Why Pay Bill Gates?
October 1, 2000
With Responses From
Oct 1, 2000
5 Min read time
This vision of a radically unconditional UBI is very expensive.
Philippe Van Parijs deserves our gratitude for seeking to stimulate a long overdue debate in the United States about the basic income concept. My disagreements with him are only tactical; they center on the problem of how to get the idea of a UBI taken seriously. Here, as elsewhere, Van Parijs struggles with the tension between his ideal vision of a UBI and a version of the UBI that would be politically and economically feasible. His procedure for resolving this tension is the weakest part of his argument.
In his ideal vision, receipt of the UBI is not conditioned by the individual’s behavior, household status, or other sources of income, and the amount to be received is greater than subsistence. Behind this emphasis on unconditionality lies the intuition that people should be able to make their life plans, including how much they work and with whom they live, without anxiety about their ability to afford food and shelter. Secure in the knowledge that the UBI check will arrive every month, even the poor could escape endless worries about basic subsistence. I agree with this motivation for the UBI; the problem comes with implementation.
As Van Parijs quickly admits, this vision of a radically unconditional UBI is very expensive. He acknowledges that the increased taxes required to finance the net income transfers would be so disruptive that the UBI would have to be phased in gradually. He doesn’t address the related problem–the absurdity that even Bill Gates would receive his monthly UBI check. Sure, wealthy people like Gates would face higher rates of taxation that would more than offset the UBI payment, but why bother cutting that completely unneeded check?
Van Parijs’s major strategy for resolving the issue of expense is a gradual phase-in of the UBI payment. The program would start well below the subsistence level and be raised over a period of time. But he doesn’t deal with the potentially treacherous politics of gradualism. In the United States, it is possible to imagine a scenario in which a powerful insurgent movement wins the first stage of UBI implementation after an extraordinary mobilization. Part of the political deal launching this shift to unconditional payments would involve the phasing out of a number of means-tested and conditional payments. Yet what if, at the second stage of implementation, opponents were politically stronger and were able to block an increase in unconditional payments while insisting on a continued reduction in older transfer programs? The result could easily be that many low- income households would be considerably worse off than they were when the idea of a UBI was not taken seriously.
Given the difficulty of gradualism in highly polarized polities, the better path is to qualify the unconditionality of the grant. If the size of the grant is conditioned by level of income and household situation, the UBI becomes a negative income tax (NIT). As Van Parijs notes, the NIT provides a UBI in the form of a tax credit only to those individuals and households who qualify by virtue of insufficient income. Since NIT payments are so closely targeted to those who have inadequate levels of income, such a program is far more affordable and could be implemented in one shot. Most importantly, the design of the NIT could be modified so that it would function quite similarly to Van Parijs’s ideal.
NIT payments could be made to households or individuals on a monthly or even weekly basis, and individuals who suddenly lose income–either because they left a degrading job or a degrading relationship–could receive some emergency assistance immediately and get the maximum monthly check within two weeks of notifying the tax bureau. (Karl Widerquist has suggested that individuals could designate a primary bank account for payment and receipt of taxes and the government would provide something like automatic overdraft protection.) The more knotty problem is that low-income individuals might reach the end of the tax year and find themselves overdrawn on their government account. Especially for those living closest to subsistence, the need to pay back the government would reintroduce the economic coercion that the UBI is intended to eliminate.
But even with an unconditional grant, a private version of overdrawing would remain common; people will take loans to make ends meet and the need to repay those loans would force them to take unattractive jobs or even return to an abusive spouse. Still, Van Parijs is hardly alone if he is concerned that public debt might represent a greater threat to personal freedom than private debt; the image of Dickensian officials demanding that the government be repaid immediately can be scary. But this scenario is hardly inevitable. For one thing, the scope of the problem could be reduced by exempting the first three or four thousand dollars of earned income from any taxation. Hence, an individual might receive a six thousand dollar negative income tax payment if his earned income were anywhere between zero and $4,000. Only when his earned income exceeded $4,000 would their negative tax credit be reduced. This would make the overall program more expensive, but it would substantially reduce the incidence of tax officials trying to extract back taxes from those living close to the margin. Furthermore, the rules could be written so that these low-income overdrawn individuals would have several years to repay with only nominal interest charges. Finally, there would also be a role for private charity. With the NIT in place, there would be less need for charitable efforts to provide people in need with food, clothing, and shelter. Charities could shift to making long term investments in poor individuals and families, including low interest loans for a variety of purposes, including repayment of both public and private debts.
In short, with a little creativity, the NIT design could achieve the ambitious goals for a UBI with the huge advantage that its initial implementation would immediately make virtually all the poor better off. Furthermore, supporters of a full scale NIT could quite reasonably argue that this represents a logical next step after years of successful experience in the United States with a NIT-like program–the Earned Income Tax Credit–that has been restricted to the working poor. Van Parijs is absolutely correct–misguided worries about making life too comfortable for the undeserving poor must not deter us from pursuing a reform with the potential to protect millions of people from the horrendous consequences of growing economic inequality.
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October 01, 2000
5 Min read time