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Universal basic income, often abbreviated to UBI, is a type of income that is funded by taxpayers, and guaranteed to an area's population at regular intervals (Miller, 2020, pg. 1). The government will essentially give you a set amount of money for being a citizen on a regular basis, no strings attached.

Although there have been many large-scale tests on UBI, as well as subsidies on goods that are covered by the government, there has never been a UBI that remains true to its concept: providing people with cold, hard cash.

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The concept of UBI has no clear origin, but has been evaluated and seriously considered several times throughout history.

- Founding father Thomas Paine proposed an early prototype of UBI in his books (Miller, 2020, pg. 1).

- Martin Luther King, Jr. promoted UBI as a means of eradicating poverty, which he supported as a branch of traditional civil rights (Nidess, 2017, pg. 2).

- In 1980, Alaska established the Alaska Permanent Fund, which is financed by the state's oil extraction and refining.
- Fund pays a yearly dividend
of $1,000 to $2,000 to Alaskan
residents 18 and up (Carmody,
2017, pg. 8)

- In late 2017, former lawyer and entrepreneur Andrew Yang started his campaign for presidency of the United States. His platform's flagship policy was UBI, where Yang vowed to start a monthly $1,000 payment for all working Americans (Tharoor, 2021, pg. 1).

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- UBI places money directly in people's pockets to spur economic activity, whether that be through stakeholder investment, or creating a new business (Wood, 2017, pg. 1-2).
- Spending > Goods/Services >
Business expansion > Job creation         > More spending...

- Money can be used for neccesities like food, shelter, and healthcare, or riskier expidentures like pursuing higher education, or moving states for better job opportunities.

- Financial pressure has been shown to cause higher rates in mortality, heart disease, and mental health issues; health problems that can be alleviated with UBI (Miller, 2020, pg. 1-2).

- In periods of recessions or low economic activity, UBI can be used to keep spending and circulation at a healthy level (Kagan, 2021, pg. 2).

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The Association of Volunteers in International Service (AVSI) gave a one-time transfer of $150, and four days of skills training, to 1,800 poor Ugandan women. Half of the 1,800 women received the cash transfer and training a year and a half after the others (Wood, 2017, pg. 3).

- The women that reecived the funding and training first had increased consumption by a third, doubled monthly income, and tripled savings (Wood, 2017, pg. 3).

Another study in Uganda, the Youth Opportunities Program, gave one-time grants of about $382 per member to group proposals for training programs and materials needed to practice a trade (Wood, 2017, pg. 3).

- Four years later, IPA found that participants were earning 41% more than a randomized control group, a figure that rose to 84% for women (Wood, 2017, pg. 4).

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- UBI has never been implemented on a national level, and its potential benefits and drawbacks have never been fully documented (Thomsom, 2020, pg. 3).

- UBI would be too costly, and can't be funded with current tax rates and budget allocation (Connaughton, 2020,  pg. 1).

- UBI could give people an incentive to work less or stop working altogether, expecting the government to cover lost hours' wages (Carmody, 2017, pg. 3).

- People might save UBI funds instead of spending it, which fails to accomplish the goal of increasing economic activity. Those funds' value would slowly degrade due to inflation
(Carmody, 2017, pg. 4-5).

- UBI is a difficult balancing act.
- Raising taxation to an acceptable
level to fund UBI, while being
realistically financed.
- Setting UBI at a high enough
amount to impact spending,
while not too high that people
stop working.

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Public Statement: Potential Issues from an American UBI

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Public Statement: Potential Issues from an American UBI

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Although UBI is theoretically a good way to grow the economy, there have been tested results that rebuke its propsed benefits.

- Decrease in working hours
- Decrease in people with jobs

There are also design flaws with UBI that make it unsustainable in today's socioeconomic climate (Tyson & Mendonca, 2018, pg. 3).

- Lack of precedence
- The US has no way to fund UBI
without triggering a budget deficit
- The current allocation of the federal
budget to its departments and
programs leaves no room for UBI

In a developing country such as Uganda, where tests supporting the benefits of UBI were conducted, growing wages and tax revenue give leeway for UBI to flourish. However, a developed country such as the US, economic growth is relatively slower, means that revenue has stagnated to a level below what is needed to fund UBI.

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The Nixon administration launched four experiments in urban and rural areas across the United States. At the same time, Canada launched a similar experiment called Mincome in the province of Manitoba.

The five experiments lasted three to five years each, providing monthly payments to families with children. In 2013 dollars, a family of four would get anywhere between $17,445 and $48,446 per year.

- The Seattle/Denver program, the largest of the five, saw a decline in the percentage of people with jobs, by about 4%. The study also saw a decrease of about two to four weeks of full-time employment over a year (Carmody, 2017, pg. 4).

- During Mincome, the entire population of Dauphin was subject to the program's funding. Dauphin saw about a 30% decline in labor force participation (Carmody, 2017, pg. 5).

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For UBI to be realistic in the US, there would have to modifications to the fundamental concept of UBI.

- Only certain people would qualify for UBI; those who don't need it would not receive it
- Increased tax revenue from large-cap corporations who often receive tax rebates and subsidies

This modifications would make UBI not universal, and fall under something called a negative income tax, or NIT. An NIT is just UBI, but for only people in a certain tax bracket or threshold (Carmody, 2017, pg. 2).

This reveals the truth of a national UBI, in that the sheer cost of operating such a fund would be too big for the American economy to sustain.

For instance, giving $1,000 monthly to all 200 million Americans that are 18 and up would amount to an annual cost of over $2 trillion, which is about half of what the current federal budget is (Nidess, 2017, pg. 4).

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1.
Q: Is UBI a viable long-term solution for economic growth, in anticipation for recessions and job automation?

A: For developing countries UBI is a good way to increase economic growth, but for already developed countries like the US, UBI is not a viable solution in the long-term. At best, it can be used as a transition from periods of recession or low economic activity, but it would be too costly over a long period of time (Carmody, 2017, pg. 7).

2.
Q: How can UBI be funded without substantially increasing taxes on the working class, and altering current budget allocation?

A: Some form of UBI can be funded using a value-added tax, or VAT, which increases revenue by instituting taxes at the end of every transaction along a prodcution line (Kagan, 2021, pg. 1).

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Public Statement: Modifications to Taxation

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Public Statement: Modifications to Taxation

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Many developed countries have something called a value-added tax, or VAT. A VAT, that is usually set to 10%, is applied to the end of every transaction across a production line (Kagan, 2017, pg. 1).

- For example:
- John transports a box of fruit.
The shipment expense is $20, so
he pays $2 as a VAT,
- Mark buys $10 worth of fruit. He
pays an additional $1 as a VAT.
- Amy buys a fruit salad from Mark
for $5. She pays an additional
$0.50 as a VAT.

A VAT would be estimated to being in about $250-500 billion in tax revenue. As shown in the example, a VAT would be less significant down the line to the consumer, but more to a supplier or retailer. This would plaec accountability in the hands of businesses, and mostly large-cap corporations, while only a small tax increase for the consumer (Kagan, 2021, pg. 3).

- Pros
- Provide a stronger incentive for
businesses to earn money
- Provide more tax revenue
- Close tax loopholes that reduce
corporate taxes

- Cons
- Higher business costs
- Slightly higher consumer costs

A VAT will be important to know for the UBI solution proposal.

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The US is in need of increased spending and economic activity, especially coming out of a recessionary period like the pandemic. Our solution would modify UBI into an NIT.

- A proposed $300 monthly payment will be given to Americans 18 and up, who fall under their state's median income level (around 104 million people).
- Payments would begin on the month that the Secretary of Health and Human Services declares the pandemic over, and would continue for the next five years.

These payments would be funded using a 10% VAT that would last during the five-year period, and bring in an additional $250-500 billion a year in tax revenue (Kagan, 2017, pg. 3).

After five years, these payments and the VAT would end. This proposal would serve as a transition from the pandemic to a normal level of economic activity, as well as a documented test of both an NIT, and  a VAT.

Our NIT would cost about $350-375 billion. This can be funded with the average projects of a 10% VAT ($250-500 billion), and can be increased if revenue is not enough for the NIT.

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This NIT would first begin on a state level, where state governments would be responsible for:

- Recording and reporting residents who fall under the state's median income level.

This would be the state's responsibliity as opposed to the federal government, as median income levels differ state by state. Averaging median income levels nationally could potentially be too much for certain states, while too little for others.

The federal government would be resonsible for:

- Receiving state reports.
- Internal Revenue Service (IRS) distributing payments on a monthly basis, tied to a social security number.
- Adjusting the VAT after every year of the NIT to meet its required funding.

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Our proposed solution modifies the concept of a UBI into an NIT, as well as how the US institutes taxes, so that it is able to be funded and reap the benefits of UBI, while minimizing the reprecussiosns of its sheer cost and unprecedence.

Our solution is meant to be a short-term transition from the pandemic to a normal level of economic activity. It would involve both the state and federal governments, and be funded off of a VAT. The proposal solution would cost $1.75 to 1.87 trillion over 5 years, but this cost would be offset be a jumpstarted economy, with consumers returning spending to pre-pandemic leves.

Overall, we feel that our NIT is the safest way to implement some sort of UBI in the country, while not being overwhelmingly expensive like a traditional one. The aim of the NIT is to be able to alleviate financial pressure in a post-pandemic population, one that we are confident can be accomplished.

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Benefits
- Increased economic activity (Standing, 2017, pg. 2)
- Return to normal circulation after pandemic
- Decreased occurence of health issues due to financial pressure
- Help people cover lost income from the pandemic
- Able to be covered by VAT, unlike a traditional UBI plan

Drawbacks
- Business growth is offset by VAT
- Public exchanges and stock markets would decline in response to a VAT (Kagan, 2021, pg. 4).
- Slightly higher consumer costs, and higher business costs proportional to total capitalization (the larger the business, the more taxes due to a VAT)

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What is UBI?: https://www.123rf.com/photo_144442225_stock-vector-universal-basic-income-ubi-is-government-guarantee-for-citizen-receives-a-guaranteed-minimum-income-.html

The history of UBI:
https://www.history.com/topics/american-revolution/thomas-paine

https://werepair.org/mlk-day/

https://ny.eater.com/2021/1/15/22232916/andrew-yang-bodega-video-twitter

The case for UBI:
https://www.newyorker.com/magazine/2018/07/09/who-really-stands-to-win-from-universal-basic-income

Studies supporting UBI:
https://basicincome.org/news/2017/04/interview-village-one-documentary-follows-village-basic-income/

The case against UBI:
https://trovoacademy.com/money/page/4/

Studies opposing UBI:
https://www.cnn.com/videos/cnnmoney/2017/10/27/the-crazy-true-story-of-nixon-and-the-basic-income.cnnmoney

Potential issues:
https://www.n2-am.com/our-insights

Modifications to UBI:
https://diem25.org/free-money-for-all/

Modifications to Taxation:
https://www.marketing91.com/calculate-marginal-revenue/

Proposal:
https://www.pandasecurity.com/en/mediacenter/mobile-news/stimulus-check-scams/

Government responsibilities:
https://www.accountingtoday.com/news/irs-updates-cobra-guidance-for-employers

Conclusion: https://www.vectorstock.com/royalty-free-vector/money-circulation-concept-cash-money-stack-vector-28410222

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Carmody, Kody. (Third Quarter of
2017). The Resurgence of Universal
Basic Income. Region Focus.
Retrieved June 19, 2021 from SIRS.

Connaughton, M. (June 15, 2020).
Universal Basic Income Comes with
a Massive Price Tag. Boston Globe.
Retrieved June 17, 2021 from SIRS.

Kagan, J. (February 8, 2021). Value
Added Tax (VAT). Investopedia.
Retrieved June 21, 2021 from
Investopedia.

Miller M. (January 22, 2020). Case for
Universal Basic Income. Hartford
Courant. Retrieved June 16, 2021
from SIRS.

Nidess, D.(August 11, 2017). Why a
Universal Income Would be a
Calamity. Wall Street Journal.

Retrieved June 17, 2021 from SIRS.

Standing, G. (January 9, 2017).  The
Case for Universal Basic Income.
Global Viewpoint. Retrieved June
19, 2021 from SIRS.

Tharoor, I. (April 12, 2021). The
Pandemic Strengthens the Case of
Universal Basic Income.
Washington Post. Retrieved June 21,
2021 from SIRS.

Thomson, S.  (September 16,2020).
Fundamental Problems with a
Universal Basic income. National
Post. Retrieved June 17, 2021 from
SIRS.

Tyson, L and  Mendonca, L.
(September 17, 2018).  Universal
Basic Income or Universal Living
Wages. Project Syndicate. Retrieved
June 16, 2021 from SIRS.

Wood, C. (March 1, 2017). Guaranteed
Paycheck: Does a ‘Basic Income’
Encourage Laziness?. Christian
Science Monitor.  Retrieved June 7,
2021 from SIRS.

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SIRS
IRS Tax Database