Basic income proposals — which call for the government to send every person a set amount of cash every year, just by virtue of being alive — are usually the kind of thing you hear from eccentric philosophers or economists. But it appears a very similar idea may have slipped into a tax plan cosponsored by a leading Republican presidential contender.
Among many other changes, the tax plan of Sens. Marco Rubio (R-FL) and Mike Lee (R-UT) gets rid of the standard deduction, personal exemption, and 10 percent tax bracket. That simplifies the tax code to a degree, but it also leaves lower-income people worse off. So the plan also introduces a "personal credit," worth $2,000 for individuals and $4,000 for couples filing jointly.
At first glance, this is just a boring tax break consolidation. But here's the thing: the personal credit is refundable. This isn't made clear in the proposal itself, but a Rubio aide confirmed it to me in an email. So the $2,000 is a guaranteed payment to people whether or not they have a positive tax burden. "It would be equivalent to a cash transfer payment that every adult could receive even if they had no income or tax liability — they’d just need to file a return and claim it," the Tax Policy Center's Len Burman writes in a post on the Rubio-Lee credit. It is, in other words … the beginning of a basic income.
Close but no UBI
But it's not really a basic income. The Rubio aide also stated, "Rules would be tailored to ensure that our reforms would not create payments for new, non-working filers." So it'd be a cash grant with a work requirement attached, a proviso most basic-income advocates vocally reject. You couldn't get it if you have no income. And, of course, $2,000 per person is not exactly enough to live on.
So the Rubio-Lee plan isn't proposing the basic income advocate's dream policy. But it is proposing a transitional policy that basic-income activists could latch onto. The idea resembles nothing so much as the A Tax Cut for the Rest of Us Act, a US House bill introduced in May 2006 and written by basic income activists Karl Widerquist and Al Sheahen. That bill would have replaced the standard deduction with a $2,000 per adult, $1,000 per child refundable tax credit. The idea was to use a policy with which Americans were already familiar — tax credits — as a way to ease them into the idea of a basic income. "Making the standard deduction and personal exemption refundable could be seen, not as a revolutionary concept, but as a logical next step," Sheahen writes.
That bill went nowhere, and its two congressional advocates are no longer in office. Its sponsor, then–Rep. Bob Filner (D-CA), went on to be elected mayor of San Diego before resigning in a sexual harassment scandal, and its lone cosponsor, then–Rep Jesse Jackson Jr. (D-IL), finished a 17-month stint in federal prison last Thursday. And it was, to be sure, a more radical proposal than the work-restricted idea that Rubio and Lee are floating. "No work requirement" was a key criterion for Widerquist and Sheahen in designing the bill.
The FairTax basic income
There's another basic income idea floating around Congress, though, and this one doesn't have a work requirement attached.
It's called the FairTax, and it would replace nearly all federal taxes with a 30 percent national sales tax. That on its own is a regressive idea — low-income people spend more of their incomes than the rich do, so would pay a greater share of their incomes in sales tax — so the FairTax would give each household a "prebate" equivalent to the sales tax they'd pay on poverty-level spending. For example, in 2013 the FairTax "consumption allowance" for a family of four (two parents, two kids) was $31,020. If you spent that much money in a FairTax world, $7,135 of it would go to federal sales taxes. So the FairTax provides a $7,135 annual rebate to families of four, distributed monthly.
Make no mistake: this is a basic income. There is no work requirement. You get it regardless of whether you make any money. It is a straight-up basic income. FairTaxers object to this characterization, saying that because the prebate is meant to compensate for taxes you pay on necessities, it's "your money being returned to you." But if you live below the poverty level, you come out ahead from the rebate. It's just a cash transfer program. As Steve Hayes, the head of Americans for Fair Taxation (the main advocacy group behind the FairTax), told me, "If you have a valid Social Security number, you are eligible for the prebate … It has nothing to do with income requirements."
Mike Huckabee championed the FairTax in 2008, when he made a serious run for the GOP presidential nomination, and it currently has 68 supporters in the House (including senior members like Budget Committee Chairman Tom Price) and six in the Senate (including Ted Cruz).
So the 2016 GOP presidential race will likely include a candidate who proposed a basic income with a work-requirement (Rubio) and one who just three weeks ago cosponsored a bill that would create an unconditional basic income (Cruz). Politics is weird.
This is how a basic income will happen (if it happens)
If you ask genuine basic income advocates how they'd like to see the idea implemented, they wouldn't describe something like Rubio-Lee's personal credit or the FairTax's prebate or even the A Tax Cut for the Rest of Us Act. The cash grant would be significantly larger than any of those plans, ideally large enough to wipe out poverty. For example, in 2006 Sheahen laid out a basic income plan that would give $10,000 per adult and $2,000 per child. For adults, that's five times larger than Rubio-Lee or A Tax Cut for the Rest of Us's credits. It means a family of four gets $24,000 every year. It'd cost $1.9 trillion a year, or more than 11 percent of GDP.
It's a huge proposal, of the kind that's unlikely to be enacted in one fell swoop. That's what makes small-scale plans — even ones that tack on new requirements like Rubio-Lee — so important to the basic income project. Let's say Rubio-Lee passes. Then, a later Congress could weaken or repeal its work requirement. And then another Congress could boost it to $4,000 per adult. And then $6,000. And then $8,000. Each step would be a slight modification of an existing policy. But those slight modifications over time can add up to a sea change. That means something as seemingly small and technical as converting an exemption into a refundable credit could serve as a Trojan horse for something much, much bigger.
Want to learn more about basic income proposals? Here's a short video explaining the idea: