Basic Income Faculty Journal Series Posted on Thursday, August 16, 2018

Ending Poverty in the U.S. with a Basic Income

Almaz Zelleke

Almaz Zelleke Associate Professor of Practice in Political Science at NYU Shanghai

The official poverty rate, which now stands at 13 percent, has never fallen below 11 percent since it was first defined in the 1960s. The persistence of poverty in the richest nation in the world suggests that it is an intractable problem that can be alleviated but never eradicated; this is not true. Other nations have lower poverty rates than the U.S. despite lower GDP per capita. As a country, we choose our poverty rate through the laws we enact to govern private property, the rates and exemptions in our tax code, the programs we decide to fund, and those we decline to support. Poverty elimination is within our reach, but it requires a break from the ineffective approaches of current social programs, which rely on conditional and means-tested benefits targeted to poor families. Instead, we need a universal, individual, and unconditional basic income.

Basic income—a monthly cash benefit for every American citizen—has the potential to do what no other social program has ever done: eliminate poverty, provide a floor of economic security on which individuals and families can build with earned income, and reduce the inefficiencies and waste of our complicated and counter-productive safety net. A basic income can do all this and make our economy stronger and fairer at the same time—if we get the details right.

To achieve these goals, a basic income in the U.S. has to be at least $500 a month for every man, woman, and child; it has to be an individual, additive benefit like Social Security, rather than a benefit scaled to family or household size and income, like the EITC. It must be taxable for high earners, rather than withdrawn from middle-income workers; and, it has to be unconditional. Let’s take each of these in turn.

The amount: $500 a month, or $6,000 a year, adds up to $24,000 for a family of four–the federal poverty line for a family that size. We could reach that level of family income with a $12,000 basic income—roughly the poverty line for individuals—that goes only to adults, but that would eliminate poverty only for two-adult families. Single-parent families—those most vulnerable to poverty because the dual burdens of child care and earned income fall on only one parent—would receive only $12,000. To eliminate poverty in our most vulnerable families, the basic income must go to children, and we can achieve the goal of poverty elimination with a $6,000 individual benefit.

Individual vs. family benefits: a $6,000 annual basic income may leave individuals who have no other income vulnerable to poverty. However, because it is an individual, additive benefit, those who cannot afford to live alone will bring the full amount of their basic income into any household they join, rather than seeing it reduced in response to the income or benefits of the household’s other members, as under our current anti-poverty programs. This allows individuals without other income to pool their resources and lower their expenses, while freeing up time for the job search or education that can lead to higher incomes. Basic income also provides an economic incentive to marriage, unlike our current anti-poverty programs, which reduce benefits for those who marry.

Taxation vs. means tests. It seems obvious that the best way to help the poor would be with programs targeted to the poor, but 50 years of ineffective anti-poverty policy demonstrate that this is wrong. The most efficient way to target the neediest is to give everyone a basic income and then tax it back from high earners. Why? Limiting benefits to the poor is trickier than it sounds, and leads to perverse disincentives. Assessing need requires a complicated set of rules about income limits, whether to count cars and homes toward asset limits, and how the income of other people in the same household affects benefit levels. Even reporting earned income accurately is hard for low-earners, whose wages tend to vary significantly by week or month. When benefits are withdrawn as earned income rises—as they must to limit benefits to the poor—the 30% benefit withdrawal rate typical of most programs feels like a 30% tax on earnings, diminishing the work incentives for those whose workforce attachment we want to promote.

We can more effectively target the neediest by giving everyone a basic income, encouraging recipients to earn as much as they can on top of the basic income, and then taxing those who end up with high incomes and wealth at the end of the year. This simplifies the system for everyone—especially for the poor, who no longer have to recalculate their eligibility for a range of benefit programs every time their income changes.

Unconditionality: does a basic income “pay people not to work”? No, the reality is just the opposite. Because it is a universal flat grant, basic income recipients always do better by earning income, and their income is taxed at the same rate as other workers’ income, maximizing the incentive to earn more. A basic income would make it easier for many of the poor to work, by providing funds for the reliable transportation, childcare, relocation, and training that support employment. Most importantly, an unconditional basic income allows poor parents to make the same decisions about juggling work and childcare, and poor workers to make the same decisions about investing in the education or training that can lead to higher wages in the future, that the affluent are able to make for themselves.

How would we pay for it? The U.S. is a rich country, with about $300,000 in net national wealth per capita. But that wealth is unevenly distributed. Roughly half the population has little or no wealth, so the half of the country that has any wealth at all has about $600,000 per person. A $6,000 basic income for the 50% without any wealth could be funded by an annual 1% tax on wealth. That tax should be progressive, not flat, since our wealth distribution is heavily skewed toward the very richest. Higher rates on the richest could offset an exemption on assets up to $1 million to avoid taxing the savings of the middle class. In practice, we need a combination of taxes on wealth, high incomes, gifts, and inheritances to minimize tax avoidance. But the fact that a poverty-eliminating basic income could be funded by a tax as low as 1% on wealth demonstrates that it is something we can do if we want to.

Basic income is redistributive, and for many people that’s a four-letter word. But redistribution is simply a way to ensure that our capitalist economy lives up to its promise to create economic prosperity for all, which the persistence of poverty calls into question. If our goal is to maintain 11-15% of our population in poverty, we are on the right track with the policies and programs we have in place. But if our goal is an economy more in line with our democratic ideals, with economic security for all, it’s time for a basic income.



Almaz Zelleke (PhD Harvard University, BA Princeton University) is Associate Professor of Practice in Political Science at NYU Shanghai. Her academic interests are in political theory and public policy, feminist political theory, and comparative political economy. Her articles on basic income, distributive justice, welfare policy, and feminist political theory have been published in Political QuarterlyBasic Income Studies, Journal of Sociology and Social Welfare, Policy and Politics, Review of Social Economy, and Journal of Socio-Economics. She is a member of the Board of Advisors of the US Basic Income Guarantee Network (USBIG) and of the International Advisory Board of the Basic Income Earth Network (BIEN)