About the BIG

A partial basic income guarantee is any income guarantee set at a level that is less than enough to meet a person’s basic needs. The Alaska Permanent Fund is the only example of an existing basic income guarantee in the world today, but it is only a partial income guarantee. Each Alaska resident (who has lived in Alaska for at least one year) is considered to be a part owner of the state’s oil resources and receives an annual dividend that was nearly $2000 last year. This is a hugely successful and popular program, but it is clearly not large enough for a person to live off of it. However, $2,000 makes an important difference to a lot of people, and the amount of the dividend grows every year so that maybe some day it will become a full basic income.

Several proposals have been made for a partial basic income guarantee nationwide. Some people believe a partial BIG is a step towards a full BIG, others see it as a permanent alternative.

Wage subsidies such as The Earned Income Tax Credit (EITC) are essentially a form of negative income tax that do not provide a guaranteed minimum. The EITC has two important features that make it distinct from a basic income guarantee: It is conditional on a person receiving paid income, and it has no guaranteed minimum even for people who meet the conditions (a person with zero private income receives zero EITC). One of the most important features of BIG (that it prevents people from destitution if they find themselves with little or no income) is completely absent from the EITC. The EITC is also relatively small and it only makes the difference between poverty or not for a small portion of recipients. Many people work full time and still live in poverty despite receiving EITC, but it does make a significant difference to many people’s incomes. Its adoption was a direct result of the guaranteed income movement of the 1970s, and some believe it is a small step in the direction of BIG.

A conditional income guarantee is an income guarantee limited to people who meet certain conditions. There are as many kinds of conditional income guarantees as there are possible conditions. The Caregivers’ Tax Credit is a proposal to make the current child tax deduction a refundable tax credit like the EITC. Currently, only parents with sufficient income benefit from the tax deduction for children. Simply making this deduction a refundable tax credit would extend its benefits to low-income parents as well. Such an act would essentially create a partial basic income guarantee for families with children. The current proposal would be only $1,000 per year per child—not enough to live on—but once again enough to make a significant impact on financially struggling families. And it would represent another step in the direction of a basic income guarantee. Proponents of the caregivers’ tax credit hope to extend the benefits from parents to those who care for the sick and disabled as well.

One conditional income guarantee, the Family Assistance Plan (FAP), was passed by the U.S. House of Representatives in 1970 and failed in the Senate by only 10 votes. This plan would have created a negative income tax, with a fairly sizable minimum guarantee. Only families with children would have been eligible, but this would have been a substantial step towards a BIG in the United States. Brazil has just introduced a plan similar to FAP for families with school-aged children, conditional on the children attending school.

The ultimate form of conditional income guarantee was proposed by Tony Atkinson and is called the Participation Income. This program would provide a subsistence level income guarantee for anyone that meets one of several conditions for “participation” in society including having a paid job, taking care of an infant or a sick relative, doing suitable volunteer work, or meeting any other condition society wants to set. The idea of a participation income is that it would be very much like a Basic Income except that it would not allow people to completely drop out of society as some fear many will do if a BIG is introduced.

A very close relative of the basic income guarantee is the Sabbatical Account, proposed by Clause Offe. This plan essentially is a basic income guarantee except that person would only be allowed to live off the income guarantee for a limited amount of time. The idea of a Sabbatical Account, like the Participation Income, is to allay the fear that people will try to live off the basic income guarantee for long periods of time. The Sabbatical Account would allow people to leave the workforce temporarily for any reason whether they were unemployed, couldn’t find good enough work, wanted to take care of an infant or a sick relative, or even if they simply wanted to take some time off. But people would have to return to the labor force eventually. Offe believes that such a proposal could eventually lead to the adoption of a basic income guarantee.

Stakeholder grants, as proposed by Bruce Ackerman and Anne Alstott, are essentially a one-time income guarantee given at the age of 18 or 21. This program is nearly identical to one made by Thomas Paine more than 200 years ago. Stakeholder grants are similar to BIG, but they have a very different goal. One of the clear goals of BIG is to alleviate or even eliminate poverty. The goal of Stakeholder grants is to increase the equality of opportunity. People receiving stakeholder grants will have a better opportunity to become successful when they are young, but people receiving a basic income guarantee will have a lower risk of becoming destitute throughout life.

In-kind grants, guarantee a certain minimum, not of money, but of certain goods. Food Stamps is one such program that gives people with low incomes coupons that can only be used for the purpose of purchasing food. Public Housing gives people aid in the form of a government-subsidized apartment, and Medicaid gives aid in the form of medical insurances. When people think of in-kind grants they think of poverty programs, but the public education system is essentially a universal, unconditional grant in the form of free classes.

The most important difference between an in-kind grant and a basic income guarantee is paternalism. Behind most in-kind grants is the assumption that recipients are not capable of making their own decisions about how to spend their income (or do not deserve the right to make their own choice). BIG would free the poor from such supervision and allow people to be responsible their own judgments. Another important difference between BIG and in-kind grants is that in-kind grants often have severe poverty traps. If someone living in public housing makes a certain amount of money they have to leave their apartment and find one on the private market where apartments are usually much more expensive. Thus, people in public housing have reason to be afraid of making too much money. No such incentive problems exist with BIG.

Proposals to create a basic income guarantee often have very different ideas about how the system can be funded best. Conceivable in any tax and some non-tax sources of revenue could be used to fund BIG. Various BIG proposals have included the following types of funding.

• Income taxes
• Sales taxes
• Capital gains taxes
• Inheritance taxes
• Wealth taxes
• Luxury taxes
• Elimination of current income support programs and tax deductions
• Repayment of the grant at death or retirement
• Land and natural resource taxes
• Pollution Taxes
• Fees from government created monopolies (such as the broadcast spectrum and utilities)
• Collective resource ownership
• Universal stock ownership
• Money creation
• Tariffs, the lottery, or sin taxes.

The most commonly cited source of revenue for BIG is the income tax. Most proposals combine a basic income guarantee with a flat tax on income. Charles Clark estimates that a flat income tax rate of less than 40% would be enough to finance all current government spending and a BIG large enough to eliminate poverty. One reason for the flat tax is simplicity. Such a move would incredibly simplify not only the government income system but also the tax system. This would also lead to greater “horizontal equity”—meaning that people who make the same amount would pay the same amount of taxes unlike the current tax system with all of its special penalties and special deductions. However, BIG does not need to be combined with a flat tax. It is not necessary to overhaul both the tax and benefit system at the same time to create a Basic Income Guarantee.

Wealth taxes, sales taxes, capital gains taxes, and luxury taxes are often proposes as supplementary forms of taxation that would help fund BIG at a lower income tax rate. Other sources of supplementary revenue include eliminating current government income support programs, and even partial or total repayment of the income guarantee at death in the form of an especially ear-market inheritance tax.

Some believe that a basic income guarantee can be entirely supported by taxes on land, natural resources, pollution, and fees from government created monopolies. If so, taxes would not discourage economic activity, but would be levied on resources that need to be rationed anyway. This source of funding would also have the advantage that it would not redistribute any money from workers to nonworkers, but would redistribute money from resource owners to everyone else.

One step further than taxing natural resource owners, is to simply to make everyone a part owner of our natural resources. In which case, all people receive a basic income outside of the government tax system. This is the idea behind the Alaska Permanent Fund, and it has made it one of the most popular government programs in the country. People do not view the fund as a handout but as the reward to ownership. The idea of Universal Stock Ownership is to do for stocks what the Alaska Permanent Fund did for Alaska’s oil resources. Every year corporations would have to put a small amount of their stock into a fund that would become the property of everyone—making everyone a part owner of the nations corporate enterprise.

Money Creation is another option. To avoid deflation (which is very harmful for an economy) the government has to create new money every year to keep up with the growth of GDP. This is a source of tax-free revenue for the government, which could help fund BIG. If the government increases the money supply by more than enough to keep prices from falling, inflation will result. Some believe inflation is harmful for the economy, and believe that the revenue that can be generated from pure money creation is limited. Others believe that there are no serious effects of a moderate inflation (as long as it is stable and predictable), and believe that substantial revenue can be generated from money creation.

Conceivably BIG could be partially supported by tariffs, the lottery, sin taxes, or any other form of taxation but I don’t know any such proposal.

There are many different funding options for BIG and no solid agreement among BIG supporters about which is best. One thing is certain and that is that the amount needed to bring the least advantaged in society up to or near to the poverty level is quite small relative to GDP and thus it is financially feasible.