Maine Policy Perspectives — The Ethical Commitment of a Universal Basic Income

Image of Almaz Zelleke

by Almaz Zelleke

Michael Howard’s (2018) commentary presents several arguments in favor of a universal basic income and describes the ways it could be implemented at the state level. The objections to basic income made by Dave Canarie (2019) center on its high cost, its effect on current safety-net programs, and the possibility that its cost will crowd out other proposed and worthy programs, including national health insurance, college-debt forgiveness or free tuition, infrastructure spending, and so on. Canarie reasonably asks why, even if one accepts Howard’s diagnosis of the problem—the possibility of significant job losses through automation, the inability of many jobs to guarantee economic security, or the question of how to compensate caregivers for their critical but often unpaid labor—basic income should be preferred to more traditional targeted, means-tested, and conditional income-support programs.

Like Howard, I believe that the core features of a basic income make it a better social welfare policy than the ones we have in place. Because basic income is universal, rather than limited to those who prove their financial need, it means that none of the needy fall through the cracks between different social policy programs. Because it is unconditional, rather than limited to those who are able to work in paid jobs, other contributions to society are recognized and supported. And because basic income is an individual, flat, and additive benefit rather than a benefit scaled to household size and income, it provides the same benefit, rather than smaller incremental benefits, to additional family or household members. This means that individuals are incentivized to take steps that increase economic security, like marrying or combining households, or taking part-time or intermittent work where full-time work is unavailable or impractical.

These important policy advantages do increase the cost of basic income, as Canarie points out, but the cost can be minimized by taxing back the basic income from those whose income or wealth is high enough that they don’t need it. While it may seem pointless to provide a basic income with one hand and tax it away with the other, doing so more effectively targets benefits to those who need them, especially those whose incomes fluctuate enough from month to month that they cycle in and out of eligibility for traditional welfare benefits. Those whose incomes are high enough not to need the basic income can forego the cash and take the benefit as a credit against the taxes they owe.

A universal, but taxable, basic income has another advantage: it makes the ethical commitment of a basic income explicit.  Everyone in a wealthy, democratic society should have access to the means necessary for a healthy and productive life. Those who can afford to contribute more to our collective economic security should do so, just as they contribute more to other forms of collective security such as military or police protection through our progressive tax system. Basic income is unapologetically redistributive and should be defended as such: it only makes sense in a society whose economic system leads to inequality and insecurity, because a society with an egalitarian distribution of income and wealth has no need for a basic income. Our capitalist economic system allows some individuals to privatize, accumulate, and monopolize economic resources to which others are denied access and to pass those resources down to their heirs, entrenching inequality through the generations. It is this kind of economy that gives rise to insecurity and inequality for large parts of the population, even as it may promote overall growth and national prosperity. Redistributing part of this prosperity as a basic income is a way to fulfill the implicit promise that allowing privatization of what, in an ethical sense, should be seen as communal resources, provides economic benefits for all, not just the few.

Canarie writes persuasively about the contributions middle-class workers make to their own success in Maine, but can hard work really explain the difference between the average income of the top 1 percent of Mainers—over $650,000—and the bottom 99%—around $43,000 (Sommellier and Price 2018)? Or the likely divergence in the future success of the almost 17 percent of children living in poverty in Maine compared to those living in households with above average income (US Census Bureau 2017)? If you think that it can, you’re unlikely to be convinced of the need for a basic income. If you think that something other than hard work explains at least some of the variation in our economic success, and that an effective form of redistribution is necessary to help level the playing field for all Americans, you might be open to the idea of a basic income, but remain unconvinced that it is affordable or feasible at the state or local level. Could Maine implement a basic income on its own?

A full basic income at a level targeted to lift individuals or families above the federal poverty threshold is probably beyond the fiscal capacity of a state like Maine. States face limitations in enacting the kinds of redistributive taxation that could fund a generous basic income. Tax competition with adjoining states imposes limits on how high income taxes can go without driving the most mobile—likely the wealthiest—taxpayers across the border. Taxes on financial wealth, which are being proposed by some Democratic presidential candidates, are even harder to impose at the state level. Taxes on real property—houses and land, which can’t be moved—can be adjusted to raise more revenue from the wealthy and be redistributed within the state as a land dividend. Regardless of the form of the tax, it is critical to build support for the basic income to make it durable across successive administrations, as there is little benefit to a basic income that lasts for a few years and is repealed.

To build support for a basic income, it may help to begin with an incremental basic income, starting with the most sympathetic recipients—children and the elderly—with a dedicated income tax surcharge or land tax. A universal child allowance, as Howard suggests, is a good place to begin, although its universality should mean that it goes to most families, not that it can’t be taxed back from the wealthiest families; what is important is that poor and middle-class families don’t have to document their income and assets before receiving it. Next could be supplementing federal benefits like Supplemental Security Income (for the elderly poor) up to a decent level above the poverty threshold. Finally, Maine could supplement TANF federal benefits for the working-aged poor, which now come with so many restrictions that the program fails to reach most of the poor. An unconditional, universal (but taxable for the wealthy) cash benefit of even a modest amount helps to eliminate the poverty trap of a life on meager welfare benefits or a life on low earnings by allowing for both to be combined and can support work by helping to pay for child care, transportation, training, or education. Eventually, these three benefits could be combined into a flat and universal basic income.

Dedicated taxation for its financing coupled with taxing back benefits received by the wealthy mimics the structure of our most successful economic security program, Social Security, which is responsible for drastically reducing elderly poverty. It is likely that the implementation of a basic income will likewise follow Social Security’s path—initially a small benefit, limited to only a portion of the population, with a gradual expansion of its tax base, eligible beneficiaries, and benefit level. For Social Security, state-level implementation, not piloting, was the spur to federal implementation. Pilots, which are necessarily small and short term, can’t demonstrate the community effects of raising everyone’s income, or the shift from short- to long-term planning encouraged by an ongoing income boost. As with Social Security, our best chance to get basic income onto the national legislative agenda may be through its adoption in a few forward-thinking states.

References

Canarie, Dave. 2019. “Not Ready for Prime Time: A Response to ‘Universal Basic Income: Policy Options at National, State, and Local Levels’.Maine Policy Review 28(1): 76–78.

Howard, Michael W. 2018. “Universal Basic Income; Policy Options at National, State, and Local Levels.Maine Policy Review 27(2): 38–42.

Sommeiller, Estelle and Mark Price. 2018. The New Gilded Age: Income Inequality in the U.S. by State, Metropolitan Area, and County. Washington, DC: Economic Policy Institute, July 19, 2018.

US Census Bureau. 2017. “Selected Economic Characteristics: 2013–2017 American Community Survey 5-Year Estimates.” American FactFinder.

Maine Policy Perspectives—Universal Basic Income

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