Universal Basic Income (UBI) is the concept that everyone should receive a basic income. This proposed solution intends to solve to wide disparity between wealth consolidation and wealth distribution. Wealth consolidation has been significantly stronger than wealth distribution for decades. Observation of Census Bureau’s Employment and Labor Force Status Table gives us 3 significant numbers for population consideration rounding to 330, 246 or 168 million. If The United States were to send a $500 check to each of the 330 million individuals in the United States for 12 months, it would cost nearly $2 trillion each year. If we limit to those 264 million that are 16 years or older, $500 for each person, 12 months is $1.6 trillion. If we further specify, only those 168 million whom are 16 years or older that participate in the workforce, $500 each month for a year will be slightly over $1 trillion. Doubling payments to $1000 a month will be slightly over $2 trillion a year. A UBI could be an additional tax supported benefit program and have it’s own path or follow the footsteps of many long standing benefit administrative structures. A major concern is whether The United States may be efficient enough to establish an effective Universal Basic Income Benefit program when consideration of weak immigration policies, increases in inflation, consumer prices, and the health/viability of other benefit programs in times of peak use. It is yet to be seen if the current Americans will be turning the safety nets, into bed rooms.
How Would It Be Paid Out
Distribution of UBI payments have many options through existing government programs. The Internal Revenue Service (IRS) had administrative responsibility for recent Emergency Impact Payment (EIP) stimulus checks distribution to tax payers from 2020 and 2021 Coronavirus Legislation. The direct payment structure set up for Earned Income Tax Credit (EITC), Child Tax Credit (CTC), and EIP, could be of use for a direct UBI payment, where only filing a tax return is necessary to trigger eligibility. The Employment Development Department (EDD) collects employment data and handles Disability and Unemployment Insurance claims for claimants and distributes payments of their benefits. The EDD and Food Stamps Program provide their own Electronic Benefit Payments Debit card program through an agreement with their program sponsor (Bank of America) that benefits deposit in on their respective periods whether it is bi-weekly with UI benefits or monthly with food stamps. The UBI could borrow the EDD’s current procedures to produce an affordable structure paying between $60 and 450 a week.
How Far Would It Go?
An issue towards the effectiveness of direct payments to individuals is another more complex issue in regards to consumer costs. We need to keep in mind the inflation of currency and prices of all consumer needs changes over time and ranges abroad needs from different industries. Historical trend is for the inflation and consumer price index to show prices increase over time, so the funding source would need see increasing taxes as well. Housing is the most expensive costs on consumers, so we can start there. According to Zumper National Rent Report December 2019, Rent for a 1 bedroom ranges on the high end being $3,490 a month in San Francisco California, to $630 in Akron Ohio. Universal Basic Income, a tool meant to counter or combat poverty, is barely an answer to homelessness in this perspective, but the extra payments could work to further bolster low incomes. Separate Housing contracts between Federal and interested State governments with available, low or underperforming housing markets could be an alternative benefit program for exploration, although Federal subsidized housing has been tried before and maintenance/longevity falls short.
How to Fund?
Funding such a benefit program would be the biggest concern as the IRS collected slightly over $3 trillion in 2019 total collections An effective UBI tax will depend on the ability to accurately specify beneficiaries, update the costs of the benefits program, and to change the tax to cover the costs as it changes. We could have an annual update to a fixed or allocative UBI tax, meaning that the tax rate for a year will establish to collect the amount needed to pay off the previous year’s expense or the tax will be estimated to collect amount that is needed. The issue with an effective tax that is paid off, and updates to necessity, is that it has a mechanism for beneficiaries to increase the costs to the payers, but no balance, or counter-mechanism to bring the costs down, or inspire beneficiaries out of the program. The most efficient way to handle the tax from an accounting view is to update the tax periodically (annual), this keeps the income in line with the costs, to pay it off completely at the end of the cycle not to increase national debt.
A UBI Trust Fund could mirror the structure of the Old Age Survivors and Disability Insurance tax. This tax collects from gross wages at a flat rate with the surplus invested into non-publicly traded government bonds. The tax divides into two separate taxes being Federal Insurance Contributions Act (FICA) and Self Employment Contributions Act (SECA). An estimated $ 1.2 trillion in 2019 was collected. In the beginning, the fund ran a surplus to be a successful story of bureaucracy. The expectations as we move forward lose prospects as the fund may start to draw from it’s reserves (depletion of surplus) in 2021 and it may deplete entirely in 2035 as the benefit payments climb with the population of those in retirement. A tax supported trust fund structure shows promise and would need further safeguards to assure it’s sustainability.
Lasting concerns arise as 2020’s exit brings an OASDI fund with expectations that it finishes it’s reserves (although OASDI was at it best, when government spending was not driving up United State’s debt), and 21 million claims with a tab for $ 130 billion dollar Unemployment benefits paid where the supporting tax usually brings between $ 4 to 8 million a year. The EDD statistics could be of use for creation of an Economic Impact Payment benefit program separate from Unemployment benefits. 21 million individuals serviced with $130 billion is within range of IRS collection potential. Since such a UBI would range between less than $100 and a max of $450, the effectiveness of the payments is still challenged by price changes, inflation, and housing costs, but could provide support for low incomes. EIP, EITC, and CTC payments are planned for the year, and these tax benefits turned benefit programs can alleviate the economic concerns of some challenged communities, that could help show a benefit program structure to temporarily alleviate but still not solve any issues.