Is Basic Income Economically Feasible?

Posted on Posted in Basic Income, Politics

Is basic income economically feasible? The simplest answer is “Yes!” The level at which it is feasible depends on how exactly it would be paid for. But as you will see a basic income of almost $15,000 per year for every adult, and $4,000 per year for every child is entirely feasibly, even without any major tax raises!

Existing Welfare Programs

One of the attractive features of basic income is that it could replace existing patchwork welfare programs. Ed Dolan at the Economic Monitor estimates that we could provide a basic income of $4,452 per year per person just by eliminating current means tested welfare programs and without major tax reforms or other policy reforms including not messing with medicare/healthcare and not messing with social security.

However, that is a good deal less than most basic income proponents would like to see. Many think that $1,000 per month or $12,000 per year would be closer the ideal amount for a basic income. So, let’s see where else we could find additional funding for a true universal basic income.

The Big Four: Taxes, Social Security, Health Care, and Defense Spending

There are basically four major ways for generating revenue to increase the amount of money that would be available for a basic income: raising taxes, reducing healthcare expenses, reducing military expenses, moving funds from social security to a basic income.

As you can see from the two graphs below, courtesy of National Priorities, our spending is basically in three areas defense, social security, and healthcare. Social security could be rolled into a basic income program. Medical and military expenses can not. But they are really the only places we are really spending big money. We could cut other places but that would really only be cosmetic. Raising taxes is of course not listed below but it is the other side of the coin. To fund a basic income we could either raise revenue (taxes) or cut expenses. Let’s consider these options a bit more.

presidents-proposed-discretionary-spending presidents-proposed-mandatory-spending

Raise Taxes and Close Tax Loopholes

Our current tax code is less graduated than it has been for most of the past one hundred years. The reforms that were passed after the great depression that lead to the greatest era of prosperity in American history have gradually been eroded. You can see a graph of the top tax rates below:

500 tax rates over time


Unsurprisingly there is a pretty direct correlation to economic inequality and top marginal tax rates. When tax rates are high inequality goes down and when tax rates are inequality goes up. Here is a chart showing income inequality:

There is enough money to provide everyone with the basic necessities, through a basic income, but it just needs to redistributed more fairly. In 2012 the mean per capita income in the United States was $42,693 which means there is no reason everyone in the United States couldn’t be provided with a minimum income subsidy of $12,000 per year. Income inequality and corporate profits are at nearly an all time high, so the obvious choice to reduce this inequality with a more steeply graduate tax code. There are truly a lot of way this could be done quite simply:

Here are some alternative tax systems could also work and might ultimately be better in the long run:

There are really tons more things that could be done. I wouldn’t mind seeing higher taxes on alcohol and cigarettes. And there are lots of other ideas out there. We wouldn’t want to or need to do all of the above. A few of the above would do the trick. The goal is just to raise somewhere between 1-2 trillion dollars. Beyond that I think the most important consideration is that it be difficult to avoid as we know the super wealthy stash large amounts of cash offshore, and of course that the new taxes affect the super wealthy.

Reform the Healthcare system

Obamacare is a step in the right direction in that it provides healthcare to those that need it. But this healthcare is provided by means of a corporations that administer the healthcare. As Bill Maher said, Obamacare is basically a “blow job” for the insurance industry. It is a kind of corporate welfare where tax dollars flow from tax payers into corporate coffers. The United States spends more on healthcare than any other country in the world yet ranks for below most other industrialized countries on important measures health. We spend close to 9,000 per year per person while other countries spend 3,000-6,000 yet we have a life expectancy of several years less.   If we brought our health care expenses down to 6,000 per year, slightly more than Sweden and Norway, we would be able to put $3,000 per person per year towards a basic income, which is 25% of the $12,000 per year target that most basic income enthusiasts point to! To do that we would need to institute a single payer system like the rest of the developed world.

Decrease Military Budget (to a reasonable level)


The United States spends almost as much on its military than the rest of the entire world! Although per capita we “only” spend a bit more than twice as much as places like the United Kingdom and France.


Cutting our military budget in half would save roughly 300 billion dollars per year. That’s $1,000 per year per person for everyone in the United States! Even if we cut our military budget in half we would still be spending more than any other country in the world.

Social Security

In 2013 the United States spent 814 billion dollars on social security, which amounts to roughly $2,551 per person.

So, the basic math looks like this if we add of the above discussed number and don’t include any other tax hikes other than the one’s Ed Dolan uses in his estimate:

$4,552 (Means tested welfare programs and middle class tax exemptions)

$3000 (Single payer Medical Care System)

$1,000 (Cutting Defense Budget in Half)

$2,551 (Social Security)


Total $11,103

$11,103 is quite close to our initial target of $12,000 per year. Although this number is a bit higher than it seems because this is per person, including children, and usually it is suggested that the basic income being provided to children would be less than what is provided to adults. If we adjust this number to reflect a basic income of $4,000 per child you end up with a basic income of $14,181 per year for every adult!

Top tax rates being historically low we could easily push this number significantly higher by raising taxes! I think a basic income of $18,000 per year for every adult is quite feasible.

Some Other Sources of Funding

While the following items are not as large sources of funding they could never less help in finding additional money for a basic income.

End Corporate Subsidies

Federal and state subsidies is estimated at 180 billion dollars annually. That is $600 per per person per year that could go to a basic income!

Decriminalize Drugs (and Prostitution)

The legalization of drugs  would not only provide significant amounts of tax revenue but also save significant amounts of money spent on law enforcement and incarceration for these “crimes.” One estimate is that drug decriminalization could save 13.7 billion per year. It is not a huge amount of revenue but it is something to add to the mix. And it is something we should do anyways! Although somewhat more controversial decriminalizing, regulating, and taxing prostitution could generate revenue from taxes and savings from law enforcement expenditures.

Sate Owned Banks

There is currently one state in the United States, North Dakota, that has a state owned bank. It was estimated that a state bank in Oregon capitalized at 100M could generate 200M dollars over a 20 year period. But it was also estimated it would generate over 5,000 jobs in the short term. Given the new jobs it would create it makes estimating the actual financial contribution a bit difficult.There is no reason this model couldn’t be implemented in every state in the united states. Check out the the Public Banking Institutes web page here.

National Resource Fund

Alaska currently uses this model to provide an income supplement to all residents of the state. This currently amounts to close to 1,000 dollars per year. This model could also be implemented in every state and the amount could probably be increased.

I’m sure there are certainly more possibilities for raising money, this is just a few off the top of my head.

Ways in which a basic income would generate income

Additionally a basic income has the potential to save money and generate income. This potential is admittedly a good bit more difficult to put an estimate on. A basic income would serve as an economic stimulus by putting money in the hands of people who will go out and immediately spend that money on goods and services. Which should in turn lead to an increase in employment, GDP and tax revenue, although just how much that would amount is difficult to estimate. A basic income would also save money by reducing spending on law enforcement and criminal justice system. Once poverty is eliminated crime rates going to go drastically down. The same goes for homelessness as well. Currently the homeless end up costing a lot of money in medical expenses and legal expenses, ironically much more than it would cost to simply house them!


Almost one third of a modest basic income of $1,000 per month could be provided just from the current means tested welfare programs that could be rolled into a basic income program. The extra 2/3 can easy be generated from some of the ways discussed above . Ideally we could do all of them and get closer to a basic income of $1,500 – $2,000 per month.

Reforming the tax code, downsizing the military and reforming the healthcare system are obviously the three major areas that could generate the money necessary for a basic income. Moving the money from social security to a basic income is of course an obvious source of funding. Although decriminalizing drugs and ending corporates susbisidies would help as well. State owned banks and a national resource fund could be powerful sources of income as well.

Leaving aside increasing tax revenues the ideas listed here would be enough to provide every adult with a basic income of $14,181 per year and every child with a  basic income of $4,000 dollars per year!

Imagine what a profound effect that would have on society. Frankly, it is hard to imagine because we’ve never seen anything like that in human history.


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