Professor Silberman School of Social Work at Hunter College and the CUNY Graduate Center
As I’ve observed, listened to, or taken part in discussions about basic income (BI), I’ve noticed people use different definitions of BI as well as different terms to refer to policies similar to BI. Since such differences in terminology might be confusing to those who’re relatively new to the BI discussion, I thought it might be useful to post something on names and definitions as they relate to this discussion.
For the other pieces I’ve written for this series, I’ve used The Basic Income Earth Network’s (BIEN’s) definition of basic income: an allotment of money which would be provided on an individual basis without a means-test or work requirement (https://basicincome.org/). To say that a BI would be provided without a means-test is to say that a person’s income wouldn’t have to be below a certain level in order to qualify for the benefit; the benefit would go to all, regardless of income. To say that a BI would be provided without a work requirement means that people wouldn’t have to sell labor, be expected to do so, or engage in some other type of work-related activity in order to qualify. The allotment of a BI without a work requirement is sometimes referred to as granting the benefit “unconditionally.”
Another commonly seen name for BI is “UBI,” where the “U” typically stands for universal. “Universal” refers to the fact that BI would go to all regardless, of income. That is, “universal” is a reference to the non-means-tested nature of BI.
You’ll notice from BIEN’s definition that there’s nothing in it which refers to a specific amount. That is, if the level of the BI were enough to live on, that would fit BIEN’s definition. But so would a level insufficient for one to live on.
If you dig around the website of U.S. Basic Income Guarantee (USBIG), you’ll find this definition of basic income guarantee (BIG): “… a government ensured guarantee that no one’s income will fall below the level necessary to meet their most basic needs for any reason” (https://usbig.net/about-big/). There’s no reference to lack of means-test or work requirement in this definition. If you scroll further down on that page, however, you’ll see the following elaboration: “the basic income guarantee differs from other income maintenance programs…in that it…has no work requirement.” Scrolling down even further, you’ll see a reference to BI as well as something called “the negative income tax” (NIT). Apparently, although it isn’t explicitly stated on the website, USBIG considers BI and NIT to be types of BIGs. I’ll come back to how NIT compares to BI later in this post.
Another term you’ll often see in discussions of BI is “guaranteed income” (GI). On its website, the JAIN Family Research Institute takes a broad definition of “GI,” seeing it as any cash transfer that would go to “…individuals or households…” and that “…provides continuous unconditional and unrestricted cash transfers to individuals or households….” (https://www.jainfamilyinstitute.org/our-work/guaranteed-income/#what-is-universal-basic-income-or-ubi). I think that by “unrestricted cash transfers” JAIN means that those who’d receive a GI would face no constraints regarding what they’d be allowed to spend the money on. Like BIEN’s definition of “BI,” JAIN’s definition of “GI” doesn’t refer to a specific level or amount. However, unlike BIEN’s definition of BI, JAIN’s definition of GI covers cash transfers allocated on a household or an individual basis.
If you scroll further down on the JAIN webpage cited above, you’ll see that JAIN makes a distinction between a BI and a UBI, but, as far as I could tell, views both as special cases of a GI. It views a “BI” as a cash transfer that is sufficient to meet basic needs, although it acknowledges that some definitions of “BI” don’t include this requirement. JAIN defines “UBI” as a BI that would go to everyone in a given community, regardless of income (https://www.jainfamilyinstitute.org/our-work/guaranteed-income/#what-is-universal-basic-income-or-ubi). Although I couldn’t find the term “negative income tax” on JAIN’s website, its definition of “BI” looks a lot like a definition of “NIT,” with the requirement that the level of the NIT be sufficient to meet basic needs.
Sometimes the term “GI” is used differently from JAIN’s use. An example is found in a piece by Jacqui Germain. She says that a GI would provide, “cash payments to specific, targeted communities of people” (https://www.teenvogue.com/story/what-is-guaranteed-minimum-income). If you read the rest of Germain’s article, you’ll see that her definition also includes the lack of a work condition. As far as I could tell, Germain’s “GI” is another name for an NIT. I’ve used the term “NIT” a few times in this piece; it’s time to say more about what an NIT is, along with how it differs from BI and UBI.
An NIT is similar to BI and UBI, in that it would provide an income without a work condition. An NIT could be allocated on an individual or household basis, although most models I’ve seen appear to have household allocation in mind. Where an NIT differs from BI, as defined by BIEN, or a UBI, as defined by JAIN, is that it would be means-tested. That is, only those with incomes below a certain level would get money from the government. I should add, though, that a BI (or UBI) financed by an income tax could be designed in such a way that it would have the same net effect on incomes as an NIT allocated on an individual basis would have. Let’s see how this would work.
Consider an NIT with a guarantee of $10,000 per year. Assume that everyone was subject to an income tax with a proportional rate of 20%. In order to make the points I’m about to make, I could use rates for a progressive income tax, but those points will be easier to understand, as well as for me to explain if I stick with a proportional rate.
Using the numbers in the previous paragraph, if someone had an annual income of $0, they’d receive an NIT of $10,000, the full amount. If someone had an annual income of $20,000, they’d owe $4,000 in income tax (.2*$20,000 = $4,000). The NIT they’d receive would be $6,000 (the full amount of $10,000 minus the $4,000 they’d owe in income tax) for a net income of $26,000. Someone with an annual income of $50,000 would owe $10,000 in income tax (.2*$50,000 = $10,000), and they’d receive $0 in NIT (the full amount of $10,000 minus the $10,000 they’d owe in income tax) for a net income of $50,000. And, finally, someone with an annual income of $200,000 would owe $40,000 in income tax (.2*$200,000 = $40,000), would receive no NIT in the sense of receiving money from the government but would receive it as a tax credit by only having to pay $30,000 in income tax, instead of the full $40,000. This would leave them with a net income of $170,000.
Now let’s look at how a BI with the same minimum income and 20% income tax rate would work. Someone with $0 annual income would receive $10,000 from the government for a net income of $10,000, just as was the case under the NIT. Someone with an annual income of $20,000 would also receive a BI of $10,000, since everyone would, regardless of their other income. However, their $20,000 income would be taxed at a rate of 20% so they’d owe $4,000 in income tax. This would leave them with a net income of $26,000, the same as the person with the $20,000 annual income in my NIT example. Someone with an annual income of $50,000 would also receive a BI of $10,000. But their $50,000 other income would be subject to a tax of 20% or $10,000, leaving them with a net income of $50,000 ($10,000 + .2*$50,000 = $50,000), just as someone with the same annual income under the NIT. Lastly, someone with an annual income of $200,000 would also receive a BI of $10,000. But they’d owe $40,000 in income tax (.2*$200,000 = $40,000) for a net income of $170,000, just as was the case for someone with the same $200,000 annual income under the NIT.
In comparing an NIT allocated on an individual basis to an income tax-financed BI, I used a specific income guarantee level and income tax rate. It can be shown, however, that the type of equivalence found above would occur under any income guarantee level and income tax rate (or rates), as long as they were the same for both programs. Where such equivalence would fall apart is when considering versions of BI which would be financed, at least in part, by other means, such as wealth taxes, inheritance taxes, value-added taxes (VATs), etc.
Some proponents of cash transfer programs debate whether an NIT, BI, or, perhaps, some other program should take priority. Answering this question depends on how one assesses the importance of household allocation versus allocation to individuals, how one thinks a minimum income program should be financed, what one thinks is politically and economically feasible, etc. I won’t go into those matters here. All I wanted to do in this post was clarify some conceptual matters. Having, hopefully, done that, I’ll call it a day.