modern basic-income discussion has several historical roots. In 1797, Thomas Paine proposed payments financed from the value of land: a lump sum upon reaching adulthood and annual support in old age. In the twentieth century, Milton Friedman advocated a negative income tax. President Richard Nixon later proposed the Family Assistance Plan, a guaranteed-income program for low-income families that passed the House but did not become law.

These proposals were not identical to modern UBI, but they reflect a recurring idea: everyone should have access to a minimum level of income.

Shares in America, Inc. advocates for universal basic income

Here at Shares in America, Inc., we favor a universal, unconditional income supplement as the fairest and most effective long-term solution. We also support guaranteed-income programs, refundable tax credits, negative income taxes, and other measures that put money directly into people’s hands and establish a stronger income floor.

We have created a specific UBI proposal that we refer to as the Shares in America UBI Model Proposal, or simply Shares, that is illustrative of a $1,000 a month per adult fully financed UBI.

Both the nonprofit and the UBI proposal were inspired by the book, Shares in America: The Case for a Universal Basic Income by Richard Frenkel.